Value have become more reliant on suppliers regarding

Value
procurement: Strategic relationships building with suppliers

 

Abstract

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Suppliers
hold the key to any company’s competitive advantage and a trump card to G1 business growth and
success. In spite of being such an essential entity in an organization, supplier
management is one of the most underrated procurement activities. Obtaining the
best prices through strategic sourcing is no longer considered as a strategic
capability of the procurement. Organisations have realized that they have become more reliant on
suppliers regarding the G2 G3 G4 security
of supply innovative power, on-going cost savings, G5 and
corporate social responsibility as a result of further outsourcing of non-core
competencies.
Many global organizations perceive strategic partnerships as one of the
critical corporate agendas and value procurement or Supplier Relationship
Management (SRM) is G6 G7 G8 G9 G10 considered as a factor that can make
a significant diffG11 erence.G12 G13 G14 G15 G16 G17 

 

Introduction

As the supply chains of
today require collaboration at various stages and from various functions,
companies are frequently looking for innovative
methods to leverage existing and new supplier relationships for their
expansionary pursuit. Supplier Relationship Management (SRM) is G18 G19 G20 G21 a key way to connect the interests both
within the organization and with the extended supply chain. Value procurement
identifies and engages the right stakeholders to create ownership of the
relationship, align strategic objectives and drive effective communication. This
results in continuous efficiency improvements, such as risk mitigation, cost
reductions, or improved go-to-market times just as well as an improved
potential for disruptive innovation. G22 

 

The
process involved in value procurement

 

The main objective of
value procurement G23 is to select vendors on factors other than
only prices, such as expertise, quality, etc. It is a continuous cycle which
involves segmentation, governance, performance management G24 G25 and
development.

 

G26 

G27 

1.     Supplier
segmentation

Supplier segmentation is
the process of categorizing suppliers based on various parameters and criteria
and identifying the key suppliers. These suppliers are then prioritized into
various levels. The criteria and parameters are defined based on business criticality
and reflect the strategic importance of the suppliers to the organization.

 

 

 

2.     Supplier
governance

After
segmenting the suppliers, it is essential to establish an efficient governance
process internally and assigned ownership of supplier relations. It is
essential to involve the right stakeholders in this process as the ownership
lies outside the procurement
of the organization. This governance committee can defiG28 G29 G30 G31 G32 G33 G34 ne
and drive the strategic roadmap together with the supplier. Top-level strategic
objectives are to be mutually agreed at the top level on both sides. A set of
measures and metrics are to be monitored periodically as a part of performance
management process.G35 G36 G37 G38 G39 G40 G41 G42 G43 G44 G45 G46 

 

3.     Performance
management

Performance management
involves continuous tracking of operational measures and metrics which have
been mutually agreed by the committee members. A supplier scorecard needs to be
developed consisting
of these metrics, and the suppliers need to be given score accordingly.
Continuous monitoring is required, and any deviation needs to be addressed
immediately by identifying the cause and taking the necessary actions.G47 G48 G49 

 

4.     Supplier
development

Supplier development
enhances the value if the entire value procurement process. It involves the
development of business relationships for long-term initiatives such as mergers
and acquisitions, market penetration, G50 G51 joint
ventures, etc.

 

Value
procurement enablers

There are seven enablers
to establish and enhance a value procurement framework.

Strategy, process,
structure, people, technology, performance management and risk management. These seven
enablers form the core of what is known as supplier relationship management or
supplier quality management. All these enablers are interrelated and need to
perform incoherence to achieve the desired outcome. G52 

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