SCM RELATIONSHIPS, STRATEGIC PARTNERSHIPS

SUPPLY CHAIN MANAGEMENT(SCM)

Supply chain management involves planning, design,& control of flow of material, information and finance along the supply chain to deliver superior value to the end customer in an effective & efficient manner

SCM RELATIONSHIP
comprehensive approach to managing an enterprise's interactions with the organizations that supply the goods and services it uses.

The goal is to streamline and make more effective the processes between an enterprise and its suppliers just as customer relationship management (CRM) . SRM includes both business practices and software and is part of the information flow component of supply chain management (SCM)

Contd
With more firms interested in working more closely with their supply chain partners, high priorities are: Developing and implementing successful supply chain relationships; The need for collaboration to achieve supply chain objectives; and, Value created by third-party logistics.

 The SCM relationship process begins by analyzing opportunities for sourcing cost and operational improvements. Information and practices across all departments and functions are collected and aggregated for further analysis. SCM relationship increases the efficiency of processes associated with acquiring goods and services, managing inventory, and processing materials.

SCM Relationship Processes

Design Collaboration Source Negotiate Buy Supply Collaboration SRM processes are well integrated with appropriate CRM and ISCM processes. 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.

Types of Relationships
Vertical Refer to the traditional links between supply chain members such as retailers, distributors, manufacturers and suppliers. Horizontal Firms that have parallel or cooperating positions in the supply chain such as a transportation firm and a warehousing firm serving the same customer.

Successful Supply Chain Relationships

Six step process for forming and sustaining

supply chain relationships: Step One Perform strategic assessment Step Two Decision to form relationship Step Three Evaluate alternatives Step Four Select partners Step Five Structure operating model Step Six Implementation and continuous improvement

Step One Perform strategic assessment

Manufacturer becomes fully aware of its logistics and supply chain needs and overall strategies that will guide its operations. Time spent at the outset is well spent.

Step Two Decision to form relationship

When using an external supplier, will the firms services be needed. If the firm has core competencies in the area that external supplier provides, then the firm can provide its own services. Using channel partners depends on whether there are compelling drivers and facilitators for partnerships are present.

Step Three Evaluate alternatives

Measure and weigh drivers and facilitators. Decide on type of relationship. Match manufacturers needs with capabilities of each potential partner. Involve other functional managers in the overall selection process.

Step Four Select partners

Made only after close consideration of the credentials of the most likely candidates. Interact with and get to know the final candidates on a professionally intimate basis. Attempt consensus to maximize buy-in

Step Five Structure operating model

Planning Joint operating controls Communication Risk/Reward sharing Trust and commitment Contract style Scope of the relationship Financial investment

Step Six Implementation and continuous improvement

Depending upon the complexity of the relationship, the implementation period may vary in length. Future successes will be a direct function of the ability of the partners to achieve both breakthrough and continuous improvement

Outcomes of SCM Relationship

Integrates external organizations into companys cross functional teams Develops an environment of trust between company Suppliers and Internal Customers Manages external functions to meet business objectives Ensures relationship is mutually beneficial Engages talent and skills of suppliers personnel in achieving companys business goals Extends companys influence on suppliers supplier Deliver maximum value to company

Benefits of SCM Relationship

Optimize supplier relationships, Create a competitive advantage and more customer-centric solutions to market faster. Lengthen and strengthen critical supplier relationships Drive profit enhancement through reduced supply chain and operational costs

SCM Relationship barriers

Lack of trust Little understanding/commitment to SC principles Different goals and objective Inadequate information system Short term emphasis on outcome Involvement in too many supply chain

SC Relationship barrier solution

Develop a new breed of managers Build relationship management skill Establish inter organizational teams Create new performance measure Invest in information technology Develop long term focus

SCM Relationship Application

Communication Planning Sourcing Procurement Collaboration Data Mining Score carding

STRATEGIC PARTNERSHIP

SCM - Strategic Partnership

Strategic partnering (SP) is when two or more firms that have complementary products or services join such that each may realize a strategic benefit. it is a formal alliance between two commercial enterprises, usually formalized by one or more business contracts but falls short of forming a legal partnership or, agency, or corporate affiliate relationship

Framework for SCM Partnerships

1.Defining a balanced set of relationships

first a company has to define its own strategy. The existing relationships have to be evaluated generation process should be made transparent.

