Topic One:-

Relationship Management:

A strategy employed by an organization in which a continuous level of engagement

is maintained between the organization and its audience. Relationship management
can be between a business and its customers (customer relationship management)
and between a business and other businesses (business relationship management).

Relationship managers typically handle operational details. Working as a liaison

between different groups of people, a relationship manager facilitates
communication, deals with complaints, resolves problems and coordinates planning.
Businesses rely on relationship managers who utilize excellent communication and
analysis skills to coordinate complex and interdependent activities.

Functions
Business relationship managers form a liaison between different organizations
within a corporation. For example, information technology groups typically employ
a business relationship manager to work with other groups in the company to
explain IT functions. Acting as a connection between groups that may not use the
same vocabulary, the business relationship manager facilitates meetings and
other events to improve communication.
Client relationship managers typically work with individuals outside the company,
explaining policies and procedures to clients receiving an ongoing service. The
manager can also be responsible for managing legal and contractual obligations.
Customer relationship managers also work outside the company, focusing on
understanding customer needs. Customer relationship managers respond to
complaints, proactively respond to issues and look for opportunities to sell
additional products to existing and potential customers.
Vendor relationship managers develop and manage service level agreements of
companies providing a product or service to a company. They hold vendors
accountable for meeting or exceeding the terms of the agreement.
Community relationship managers work with officials and volunteers in the area
around a company to resolve conflicts and proactively respond to issues. The
manager can be responsible for fund raising, as well as recruiting and training
volunteers.

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TYPES OF RELATIONSHIPS.

Supplier relationship management is a comprehensive approach to managing an

enterprise's interactions with the organizations that supply the goods and
services it uses. The goal of supplier relationship management (SRM) is to
streamline and make more effective the processes between an enterprise and its
suppliers just as customer relationship management (CRM) is intended to
streamline and make more effective the processes between an enterprise and its
customers.

SRM includes both business practices and software and is part of the information
flow component of supply chain management (SCM). SRM practices create a
common frame of reference to enable effective communication between an
enterprise and suppliers who may use quite different business practices and
terminology. As a result, SRM increases the efficiency of processes associated
with acquiring goods and services, managing inventory, and processing materials.

According to proponents, the use of SRM software can lead to lower production
costs and a higher quality, but lower priced end product. SRM products are
available from a number of vendors, including 12 Technologies,
Manugistics, PeopleSoft, and SAP.

Business relationship management is a formal approach to understanding,

defining, and supporting a broad spectrum of inter-business activities related to
providing and consuming knowledge and services via networks, with an emphasis
on the emergence of online networks as a primary medium through which business
relationships are conducted.
Business relationship management (BRM) is distinct from, but related to,
concepts such as enterprise relationship management and customer relationship
management. It also exceeds the scope of the limited context of describing a
liaison who aligns business interests with IT deliverables.
BRM seeks to provide a complete and holistic model of business relationships and
business relationship value over time, in order to make the various aspects of
business relationships both explicit and measurable. A mature BRM model will
ultimately support both:

 strategic business research and development efforts

 tools and techniques that implement BRM principles
BRM as a discipline seeks to enable all stakeholders to develop, evaluate, and
leverage high-value relationships throughout the network.

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Customer relationship management (CRM) is a widely implemented model for
managing a company’s interactions with customers, clients, and sales prospects.
It involves using technology to organize, automate, and synchronize business
processes—principally sales activities, but also those for marketing, customer
service, and technical support. The overall goals are to find, attract, and win new
clients; nurture and retain those the company already has; entice former clients
back into the fold; and reduce the costs of marketing and client service. Customer
relationship management describes a company-wide business strategy including
customer-interface departments as well as other departments. Measuring and
valuing customer relationships is critical to implementing this strategy.

Topic Two:-
EFFECTIVE RELATIONSHIP MANAGEMENT IN PROCUREMENT:

In order for a company or a firm to maintain an effective relationship

management in procurement, there should be an effective supplier relationship
management. Therefore in this topic we shall focus more on an effective supplier
relationship management.

Effective Supplier Relationship Management: - Effective supplier relationship

management requires an enterprise-wide analysis of what activities to engage in
with each supplier. The common practice of implementing a “one size fits all”
approach to managing suppliers can stretch resources and limit the potential value
that can be derived from strategic supplier relationships.

Strategic Supplier Relationships:-

Recalling our definition earlier supplier relationship management is a

comprehensive approach to managing an enterprise's interactions with the
organizations that supply the goods and services it uses. Therefore for most
enterprises having strong, long-term relationship with most of their strategic
suppliers is a critical step in improving performance and generating greater cost
efficiencies that can help the business grow.

This has become even more important given the prospects of a looming economic
recession—this reality has forced many enterprises to take a closer look at their
operating costs.
When it comes to analyzing strategic suppliers, looking at the people who are
involved in those working relationships provides an excellent way to measure
overall performance (as well as using more traditional metrics such as component

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pricing or on-time availability). Since any strategic business relationship
ultimately depends on how well both client and supplier personnel work together,
analyzing and managing the “people component” in these relationships is one way
that businesses can generate supplier and cost efficiencies and, can ultimately,
gain a greater and more profitable competitive advantage.
Therefore, by incorporating tools to better measure, analyze, and maximize the
people component in supplier assessments, an organization can dramatically
improve its supplier scorecards, which in turn can lead to superior supplier
performance, enhanced business-to-business productivity, and better
achievement of established business goals.
Unfortunately, most enterprise supplier management solutions aren’t oriented
toward analyzing and managing this essential “people component.” Without the
ability to incorporate relationship analysis in an overall performance evaluation,
enterprises miss out on a valuable opportunity to build strong and long-lasting
relationships with their strategic suppliers.

Tactical versus Strategic Relationships in Supplier Management

Historically, most businesses have based the quality of their supplier

relationships on transactional metrics such as price, availability, level of service,
or the perceived value of the supplier to the business. Using this approach at a
simplistic level, enterprises typically place their suppliers into one of two
categories:
1. Tactical Relationships are commodity-oriented associations that are
based on the supplier’s ability to provide the lowest price or best
availability of commonly used goods and/or services. These relationships
are typically short term in nature, and depending on market dynamics, any
“tactical” supplier can be replaced when market conditions (such as new
customer requirements) warrant such a change.

