Supplier Relationship
Management (SRM)
WS 2019 / 2020
- Session 1 & 2 -
1
Goals and Expectations
At the end of the course students should be able to understand and apply:
▪ Key terms, main issues, and tasks associated with Supplier Relationship
Management
▪ Basic negotiation skills
▪ Presentation
▪ Commodity management
▪ Supplier Management
At the end of the class you will say…
▪ I learned something I can apply…
▪ Purchasing / Procurement is one of the most interesting functions
▪ That was COOL!
2
My Deliveries
▪ Provide examples and share how it is being done in real work … including
some theory
▪ Provide feedback (not only on content)
▪ Answer questions
➢ However, the material that I provide is not always aligned with theory.
3
You will…
…participate!!!
4
This means…
You will:
▪ Play and excercise
▪ Negotiate
▪ Present
▪ Listen
5
Key Areas
▪ Industry Analyis and Sourcing Strategy
▪ Negotiation and Communication
▪ Commodity Management
▪ Supplier Relationship (types, etc.)
➢ Learing by doing!
6
Course Overview
Test
Summary with focus on what you want.
Overview Sourcing Negotiation Specific
Power
Strategy SRM
E2E Sourcing Approaches
E2E Competitive
Process & Why Bidding Style &
SRM? Outsourcing Collaboration
SRM Types
7
Literature
Articles (Emerald Insight)
▪Jongkyung Park, Kitae Shin, Tai-Woo Chang, Jinwoo Park (2009). "An integrative framework for supplier relationship management”,
Industrial Management & Data Systems, Seoul
▪Vijay R. Kannan, Keah Choon Tan (2006). “Buyer-supplier relationship: The impact of supplier selection and buyer-supplier
engagement on relationship and firm performance”, International Journal of Physical Distribution & Logistics Management, Logan
(Utah) & Las Vegas (Nevada)
▪Ming-Chang Huang, Ghi-Feng Yen and Tzu-Chuan Liu (2013). “Reexamining supply chain integration and the supplier´s
performance relationships under uncertainty”, Supply Chain Management: An International Journal, Taiwan
▪Keith Goffin, Marek Szwejczewski and Colin New (1997). “Managing suppliers: when fewer can mean more”, International Journal of
Physical Distribution & Logistics Management, Cranfield (UK)
▪Dayna F. Simpson and Damien J. Power (2005). “Use the supply relationship to develop lean and green suppliers”, Supply Chain
Management: An International Journal, Melbourne
▪Chris Ellegaard, John Johansen and Anders Drejer (2002). “Managing industrial buyer-supplier relations – the case for
attractiveness”, Integrated Manufacturing Systems, Aalborg (DK)
▪Eamonn Ambrose, Donna Marshall and Daniel Lynch (2010). “Buyer supplier perspectives on supply chain relationships”,
International Journal of Operations & Production Management, Dublin (Ireland) & Halifax (Canada)
▪Eric P. Jack and Thomas L. Powers (2012), “Managing strategic supplier relationships: antecedents and outcomes”, Journal of
Business & Industrial Marketing, Birmingham (Alabama)
8
Quiz
▪ Why are you here?
▪ Do you think this course will help you in your professional life in the future?
▪ Is SRM just a buzzword?
▪ Is it really applied in multinational companies?
▪ Why is SRM needed or where might it be appropriate?
▪ What is SRM?
9
Overview E2E and SRM
E2E
Sourcing
Why SRM?
10
Lets first look into what it is and where it might fit.
▪ What is SRM?
▪ Where does it fit?
11
SRM
▪ Google ≈ 5m Results
▪ Definition: Supplier Relationship Management is an all- inclusive
approach to managing the affairs and interactions with the organizations
that supply your company with goods and services. This includes
communications, business practices, negotiations, methodologies and
software that is used to establish and maintain a relationship with a
supplier. Benefits include lower costs, higher quality, better forecasting
and less tension between the two entities that result in a win-win
relationship.
12
My v i e w …
Effective supplier relationships can be
created and sustained, for companies that need
each other mid to
long term (strategic), by people that trust
each other.
13
Playtime
14
Playtime
PLEASE ANSWER ALL QUESTIONS FROM THE VIEWPOINT OF A TYPICAL MEMBER OF STAFF, WITHIN A
TYPICAL ORGANISATION WITHIN YOUR COUNTRY. THEY ARE NOT YOUR PERSONAL VIEWS. THEY ARE
TO REPRESENT THE VIEWS OF STAFF WITHIN YOUR COUNTRY. THANKS.
Section 1: Employment security within the workplace
Strongly Neutral Strongly
Question 1: Disagree View Agree
1 2 3 4 5 6 7
Organisations provide employees with long term job
security. As a result, companies do not, or strongly
avoid having to make redundancies during hard times,
and employees do not move jobs when better
opportunities arise.
Section 2: Recruitment and selection processes within the workplace
Strongly Neutral Strongly
Question 2: Disagree View Agree
1 2 3 4 5 6 7
Organisations have very clear guidelines and
procedures for the selection and recruitment of good
people, which must be followed by all individuals. This
helps to ensure that the right people are selected.
Section 3: The structure and management of teams within the workplace
Strongly Neutral Strongly
Question 3: Disagree View Agree
1 2 3 4 5 6 7
Delegation to teams is likely to be accompanied with just
broad guidelines and objectives, with teams then left to
15 define their own way of working i.e. the detailed tasks,
How do we find out whether
companies need each other?
16
By…
Sourcing
Strategy
17
Can you draft the strategic, tactical
and transactional sourcing process?
