Emphasising the relationships in SRM | by Dr Ellsworth C Jonathan

dr ellsworth.jonathanSupplier relationship management (SRM) has become a crucial business strategy for many reasons including: pricing pressures; the need to understand profitability and risk; the need to maintain cost-effectiveness to be cost-effective; and the need to build stronger partnerships with key suppliers that produce creative new technologies and effectively deliver them to market.

SRM methodology enables organisations and practitioners to develop a better understanding of the effects of suppliers-buyer relationship and to prevent costly mistakes. In particular, a deliberate commitment with suppliers as long-term collaborators (and an attempt to establish a relational connection) would enhance the value of the supplier-buyer relationship.

Collaboration is key
Due to the challenging employment climate, supply chain practitioners must take advantage of the resources available, organise collectively to work effectively and be more creative. Collaboration is one way to accomplish this goal. Collaboration is essential as it allows participants to cooperate for shared interests and encourages teamwork and knowledge acquisition. There are, however, two known impediments to operationalising cooperation: first, the issue of who to partner with, and, secondly, how to facilitate enhanced collaboration. Any company's business behaviour in the supply chain will critically impact the brand identity and priorities of other firms in the supply chain, taking part in the collaboration. The appointment of an influential accounts manager to manage partnerships both internally and externally from the supply chain and the company will maximise the value of the collaboration.

Supporting CSR
Corporate social responsibility (CSR) enforcement in the supply chain may be facilitated through collaborations. CSR can be defined as the means to satisfy the needs of society, employees, customers, the environment and others, to pursue a long-term growth plan, concerning maximising revenues and its shareholders' obligations. The incorporation of CSR into supply chain management would help to create and strengthen mutual trust among the supply chain's node businesses, mitigate the uncertainties in supply chain management, promote shared interests within the supply chain and develop a long-term relationship. It is critical to understand what drives a successful and competent supply chain in a different part in the world within the various countries where race relations and cultures form part of CSR policies.

Collaboration across company cultures
From an inter-organisational point of view, cultural integration the alignment between two combined corporate cultures. The value of inter-organisational cultural fitness – as it feeds into company success – is also widely acknowledged in the supply chain management literature. Various forms of inter-organisational relationships have been identified and, in general, all inter-organisational links are challenging simply because they are not integrated.

If companies operate from different countries, there will always be different law, and likely different cultures. This needs to be tackled in some form of a policy or procedure to guide the parties from each side of the relationship.

For instance, the handing over of gifts after a meeting may be expected or a total “no no”. Companies have to ensure that their rules or policies are clear on this behaviour to avoid insulting and disrespecting their peers from the other company, which could ruin future business for both parties and have long-term negative consequences. srm image

SRM in the public sector
The public sector is regarded as one of the most significant customer categories for many manufacturers and service providers. In the South Africa public sector, however, the management of stable supplier relationships can be a challenge, despite the aim to improve service delivery through reasonable and reliable supplier-management processes.

Throughout the South African public sector, procurement is a managed mechanism established and governed by a wide variety of rules, legislation and regulations, judicial and administrative rulings, policies and procedures. There is an effort by the government to ensure that central to public procurement transparency and a high level of integrity, with a focus on treating all vendors equally. With this in mind, documents or policies as they relate to public sector SRM may prove useful.

A new way of thinking
The partnership between companies has changed from being transactional to being relational and alliance-based. Still, the public sector has an obligation to fairness, which may mean including all vendors in the product pool with fair value to all. This can mean that the suppliers in the database are rotated, and several vendors are used. The perception that inappropriateness occurs from time to time does not discourage public procurement practitioners and organisations from taking advantage of them. Consequently, the risk of dishonest conduct when working with vendors prohibits public procurement authorities from enforcing the benefits of SRM.

The challenges and opportunities of globalisation and the increasing need for efficiency and cost control make it essential for companies in both the private and public sector to develop links with their suppliers for an effective and transparent supply chain.

Dr Ellsworth C. Jonathan is a principal associate at Bespoke Group Africa - www.bespoke.co.za

Posted on August 07, 2020

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