2. Strategic Relationships, on the other hand, are defined as high-value, long-

term relationships that require an investment of time, training, and
resources, and as a result, increase the overall worth of that relationship
to the business. Unlike with tactical relationships, the value of personal
interactions is an important metric in a strategic supplier relationship.
By evaluating suppliers in terms of specific departmental business needs
and goals, enterprises can determine where tactical and strategic suppliers
fit within the overall organizational framework. But once a supplier has
been elevated to a strategic level, it is incumbent on the enterprise to
ensure that both sets of personnel maintain a positive working relationship

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 to ensure that the strategic relationship remains a viable part of the long-
term business needs of the enterprise.

There are four primary reasons why enterprises aren’t placing a greater
emphasis on measuring, evaluating, and nurturing quality “people-oriented”
relationships:

Inappropriate Tools – Many enterprises use outdated tools, such as spreadsheets

combined with manual processes that make assessing strategic supplier
relationships and their associated performance levels more difficult.
Limited Accuracy – Many enterprises fail to obtain an accurate mix of both
qualitative and quantitative measurements that would accurately assess the
Lack of Customization – Many existing value chain solutions lack the level of
customization necessary to benchmark and evaluate each strategic supplier
relationship in terms of achieving enterprise business goals.
Incorrect Orientation – Most enterprises apply a “bottom up” tactical data
analysis (such as quarterly reporting using monthly source data) to evaluate their
supplier relationships instead of a “top down” approach that is based on the
attainment of strategic business goals.

The Benefits of a Strategically Centered Supplier Development Solution

Rather than applying processes that are centered on tactical metrics, strategic
supplier management solutions must be evaluated based on how supplier expertise,
capabilities, and resources are able to meet strategic enterprise business goals.

To maximize the effectiveness of strategic supplier relationships, an enterprise

must ensure that supplier development solutions evaluate the quality of personal
relationships and uncover specific areas that require improvement.

The term “supplier development” is vastly different from the more traditional
term, “supplier management.” Supplier management is typically handled by junior-
level managers and refers to a process of measuring the specific tactical metrics
or values associated with the performance of a supplier, such as contract
compliance, component costs, and on-time delivery standards.
In comparison, the term “supplier development” pertains to implementing
techniques that continuously optimize and improve strategic supplier
relationships. More of this will be covered in the next topic

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By applying strategic supplier development solutions that will monitor and measure
the effectiveness of these relationships, enterprises can achieve four beneficial
results:
1. Increased Performance – With strategic supplier development solutions,
enterprises can use detailed information that allows them to reach into supply
chain operations and gain a better understanding of the specific areas where
output performance can be improved. Through this analysis, relationship
experiences can be leveraged into an increased level of enterprise/supplier trust
that can translate into process improvements and increased performance.
2. Reduced Risk and Turnover – Reducing the amount of turnover associated
with strategic suppliers is essential to maintaining enterprise growth and long-
term profitability. Negative or deteriorating supplier relationships can lead to
greater friction, distrust, and poor resource performance. An effective strategic
supplier relationship management solution allows an enterprise to detect specific
problem areas, thus making it easier to implement changes, improve the working
relationship, and reduce the factors that contribute to greater
employee/supplier turnover.
3. Improved Operational Efficiencies – Strategic supplier relationship solution
allow the enterprise to build bridges between internal and supplier organizations
that maximize operational efficiencies. These solutions realign processes and
resources based on trust. By allowing client and supplier participants to provide
commentary, feedback, and scorecard rankings that realign supply chain
resources, enterprises can extract greater cost-effectiveness from their
strategic supplier relationships, thereby directly contributing to improved
corporate profitability.
4. Better Access to Exceptional Suppliers – By using strategic supplier
management solutions that enable in-depth evaluations and scoring of strategic
supplier relationships, enterprises can find, improve, retain, or if need be,
eliminate specific resources, ensuring that the best-qualified strategic suppliers
will continue to meet their business needs today, and well into the future.

In order to remain competitive, enterprise businesses must incorporate new tools

that shift the focus of evaluating tactical, operational data to value-based, people
oriented information that will improve assessment processes and build greater
trust and affinity between buyers and suppliers. Once new processes are
established that help businesses evaluate their strategic people-oriented
relationships, these improved assessments can play a greater role in improving
business performance and meeting strategic business objectives; this “new
reality” can lead to a greater competitive advantage in the marketplace.

Topic Three:-

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SUPPLIER DEVELOPMENT PROGRAM:
Supplier development is defined as “any activity that a buyer undertakes to
improve a supplier’s performance and capabilities to meet the buyer’s short and
or long-term supply needs. Supplier development requires financial and human
resources investment by both partners and includes a wide range of activities
such as training of the supplier’s personnel, investing in the supplier’s operations
and an ongoing performance assessment.

The components of a strategically centered supplier relationship development

solution should include the following:

A Question and Evaluation Framework – By measuring the relationship between

buyer/supplier stakeholders through questionnaires that measure the overall
quality of the working relationship, enterprises can obtain an accurate assessment
of each specific area within those relationships. The results from this process
can then be used to develop a subsequent strategic action plan.

High Levels of Engagement – The ability to evaluate a strategic supplier

relationship is only as good as the quantity and quality of the data received.

If the response rate from a questionnaire is low, an accurate assessment of the

relationship cannot be achieved. To increase participant response rates, the
software used to deploy the questionnaire must employ friendly user interfaces
that increase user participation while ensuring that all of the questions will be
answered correctly and completely. E-mail capabilities must also be integrated in
this process so that enterprise managers can achieve full participation from the
greatest number of participants efficiently, allowing an accurate assessment of
the relationship to be obtained.

Value Measurement – A strategic supplier development solution must be able to

translate answers received from the questionnaire into an accurate scoring
methodology that will allow decision makers to evaluate the relationship and the
value it contributes to both the enterprise and the strategic supplier.