18
The Strategic Part
Competitive
Analysis
Competition
Supplier
Analysis
Industry Sourcing Contracting
and Ongoing Renewal or
Analysis Strategy Change
Business
Economic
Analysis
Collaboration
Other Factors
Supplier Relationship Management
19
PART II
20
The E2EProcess
Sourcing
Strategy
Transactional Process: From PO until Payment
Source: www.nationaldiversitysolutions.com
21
Why SRM?
▪ Costs are going up
▪ Margins are being squeezed…
▪ Less and less differentiating factors
▪ Copying in record speed…
▪ Innovation and access to external ideas and support becomes key for
future success…
▪ Markets are dynamic….leverage changes over time
22
1st Conclusion
Developing and investing into mutual trust can
▪ Increase your results and
▪ Increase your efficiency.
23
The Strategic Part
Competitive
Analysis
Competition
Supplier
Analysis
Industry Sourcing Contracting
and Ongoing Renewal or
Analysis Strategy Change
Business
Economic
Analysis
Collaboration
Other Factors
Supplier Relationship Management
24
How to best analyze an industry?
▪ Theory - The Porter Model
▪ Exercise - Analyze an industry
25
Industry A n a lys is …
▪ Is applicable to any market
▪ Helps structuring and analyzing market
▪ Information identifies magnitude, owners and drivers of power, predicts market
development
▪ Helps to derive this knowledge into tactics and a strategy to gain a competitive
advantage in that industry
26
Critical Steps
▪ Scope- Define your Market.
▪ Facts - Gather Data.
▪ Organize the data and describe the industry.
27
What is a Market?
▪ “Forum” where buyers and sellers meet to trade goods and services
▪ Market fundamentals describe the status and dynamics between Offers and Demand
▪ Markets have prices and quantities at which buyers and sellers trade
▪ Markets are dynamic
▪ Sources of change are numerous
28
Example of an industry
Other
Kid’s food
Petfood
Food
Meat Bones / Organs
Shoes Fertilizer
Cloths
Seats
…. Skin
Gelatine
Milk
29
Markets are dynamic and many factors apply
▪ Seasonal Changes – when are you buying perfume?
▪ Raw Material impacts (oil) – e.g. OPEC, wars, political issues…
▪ Laws / Legal restrictions
▪ Public Relations / sustainability (PVC, Greenpeace), move from local to global
▪ Technologies / Patents
▪ Management changes and changes in companies strategies (e.g. facilities)
▪ Human Behavior (Cartel)
▪ Economic Developments – Euro Crisis (Greece)
▪ Political Environment / Developments
▪ Weather or other catastrophes – external hard disks / SIM Cards (Japan)
30
Copper Market Prices(LME)
31
Other Prominent and complex examples.
▪ E10 Petrol
▪ Energy
▪ PC‘s – desktops
▪ Phones – e.g. Nokia vs. Apple
▪ Gold or other metals – e.g. copper print media
32
PART III
33
Course Overview
Test
Summary with focus on what you want.
Overview Sourcing Negotiation Specific
Power
Strategy SRM
E2E Sourcing Approaches
E2E Competitive
Process & Why Bidding Style &
SRM? Outsourcing Collaboration
SRM Types
34
The Strategic Part
Competitive
Analysis
Competition
Supplier
Analysis
Industry Sourcing Contracting
and Ongoing Renewal or
Analysis Strategy Change
Business
Economic
Analysis
Collaboration
Other Factors
Supplier Relationship Management
35
Critical Steps (again!)
▪ Scope- Define your Market.
▪ Facts - Gather Data.
▪ Organize the data and describe the industry.
36
Porter Model
▪ An Industry Analysis Model in many companies
▪ Developed by Michael Porter in 1970’s
▪ A generic explanation of how markets behave/behaved
▪ Optimize the existing value chain
▪ Create power via unique positioning
37
Five Forces That Shape Industry Competition
Threat of
new entrants
Bargaining Rivalry among Bargaining
power of suppliers existing power of buyers
competitors
Threat of substitute
products or services
From the „Five Competitive Forces That Shape Strategy“ by Michael E. Porter. Harvard Business Review, January 2008.
38
Porter Model Overview
Threat of new entrants affected by:
▪ Level of buyers’ switching costs
▪ Capital requirements for entry
▪ How proprietary is the technology
Potential Entrants ▪ Degree of customer loyalty and product identity
▪ Significance of barriers to entry for new suppliers
▪ Profit margins of industry
Raw Material INDUSTRY
Buyers
Suppliers COMPETITORS
Buying power of the raw material suppliers Rivalry Among Existing Industry (your Bargaining power of buyers affected by:
affected by: companies Suppliers) affected by: ▪Relative volume of purchase
▪Relative volume of purchase ▪Number and relative balance among ▪Importance of product to buyer’s costs
▪Importance of feedstock to the industry’s cost competitors ▪Degree to which product is standard
▪Degree to which product is standard ▪Utilization of industry capacity ▪How easily the buyer can switch suppliers
▪How easily the industry can switch ▪Capacity utilization of individual suppliers ▪Profit margin buyers earns on product
feedstock suppliers ▪Rate of industry growth ▪Ability of buyer to backward integrate
▪Profit margins the industry earns on product ▪Ability of buyers to switch suppliers ▪Amount of industry information buyer has
▪Ability of the industry to backward integrate ▪Level of fixed costs ▪Supply/demand balance
▪Amount of information industry buyers ▪Degree of exit barriers
have about their suppliers
▪Supply/demand balance Threat of substitute products/services affected by:
▪Development of new product(s) with similar
Substitutes price/performance characteristics
▪Availability of substitute products with similar
price/performance
▪Degree to which existing suppliers perceive a threat