2. Developing the right interface structure

only buyer / seller interaction closer collaboration between buying and selling (account management); relationship between companies, where there is direct interaction between a range of functions and usually substantial investment in the relationship

3. Cooperation
Here aspects like information sharing or data accuracy come into play. It is the sensitive parts of partnership

4.Change management
The change towards a company which embraces strategic relationships is not an easy one. Managing people through this change is an essential part of partnership management

5. Monitoring the relationships

Monitoring can be done in a formal and / or informal way. The important point here is not to loose track of what has been achieved and how it was achieved.

Types of strategic partnering

Quick response, Continuous replenishment, Advanced continuous replenishment Vendor managed inventory (VMI

SCM - Strategic Partnership

In quick response SP vendors receive point-of-sales (POS) data from retailers. The data are then used to synchronize production and inventory management at the supplier. the POS data is used to improve forecasting and scheduling.

SCM - Strategic Partnership

In continuous replenishment SP vendors again receive POS data and use them to prepare shipments at previously agreed to intervals as well as to maintain agreed to inventory levels. This approach is used by WalMart.

SCM - Strategic Partnership

In advanced continuous replenishment SP suppliers will gradually decrease inventory levels at the retailers location as long as they can still meet service levels. The result is that inventory level are continuously improved. Kmart uses this approach.

SCM - Strategic Partnership

In vendor managed inventory SP the supplier will decide on the appropriate inventory levels for each of the products it supplies and the appropriate inventory policies to maintain these levels. One of the best examples of this is the SP between WalMart and Proctor & Gamble.

Steps in SP implementation
Contractual negotiations Ownership Credit terms Ordering decisions Develop or integrate information systems Develop effective forecasting techniques Develop a tactical decision support tool

Strategic partnership- Benefits

Increase in capital for research and product
development and yet lower risk (Innovation) Decrease in product lead times and life cycles. (time pressures) Ability to bring together complementary skills and assets. Access to knowledge and expertise beyond company borders.

Contd
Rapidly achieve scale, critical mass and momentum Expansion of channel and international market presence. Building credibility in the industry and brand awareness . Providing added value to customers. Establishing technological standards for the industry that will benefit the firm.

Disadvantages of SCM Partnership

Expensive technology is required Must develop supplier/retailer trust Supplier responsibility increases Expenses at the supplier also often increase

Conclusion
The SCM approach implies managing the relationships between the businesses responsible for the efficient production and supply of products from farm level to consumers, to reliably meet consumers' requirements in terms of quantity, quality and price.

Reference

http://searchsap.techtarget.com/definition/supplier-relationship-management SCM Relationships, http://www.ebizq.net/topics/scm/features/3881.html, downloaded on 24/01/2012. http://doi.ieeecomputersociety.org/10.1109/ICMECG.2008.21 The Appliance of Supply Chain Management Theory to Tourism Development; Liying Wei, Ke Lu; referred on 26/01/2012 Ellen O'Brien, 2002, Gartner's Karen Peterson on ABC's of SCM, browsed on 28/8/12, http://searchsap.techtarget.com/news/833189/Gartners-KarenPeterson-on-ABCs-of-SCM Amir H. Khataie, 2011, Activity-Based Costing in Supply Chain Cost Management Decision Support Systems, browsed on 29/8/12, http://spectrum.library.concordia.ca/7332/1/Khataie_PhD_S2011.pdf Supply Chain Management: Concepts, Techniques and Practices, Enhancing value through Collaboration, Ling Li