Information Integration – A strategic supplier development solution must be able

to integrate relationship information from questionnaires along with business
information available in enterprise resource planning (ERP) applications,
databases, financial spreadsheets, human resource evaluations, and other
business resources. This information will need to be hosted in a central data
warehouse that provides decision makers with the ability to perform additional
in-depth analysis and problem identification.

Developed and Compiled by Peter K Ndichu © 2013

Reporting Capability – A strategic supplier development solution must also be
able to generate accurate and detailed reports on many facets of the working
relationship. Once an analysis of the strategic supplier relationship has been
completed, reports must be generated so that the final results can be distributed
to the relationship stakeholders. This information is time sensitive. Quick
placement of relationship analysis information into the hands of the business
stakeholders allows for process improvements to begin as rapidly as possible.

Rapid Action ability – Once areas for improvement become known, corrective
action must be swiftly taken. If the reports show that there are problems in the
client/supplier relationship, any delay in making the necessary changes will only
create further degradation of the working relationship. Under these
circumstances, decision makers must be able to quickly take corrective action and
communicate necessary changes to the stakeholders in order to maintain high
performance levels of the strategic relationship for the enterprise.

Most medium to large size companies have supplier development programs in

place; many of these programs are programs in word only. Most of these programs
are nothing more than "Supplier Quality Award" programs, in which suppliers
receive an award for a certain level of quality and on-time delivery. While there
is nothing wrong with doing this, it falls short of what is truly needed in a
successful supplier development program.

Let's start by asking "What is the purpose of a supplier development program?"

At a minimum, a supplier development program should be aimed at achieving the
following:

 Lower supply chain total cost

 Increased profitability for all supply chain participants
 Increased product quality
 Near-perfect on-time-delivery at each point in the supply chain

Most supplier development programs do not do enough to meet these goals.

Auditing suppliers once per year to determine if they've met certain on-time-
delivery and quality goals will not actually fulfil the purpose of a supplier
development program. One could call this type of work "supplier checking and
verification" rather than "supplier development." Supplier development requires
much more work than auditing and checking does.

Developed and Compiled by Peter K Ndichu © 2013

Supplier development is actually developing suppliers in much the same way
employees are developed. How should an organization develop its employees? Well,
this question might open an entirely different can of worms in that many
organizations don't do a very good job of developing employees either. However,
those companies that do well in this area provide the training, tools, and incentives
that will make them successful. In short, they invest in their employees because
they know that great employees are what make companies great. It should come
as no surprise, then, that great suppliers make supply chains great.

Thus, a supplier development program must be aimed at improving suppliers

performance, not browbeating them into charging less or simply auditing and
rewarding them. Instead, supplier development is all about providing suppliers
with what they need to be successful in the supply chain. Two of the most
important functions of a supplier development program are:

 Providing information about products, expected sales growth, etc. Poor

communication is one of the biggest wastes with a lean supply chain. Lack
of information translates into additional costs (usually in the form of just-
in-case inventory). Suppliers need to become extensions of their
customers.
 Training in the application of lean and quality tools. Asking suppliers to drop
their price without giving them the know-how to lower their costs through
lean implementation is not sustainable long-term. In other words, this will
drive suppliers out of business, which goes against the purpose of supplier
development.

If suppliers had more information about the entire supply chain and had a true
lean transformation underway, they would become more profitable and provide a
better quality and lower-cost product on-time.

Topic Four:-
Selecting and Maintaining Suppliers:
Your approach to suppliers needs to be part of your strategic plan since almost
every company, whether product- or service-oriented, is dependent on suppliers.
Many business owners seem to get this supplier issue backwards. They think that
because they write the order, they're in the dominant position and can exploit it
with unreasonable demands, including personal perks.

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Let's get this right . . . you need good and reliable suppliers. When you find them,
treat them like gold. Work as hard on building a good supplier relationship as you
do building a good relationship with your customers.
And be loyal to your good suppliers. They are essential to your business's good
health and growth.
Let's briefly look at all the ways suppliers can impact your company.
 Quality: Supplier components can positively or negatively affect the
quality of your product. Higher quality increases customer satisfaction and
decreases returns, which adds cash to your bottom line.
 Timeliness: Their timely deliveries are crucial to how customers view your
reliability. A quick turnaround can become the key to minimizing your
inventory, which in turn translates to less risk of inventory obsolescence
and lower cash needs.
 Competitiveness: They can give you the one-up on your competition based
on their pricing, quality, reliability, technological breakthroughs and
knowledge of industry trends.
 Innovation: Suppliers can make major contributions to your new product
development. Remember, they live their product more than you do; they're
working to be on the cutting edge of innovation for their product. The good
ones will understand your company, its industry and needs, and can help you
tweak your new idea.
 Finance: If you've proven to be a considerate, loyal and paying customer,
you may be able to tap into your suppliers for additional financing once you
hit growth mode--or if you run into a cash crunch. That financing may take
the form of postponed debt, extended terms on new purchases, a loan, or
an investment in your company.
All of these improve your cash position.

There are times you need to replace a supplier because you have outgrown them
and they can't perform to your new expectations. Before dropping them, however,
you might try to help them change to keep up with you.
Also, it's not prudent to rely on one supplier. If that supplier has a strike or a
fire, you don't want to be in a position where you'd be shut down too. So keep a
backup or multiple suppliers on hand--and don't be embarrassed to tell your key
supplier that you're doing so. They will appreciate your honesty.
EVALUATING SUPPLIERS

Whether searching out new suppliers or benchmarking the performance of

current suppliers, businesses are urged to consider the following when evaluating
their options:

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  Commitment to quality—Not surprisingly, product quality is regarded as an
essential factor in selecting a supplier. Specifics in this realm include the
suppliers' statistical process control methods, its QS-9000 registration,
its approaches to problem solving and preventive maintenance, and its
methods of equipment calibration. "What gets looked at varies by whether
the supplier is a distributor or manufacturer," pointed out Anderson. "With
a distributor, the team wants to determine whether it carries mainly Grade
A lines or B lines in a particular group. With a manufacturer it's important
to have QC people on the team to realistically appraise the supplier's
control standards and methods of measuring quality."
 Cost-competitive—Competitive pricing is another huge factor, especially
for businesses that are smaller or experiencing financial difficulties.
 Communication—Suppliers that do not maintain a policy of open
communication—or even worse, actively practice deception—should be
avoided at all costs. The frustrations of dealing with such companies can
sometimes assume debilitating dimensions. Moreover, constant exposure to
such tactics can have a corrosive effect on internal staff.
 Timely service—Businesses strategies are predicated on schedules, which
in turn are based on receiving shipments at agreed-upon times. When those
shipments slip, business strategies suffer. The blow can be particularly
severe if the supplier is negligent or late in reporting the problem. "Reliable
delivery is first among the basics of what we expect [from suppliers]," one
executive told Industrial Distribution. "It doesn't have to be
instantaneous—it just needs to get there when they promised it would."
 Flexibility and special services—Many purchasers express appreciation for
suppliers that take extra measures to satisfy their customers. These
"perks" can range from after-hours accessibility to training or inventory
support.
 Market knowledge—Suppliers with extensive knowledge of market
conditions and mastery of contemporary issues impacting your business can
be immensely valuable in helping small companies chart a course to
sustained financial success.
 Production capabilities—the supplier's capacity for program management
and production should be considered, including its ability to integrate
design and manufacturing functions, its approach to design changes, and its
program measurement features.
 Financial stability—Businesses that allocate large sums for purchasing
materials often prefer to make long-term deals with suppliers that are
financially stable. Such arrangements not only convey security, but they
allow companies to learn about one another and gain a fuller understanding
of each business's needs, desires, operating practices, and future

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 objectives. Moreover, The Economist noted that "being in a meaningful
relationship instead of a one-part stand encourages suppliers to make
investments that are tailored to the purchasing firm's needs—and to be
thriftier. A trusted supplier is more likely to think about the purchasing
firm's own customers."
 Logistics/Location—Supplier capabilities in this area include
transportation capacity, sourcing capabilities, and 'just-in-time'
performance.
 Inventory—According to Purchasing, evaluation of this consideration is
dependent somewhat on the supplier's business. "If the supplier is a
distributor, the emphasis will be on how well his inventory is set up to avoid
stock-outs. With a manufacturer, emphasis has to be on inventory
accessibility. If the supplier has a [just in time] program with 24-hour
assured delivery, it's in better condition than the manufacturer with a lot
of raw material inventory and an eight-week lead-time for raw material."
 Ability to provide technical assistance—Suppliers with top research and
development capacities can be quite valuable to buyers, providing them with
significant savings in both price and quality.

Topic Five:-
Impact of Developing Relationship throughout the Supply Chain

A number of analysts have forecasted the demise of long-term supply chain

relationships because of increased competition within the supply chains for
thinner slices of the margin pie. As markets become tighter, energy and raw
materials prices increase, and as working capital become harder to procure, supply
chain collaboration will suffer in a Darwinian struggle for profitability scraps. Yet
two reassuring developments are undermining that premise.
First, most supply chains are finding enormous amounts of waste, which they are
c trimming away to keep working margins. Second, supply chain partners are
finding innovative ways to make collaboration work for mutual benefit in
previously unexplored ways. As a result, while a number of supply chain
partnerships have deteriorated over the past eight business quarters or so, most
have survived. In fact, many companies credit their own survival largely to their
working relationships with buyers and suppliers.
Because successful supply chain relationships mean much more than cost
efficiencies and economic conveniences. As we discuss below, they bring with
them other important advantages that are not always apparent to the folks in the
organization with the “sharp pencils.”

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Research shows that world class supply chains benefit in many ways from
collaboration - even in times of severe economic stress. These benefits extend
beyond improved efficiency and effectiveness to include helping all the supply
chain members meet customer demands, grow markets, and increase competitive
market share.
These advantages are achieved in a number of innovative ways over the life of
the collaborative relationship—for example, by increasing sales volume from
downstream buyers, lowering operational costs within the relationship, word-of-
mouth referrals, and new product and process innovations borne from the working
relationship between trusting partners.
Collaboration Increases Share of ‘Wallet’
In a tight economy, new accounts can be increasingly difficult to secure, even in
emerging markets. As a result, suppliers are increasingly targeting their sales
efforts to existing customers and can only succeed if they add value above and
beyond their competitors. While price is important, competing on price alone
often leads to fickle customers who, a year after of doing business with you will
leave to find cheaper pastures.
The best supply chains have buyer-supplier relationships that are based on value
and consistent delivery of this value. That value can be based on services, quality,
on-time deliveries, returns management, or some combination of these. It’s what
makes buyers increase their percentage of purchases from individual suppliers
for the long run. This provides a double-edged benefit for suppliers: when a buyer
increases its purchase of a needed material from 45 percent to 60 percent, this
not only enhances the chosen supplier’s bottom line, but also negatively impacts
the competition. Further, this increased collaboration between supply chain buyer
and seller leads to another valuable outcome: increased efficiencies.
The Longer the Collaboration, the Lower the Costs
One of the greatest benefits from long-term supply chain collaboration (and one
that consistently delights operationally oriented managers) is the cost savings
that result from routine procedures over the life of the relationship. When
buyers and suppliers begin a relationship, their interactions often are fraught
with inefficiencies and expensive organizational idiosyncrasies, adding to the cost
of doing business in year one. In year two, however, procedures typically become
more streamlined, kinks in IT are worked through, and interpersonal relationships
between organizations become more efficient.
The longer the relationships, the more indirect costs—operational and
otherwise— are reduced. These cost savings are shared by both buyers and
sellers, increasing the benefits to both. They can also be passed on to customers

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in the form of lower prices, thereby increasing the supply chain’s position in the
competitive landscape.
The Power of Word of Mouth
Much has been written recently about the “Post-Crisis Consumer” and her
propensity to rely on referrals from other buyers rather than trust promotions
directly from the company. There are a variety of reasons for this change in
perspective. But many point to the average consumer’s increasing lack of trust in
advertising as well as the incessant “noise” coming from the traditional
promotional outlets.
In supply chains, we are seeing a similar move toward referrals, albeit for
different reasons. Largely, these word of mouth referrals come from supply chain
members who stand to benefit from partner firms buying—or supplying—other
organizations in their extended network. This is becoming especially prevalent as
the number of joint venture arrangements increases worldwide. So a buyer that
purchases wiring from a supplier in the U.S. will refer the supplier to its joint
venture partner in Mumbai in order to meet market demands there.
Furthermore, horizontal buying networks across multiple markets (often in the
form of multiple joint ventures or strategic alliances) often are consolidating
suppliers in order to service all points of operation from a single source. This
means that the longer the relationship a company has with one supply chain
partner, the better the chance of picking up that partner’s joint venture
collaborators. This form of “global account management” is often one of the major
benefits for members of expanding global supply chains and offers an excellent
way to enter otherwise very difficult marketplaces.
Innovation through Long-Term Collaboration
It is common knowledge that reduced product life cycles increase the pressure
on firms to develop new products, which often creates considerable stress on the
organization’s R&D function and its budgetary constraints. Similarly, increasingly
competitive global supply chains place enormous pressures on supply chain
managers to develop new processes that enhance both cost efficiencies and
customer services. Like new product development, new process development can
be extraordinarily expensive…and risky. Yet time and time again, we see long-term
collaborative partnerships as the most innovative way to develop processes that
both reduce costs and add value for the partners.
In their book The New Supply Chain Agenda, Rueben Slone, Paul Dittmann, and
Tom Mentzer give numerous examples of how long-term supply chain relationships
create an environment for developing innovative solutions to problems and
challenges. These innovations aren’t necessarily the big breakthroughs of highly
advanced new processes; more often they are innovative combinations of existing

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tactics that are well suited for volatile markets. This is consistent with the
premise that most successful innovations don’t come from the lab, they come from
customers and suppliers. A corollary is that firms experiencing significant
turnover in their customer or supplier bases rarely benefit from such practical
innovation as their competitors with long-term collaborative relationships.

Absolute vs. Relative Gains

As supply chain relationships extend in time, it is critical to remember that, while
both partners’ share of the benefit pie will grow, each share will not necessarily
grow at the same rate. Too often, a lack of understanding around this point has
caused acrimony between the supply chain partners. And because of the
unrealistic expectations of both parties, otherwise profitable relationships have
deteriorated.
We call this the problem of absolute vs. relative gains, with too many firms
focusing on the latter. In reality, supply chain partners should concentrate on the
relationship’s absolute benefits to their firm—and whether those benefits would
be realized if the partnership did not exist. These benefits may not accrue in
equal portions to the participants. But as long as the partnership is mutually
beneficial and strengthens the competitive position of the supply chain at large,
all parties should gain significantly in absolute terms. The longer the collaborative
relationship, the more firms from raw material providers to retailers will see
benefits— not just in traditional cost-saving terms but also through increased
share of wallet, word of mouth referrals, and enhanced innovation capabilities.

Topic Six:-

Relationships in a multicultural environment: Definitions of Culture

and types.

In a global business environment, cultural understanding is an essential tool for

successful communication and relationship building between organizations and
audiences. However, the power of cultural values to modify individuals' ways of
thinking and communicating is not well understood in terms of crisis
communication management.

Culture is a complex issue that essentially includes all of a group’s shared values,
attitudes, beliefs, assumptions, artefacts, and behaviours. Culture is broad —

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encompassing all aspects of its internal and external relationships—and culture is
deep in that it guides individual actions even to the extent that members are not
even aware they are influenced by it.

Organizational culture is the collective behaviour of humans that are part of an

organization, it is also formed by the organization values, visions, norms, working
language, systems, and symbols, and it includes beliefs and habits. It is also the
pattern of such collective behaviours and assumptions that are taught to new
organizational members as a way of perceiving, and even thinking and
feeling. Organizational culture affects the way people and groups interact with
each other, with clients, and with stakeholders.

Types of Culture:

1. Normative Culture: In such a culture, the norms and procedures of the

organization are predefined and the rules and regulations are set as per
the existing guidelines. The employees behave in an ideal way and strictly
adhere to the policies of the organization. No employee dares to break the
rules and sticks to the already laid policies.
2. Pragmatic Culture: In a pragmatic culture, more emphasis is placed on the
clients and the external parties. Customer satisfaction is the main motive
of the employees in a pragmatic culture. Such organizations treat their
clients as Gods and do not follow any set rules. Every employee strives hard
to satisfy his clients to expect maximum business from their side.
3. Academy Culture: Organizations following academy culture hire skilled
individuals. The roles and responsibilities are delegated according to the
back ground, educational qualification and work experience of the
employees. Organizations following academy culture are very particular
about training the existing employees. They ensure that various training
programmes are being conducted at the workplace to hone the skills of the
employees. The management makes sincere efforts to upgrade the
knowledge of the employees to improve their professional competence. The
employees in an academy culture stick to the organization for a longer
duration and also grow within it. Educational institutions, universities,
hospitals practice such a culture.
4. Baseball team Culture: A baseball team culture considers the employees
as the most treasured possession of the organization. The employees are
the true assets of the organization who have a major role in its successful
functioning. In such a culture, the individuals always have an upper edge
and they do not bother much about their organization. Advertising

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 agencies, event management companies, financial institutions follow such a
culture.
5. Club Culture: Organizations following a club culture are very particular
about the employees they recruit. The individuals are hired as per their
specialization, educational qualification and interests. Each one does what
he is best at. The high potential employees are promoted suitably and
appraisals are a regular feature of such a culture.
6. Fortress Culture: There are certain organizations where the employees
are not very sure about their career and longevity. Such organizations
follow fortress culture. The employees are terminated if the organization
is not performing well. Individuals suffer the most when the organization
is at a loss. Stock broking industries follow such a culture.
7. Tough Guy Culture: In a tough guy culture, feedbacks are essential. The
performance of the employees is reviewed from time to time and their
work is thoroughly monitored. Team managers are appointed to discuss
queries with the team members and guide them whenever required. The
employees are under constant watch in such a culture.
8. Bet your company Culture: Organizations which follow bet your company
culture take decisions which involve a huge amount of risk and the
consequences are also unforeseen. The principles and policies of such an
organization are formulated to address sensitive issues and it takes time
to get the results.
9. Process Culture: As the name suggests the employees in such a culture
adhere to the processes and procedures of the organization. Feedbacks
and performance reviews do not matter much in such organizations. The
employees abide by the rules and regulations and work according to the
ideologies of the workplace. All government organizations follow such a
culture.

Topic Seven:-
Importance of culture in an organisation

 The culture decides the way employees interact at their workplace.

A healthy culture encourages the employees to stay motivated and loyal
towards the management.
 The culture of the workplace also goes a long way in promoting healthy
competition at the workplace. Employees try their level best to
perform better than their fellow workers and earn recognition and
appreciation of the superiors. It is the culture of the workplace which
actually motivates the employees to perform.

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  Every organization must have set guidelines for the employees to work
accordingly. The culture of an organization represents certain
predefined policies which guide the employees and give them a sense
of direction at the workplace. Every individual is clear about his roles
and responsibilities in the organization and know how to accomplish the
tasks ahead of the deadlines.
 No two organizations can have the same work culture. It is the culture
of an organization which makes it distinct from others. The work
culture goes a long way in creating the brand image of the
organization. The work culture gives an identity to the organization. In
other words, an organization is known by its culture.
 The organization culture brings all the employees on a common
platform. The employees must be treated equally and no one should feel
neglected or left out at the workplace. It is essential for the employees
to adjust well in the organization culture for them to deliver their level
best.
 The work culture unites the employees who are otherwise from
different back grounds, families and have varied attitudes and
mentalities. The culture gives the employees a sense of unity at the
workplace.
Certain organizations follow a culture where all the employees
irrespective of their designations have to step into the office on time.
Such a culture encourages the employees to be punctual which
eventually benefits them in the long run. It is the culture of the
organization which makes the individuals a successful professional.

 Every employee is clear with his roles and responsibilities and strives
hard to accomplish the tasks within the desired time frame as per the
set guidelines. Implementation of policies is never a problem in
organizations where people follow a set culture. The new employees also
try their level best to understand the work culture and make the
organization a better place to work.
 The work culture promotes healthy relationship amongst the
employees. No one treats work as a burden and moulds himself
according to the culture.
 It is the culture of the organization which extracts the best out of
each team member. In a culture where management is very particular
about the reporting system, the employees however busy they are would
send their reports by end of the day. No one has to force anyone to

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 work. The culture develops a habit in the individuals which makes them
successful at the workplace.

Topic Eight:-
Hofstede's Cultural Dimensions
Understanding Workplace Values around the World

We know that we are living in a global age. Technology has brought everyone much
closer together. This means that people of different cultures find themselves
working together and communicating more and more.

This is exciting, but it can also be frustrating and fraught with uncertainty. How
do you relate to someone of another culture? What do you say, or not say, to
start a conversation right? Are there cultural taboos that you need to be aware
of?

Building connections with people from around the world is just one dimension of
cultural diversity. You will also need to factor it into motivating people,
structuring projects, and developing strategy.

How can we understand cultural differences? Are we relegated to learning from

our mistakes, or are there generalized guidelines to follow?

Fortunately, psychologist Dr Geert Hofstede asked himself this question in the

1970s. What emerged after a decade of research and thousands of interviews is
a model of cultural dimensions that has become an internationally recognized
standard.

With access to people working for the same organization in over 40 countries of
the world, Hofstede collected cultural data and analyzed his findings. He initially
identified four distinct cultural dimensions that served to distinguish one culture
from another. Later he added a fifth dimension, and that is how the model stands
today.

He scored each country using a scale of roughly 0 to 100 for each dimension. The
higher the score, the more that dimension is exhibited in society.
The Five Dimensions of Culture

Armed with a large database of cultural statistics, Hofstede analyzed the results
and found clear patterns of similarity and difference amid the responses along

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these five dimensions. Interestingly, his research was done on employees of IBM
only, which allowed him to attribute the patterns to national differences in
culture, largely eliminating the problem of differences in company culture.

The five dimensions are:

1. Power/Distance (PD)
This refers to the degree of inequality that exists – and is accepted – among
people with and without power. A high PD score indicates that society accepts an
unequal distribution of power, and that people understand "their place" in the
system. Low PD means that power is shared and well dispersed. It also means that
society members view themselves as equals.
Application: According to Hofstede's model, in a high PD country such as Malaysia
(104), you would probably send reports only to top management and have closed
door meetings where only a select few, powerful leaders were in attendance.
Characteristics Tips
 Centralized  Acknowledge a
companies. leader's power.
 Strong  Be aware that
hierarchies. you may need to
High PD
 Large gaps in go to the top for
compensation, answers.
authority, and
respect.

 Flatter  Use teamwork

organizations.  Involve as many
 Supervisors and people as possible
Low PD
employees are in decision
considered making.
almost as equals.

2. Individualism (IDV)
This refers to the strength of the ties people have to others within the
community. A high IDV score indicates loose connections. In countries with a high
IDV score there is a lack of interpersonal connection, and little sharing of
responsibility beyond family and perhaps a few close friends. A society with a low
IDV score would have strong group cohesion, and there would be a large amount
of loyalty and respect for members of the group. The group itself is also larger
and people take more responsibility for each other's well being.

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Application: Hofstede's analysis suggests that in the Central American countries
of Panama and Guatemala where the IDV scores are very low (11 and 6,
respectively), a marketing campaign that emphasized benefits to the community
or that tied into a popular political movement would likely be understood and well-
received.
Characteristics Tips
 High valuation on  Acknowledge
people's time and accomplishments.
their need for  Don't ask for too
freedom. much personal
 An enjoyment of information.
High IDV challenges, and an  Encourage
expectation of debate and
rewards for hard expression of
work. own ideas.
 Respect for
privacy.

 Emphasis on  Show respect for

building skills and age and wisdom.
becoming  Suppress
masters of feelings and
something. emotions to work
Low IDV
 Work for in harmony.
intrinsic rewards.  Respect
 Harmony more traditions and
important than introduce change
honesty. slowly.

3. Masculinity (MAS)
This refers to how much a society sticks with, and values, traditional male and
female roles. High MAS scores are found in countries where men are expected to
be "tough," to be the provider, and to be assertive. If women work outside the
home, they tend to have separate professions from men. Low MAS scores do not
reverse the gender roles. In a low MAS society, the roles are simply blurred. You
see women and men working together equally across many professions. Men are
allowed to be sensitive, and women can work hard for professional success.

Developed and Compiled by Peter K Ndichu © 2013

Application: Japan is highly masculine with a score of 95 whereas Sweden has
the lowest measured value (5). According to Hofstede's analysis, if you were to
open an office in Japan, you might have greater success if you appointed a male
employee to lead the team and had a strong male contingent on the team. In
Sweden, on the other hand, you would aim for a team that was balanced in terms
of skill rather than gender.
Characteristics Tips
 Men are  Be aware that
masculine and people may
women are expect male and
feminine. female roles to
 There is a well be distinct.
defined  Advise men to
High MAS
distinction avoid discussing
between men's emotions or
work and making
women's work. emotionally
based decisions
or arguments.

 A woman can do  Avoid an "old

anything a man boys' club"
can do. mentality.
 Powerful and  Ensure job design
successful women and practices are
Low MAS
are admired and not
respected. discriminatory to
either gender.
 Treat men and
women equally.

4. Uncertainty/Avoidance Index (UAI)

This relates to the degree of anxiety society members feel when in uncertain or
unknown situations. High UAI-scoring nations try to avoid ambiguous situations
whenever possible. They are governed by rules and order and they seek a
collective "truth." Low UAI scores indicate the society enjoys novel events and
values differences. There are very few rules and people are encouraged to
discover their own truth.

Developed and Compiled by Peter K Ndichu © 2013

Application: Hofstede's Cultural Dimensions imply that when discussing a project
with people in Belgium, whose country scored a 94 on the UAI scale, you should
investigate the various options and then present a limited number of choices, but
have very detailed information available on your contingency and risk plans. (Note
that there will be cultural differences between French and Dutch speakers in
Belgium.)

Characteristics Tips
 Very formal  Be clear and
business conduct concise about
with lots of rules your
and policies. expectations and
 Need and expect parameters.
structure.  Plan and prepare,
 Sense of communicate
nervousness often and early,
High UAI spurns high levels provide detailed
of emotion and plans and focus
expression. on the tactical
aspects of a job
 Differences are
or project.
avoided.
 Express your
emotions through
hands gestures
and raised voices.

 Informal  Do not impose

business rules or
attitude. structure
 More concern unnecessarily.
with long-term  Minimize your
strategy than emotional
Low UAI what is happening response by
on a daily basis. being calm and
 Accepting of contemplating
change and risk. situations before
speaking.
 Express curiosity
when you

Developed and Compiled by Peter K Ndichu © 2013

 discover
differences.

5. Long Term Orientation (LTO)

This refers to how much society values long-standing – as opposed to short-term
– traditions and values. This is the fifth dimension that Hofstede added in the
1990s after finding that Asian countries with a strong link to Confucian
philosophy acted differently from western cultures. In countries with a high LTO
score, delivering on social obligations and avoiding "loss of face" are considered
very important.
Application: According to Hofstede's analysis, people in the United States and
United Kingdom have low LTO scores. This suggests that you can pretty much
expect anything in this culture in terms of creative expression and novel ideas.
The model implies that people in the U.S. and U.K. don't value tradition as much
as many others, and are therefore likely to be willing to help you execute the
most innovative plans as long as they get to participate fully. (This may be
surprising to people in the UK, with its associations of tradition.)

Characteristics Tips
 Family is the  Show respect for
basis of society. traditions.
 Parents and men  Do not display
have more extravagance or
authority than act frivolously.
young people and  Reward
women. perseverance,
High LTO
 Strong work loyalty, and
ethic. commitment.
 High value placed  Avoid doing
on education and anything that
training. would cause
another to "lose
face."

 Promotion of  Expect to live by

equality. the same
Low LTO standards and
 High creativity,
individualism. rules you create.

Developed and Compiled by Peter K Ndichu © 2013

  Treat others as  Be respectful of
you would like to others.
be treated.  Do not hesitate
 Self- to introduce
actualization is necessary
sought. changes.

Topic Nine:-

Negotiation Skills for global procurement

Negotiation is a valuable tool at the disposal of the procurement officer and can
be used to resolve disputes, improve performance and obtain ‘value for money’.
The Procurement Competency framework defines negotiation skills as “must have”
for staffs that are employed primarily as purchasing, procurement, commissioning
or contract officers

A definition of ‘negotiation’ is
“To communicate with the objective of reaching an agreement by means,
Where appropriate, of compromise.”

2. When can you use negotiation?

As part of the tendering process:
Note: the information on “when can you use negotiation” mostly with regard
to European Union it can change depending on the country
The extent to which local authorities can negotiate with suppliers is governed
primarily by EU Directives, which are enshrined in UK law. Additionally, the
Council’s Contract Procedure Rules provide a corporate framework for the
procurement of all goods, services and works for the Council and identify the
Council’s rules on negotiation with suppliers.
Essentially, post tender negotiations with suppliers should only be entered into
when it is considered that none of the tenders submitted offer best value when
assessed in accordance with the pre-determined evaluation criteria and process.
The EU Directives on public procurement exclude negotiation over the
thresholds (apart from in the negotiated procedure and, to a lesser extent, in the
competitive dialogue procedure). Authorities may only clarify the offers made to
them and in doing so iron out any inconsistencies in the proposals which prevent
the delivery of best value. Care must be taken when seeking clarification not to
enter into a negotiation which will materially alter a supplier’s tender. Remember,
the process is
to:

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 ensure that the tender is constructed correctly; or
ensure that the renderer has fully understood the specification; or
seek clarification from renderers of price (i.e. mathematical errors), quality and
performance indicators.

The EU Directives on public procurement do allow for negotiation but have a strict
process and definition using the Negotiated Procedure, which can only be used:
a) When irregular or unacceptable tenders have been received in response to an
open or restricted procedure.
b) In exceptional cases when the nature of the contract or the risks involved do
not permit overall pricing.
c) When contract specifications cannot be established with sufficient precision
to permit the award by following the rules governing open or restricted
procedures, particularly in the case of intellectual services, such as insurance,
banking and investment services.
Or in the case of Works:
d) When the works are carried out purely for the purpose of research,
experiment or development and not to establish viability or to recover research
and development costs.

As part of the contract management process:

The Change Process. During the course of a contract, particularly for services,
it is likely that there will be a need for changes to the requirements of the
contract. One of the Contract Manager’s key roles is to manage the process of
change in an equitable way, balancing the spirit of the relationship with the
requirements and obligations of the contract. The contract itself should set out
the change control or variation procedures and the appropriate clauses need to
be followed carefully to avoid breaches.

Resolving disputes. These often arise as a result of misunderstanding or

breach of the contract, and need to be rectified. It is important that the process
set out in the contract management plan is followed but it is equally imperative
that negotiation is used to ensure that all parties feel that they have reached an
acceptable agreed solution.
Extension. Contracts are often let with the option to extend for a further
period of time. If this is done correctly at the time of award it should be a
straightforward process. However, this can be taken as an opportunity to
renegotiate some of the terms and requirements under the contract though care
must be taken not to materially alter the make-up of the contract so as to breach
the EU Directives.

Developed and Compiled by Peter K Ndichu © 2013

3. What are the advantages of negotiation?
 It is a method of obtaining value for money.
 It is a useful method of maintaining value for money in a single source
situation i.e. where there is no real competition to drive down prices.
 It is useful when the requirement is difficult to specify.
 It is an in-expensive method of achieving best value.
 It is flexible and adaptive.
 It ‘should’ be confidential.
 It can be used to generate a ‘win / win’ solution for both the Council and
the supplier.

4. What are the possible disadvantages to negotiation?

 It may be difficult to create a clear audit trail.
 Effective negotiation requires a high level of competence and skill.
 It may be viewed as competitive, by creating winners and losers.
 Effective negotiation requires a large amount of preparation and research.
5. Process of negotiation
The process of negotiation can be broken down into 3 stages:
1. Planning
2. Discussion/Debate
3. Resolution/Conclusion
Planning
The planning stage of negotiation is the most important stage. It is advisable to
consider the following during the planning stage.
 Decide upon a neutral venue if possible as this will be more conducive to a
successful negotiation than the office of one of the parties.
 Know what your parameters are – what are you authorised to negotiate on,
and what is your bottom line?
 Factors to be traded must be identified i.e. things which may be conceded
by the Council, and things to be obtained.
 A pre-assessment of ‘both’ parties bargaining power should be made.
 Ideal and realistic objectives must be set for the negotiation, including a
fall-back position.
 Work out a line of questioning and try and anticipate the supplier’s
responses, what they are likely to concede? And how to counteract their
responses.
 Make sure that you research the market so that you know it and any issues,
which may affect negotiations.
Discussion/Debate

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It is important to set the correct tone for the negotiation from the outset. The
Council should approach its relationships with suppliers as a ‘partnership’ with a
common goal in mind, or at least recognise each other’s priorities and needs. It is
therefore in our best interest to negotiate in a firm way, but in a manner that
promotes a good relationship and fosters good will.

It is important to remember that when you are dealing with suppliers you are an
ambassador of the Council and as such you must adhere to the Employee Code of
Conduct. It is essential therefore to ensure that negotiations are conducted in a
fair and ethical manner.
It is important to give consideration to the following at the negotiation meeting:

 Begin by clearly and logically stating your position, what you would like to
gain from the negotiation and what you see are the advantages to the
supplier.
 Allow the supplier to state their opening position and agree what areas are
not common ground and therefore need to be addressed.
 Always remain calm, do not use emotive language and be prepared to take
breaks in the proceedings if tempers rise or if the negotiation is going in
the wrong direction.
 Use plain English, and explain any terms and conditions that the supplier
may not understand.
 Try and be as honest as possible with the supplier without disclosing any
key information which may prejudice the Council’s position, or disclosing
any confidential information.
 Do not use information relating to third parties when negotiating, e.g.
disclosing a supplier’s price list so that a supplier can adjust their prices in
order to undercut.
 Remember that compromise will need to be reached and therefore be
prepared to move to your fall-back position if required; however remember
that compromise is only achieved by both parties.
 Avoid using threats i.e. “unless we receive this we will withdraw from the
contract”. Threats are only credible if they are capable of being executed.
If necessary, seek advice from Legal and Democratic Services regarding
remedies within the Contract.
 Negotiations do not necessarily have to be about price. The best deal for
the Council should always be based on the MEAT (Most Economically
Advantageous Tender) principles and whole life costing.

Resolution/Conclusion

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Issues may take time to be resolved and repeated sessions of negotiation may
have to be undertaken. It is important however to recognise when a negotiation
can go no further and that the supplier has reached a point at which he/she is no
longer in a position to move.

Agreements must be made which are workable and achievable and neither party
must have been forced into an unachievable conclusion. It is very important to
keep a record of all decisions made during the negotiation such as changes to
pricing structures and contract terms etc. If you are involved in lengthy
negotiations, it is good practice to agree a written record of what you have agreed
at each stage, and avoid revisiting those issues. At the conclusion of the
negotiation process, all agreements should be recorded in writing to each party’s
satisfaction; these may include changes to the contract terms, revised pricing
structures, etc.

Topic Ten:-
Revision Questions:

QUESTION ONE:

a) Discuss the various roles of relationship managers. (10 marks)

b) Discuss the types of relationship that can be established in a firm.

(6 marks)

c) “Relationship management in any organisation is important”. Explain

(4 marks)

QUESTION TWO:

Discuss the dimensions of culture as developed by Hofstede and how they relate
to African countries. (20 Marks)

QUESTION THREE:

Supplier segmentation is one of the strategies used in effective supplier

management relationship.” Discuss (20 Marks)

Question four:

“Effective selection of suppliers benefits the organisation” Discuss. (20 Marks)

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Question Five:

Outline the Advantages and Disadvantages of having a supplier Development

Programme (20 Marks)

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