What Is Supplier Performance Management?

Supplier Relationship Management (SRM) Just as popular CRM is used to improve relationships with customers, SRM is used to improve relationships with suppliers in the upstream of the supply chain. It is a commitment to establish and maintain with suppliers Long-term, close partnership management ideas and software technology solutions. It aims to improve the new management mechanism of the relationship between enterprises and suppliers. It is implemented in the areas surrounding enterprise procurement business. The goal is to establish long-term, Close business relations, and through the integration of resources and competitive advantages of both parties to jointly develop the market, expand market demand and share, reduce the high cost of the product in the early stage, and achieve a win-win business management model.

Supplier relationship management

Supplier Relationship Management (SRM) In fact, it is

demand analysis

Accurate and timely demand analysis is a prerequisite for enterprise decision-making, as is the procurement aspect. With the professional development of the supplier team, accurate and timely procurement can save costs and obtain procurement advantages in the market. Purchasing must face both production and meet market and customer requirements. SRM can integrate internal and external resources, establish a high-efficiency organizational procurement, and strategically deploy its own business-critical materials or service requirements to reduce unexpected problems in daily production operations.

Classification and selection of suppliers

The characteristics of suppliers that are in line with the company's strategy should be determined, and all suppliers should be evaluated, and suppliers can be divided into transactional, strategic, and large amount. Generally speaking, the transaction type refers to a large number of suppliers with a small transaction amount; the strategic supplier refers to the few suppliers necessary for the company's strategic development; the large-value supplier refers to a large transaction amount with strategic significance General vendor. The goal of supplier classification is to develop different types of suppliers for different types of suppliers.

From CRM to SRM

The two most important exports of corporate business to the outside world are broadly "buy" and "sell". In terms of "selling", in order to make their products and services win the market and win customers, companies attach more importance to management and investment in this area.

Summary

For a long time, enterprises as an individual economic role have been in a "natural state" of indifference, loneliness, malaise, and struggle, but with the acceleration of the global economic integration process, with the vigorous development and promotion of the Internet worldwide Application, this era and situation have begun to fall apart, replaced by members of the supply chain to cooperate with each other for market value

Supplier relationship management

Trend.

For many companies, partnerships with their suppliers have become their main mode of access to resources and the delivery of products and services along the supply chain. There are at least three strong reasons to support this model:

Efficiency and economies of scale

It is gradually discovered that suppliers can use technology to work together to reduce costs and improve efficiency through partnerships with peers. This is particularly prevalent in the retail industry. For example, JC Penny integrated its inventory control and product replenishment systems with other suppliers. Together, companies in the supply chain can use their respective capabilities and resources to save overlapping costs.

Whether the entire supply process is streamlined through technology, or the economy of scale in research and development is achieved, the most important reason for the partnership between suppliers is the need to pursue greater efficiency and better production efficiency. In this regard, the same factors that drive many supplier-customer partnerships are that partnerships are born to adapt to the pursuit of better productivity.

New market value

In some industries, the partnership between companies in the supply chain has entered a new level-combining forces to create more market value and creating new contributions to the integrated market. In other words, companies combine each other's core capabilities, develop new products or launch new solutions. At the highest level, this combination of core capabilities will even reverse the direction of integrating industries. From the perspective of daily operations, the new market value created through cooperation brings more powerful competitive advantages to partner manufacturers. For example, Apple Computer, IBM and Motorola have collaborated to create Power PC and other products. From the perspective of daily operation, the new market value created through cooperation brings more powerful competitive advantages to partner manufacturers.

customer demand

The strongest and most powerful reason to change and innovate the entire industry strategy is to meet customer expectations and needs. The cooperation and cooperation between enterprises has gradually become the basic requirements and expectations of customers, especially in the high-tech industry. This is because customers are not only looking for suppliers who can provide products and services, but also require suppliers to cut into the entire supply project and have the ability to co-operate with others. Customers also require strong partnerships to bring them complete Solutions, as well as providing the best products and services.

Acquisition cost and supplier relationship

After years of internal productivity improvements in enterprises, the sources of productivity within some large enterprises have begun to dry up, as Shawn Tully pointed out in an article in the Fortune magazine: "To find effective Sources are getting harder and harder to achieve, which means that companies don't have much fat to reduce.

However, more than half of the company's revenue is spent on external purchases, more than 55% (more if the external contract is included, even up to 80%), and it is traditionally regarded as productivity improvement The focus is on less than half of the internal costs. Therefore, companies are gradually starting to save the 55-80% portion and are eager to save costs. As a result, some large companies rely on their huge purchasing power to start taking tough measures. First of all, they take advantage of their advantageous positions and take advantage of large purchases to force suppliers to significantly reduce prices. For example, General Motors will supply supplies in the automotive industry. Businessmen became famous under pressure. They are motivated by large purchases, forcing prices to drop significantly. However, let's imagine that the supplier made a price concession in order to obtain a large order, which actually means that the buyer has gained the benefit and transferred the loss to the supplier. The supplier has only two options: one is from internal Increase efficiency or dig savings to compensate for this loss; the second is to equally return the equivalent loss to its buyer in other ways. As a result, some critical components will not be delivered on time or will be of poor quality The supplier also knows how to play the latter case with the buyer. At first, this threatening method seemed to work, and GM did use it to reduce its procurement costs by nearly $ 4 billion. But over time, GM and other companies adopting the same strategy have found that things are far from simple. Due to the fact that suppliers have been squeezed out of too many benefits and have a resentment, some companies have begun to lose their loyalty and trust. In the buyer's market, this loss of injury may not be obvious, but what will happen in the event of a shortage of raw material supply? GM found that when the market situation reversed, many suppliers still remembered the old hate, and scarce raw materials They are turning to GM competitors, such as Honda, who have always been good at gaining supplier loyalty.

Subsequently, buyer companies began to select suppliers, no longer using insurance practices that used to win by number and spread work to hundreds of suppliers, and began to ruthlessly reduce the number of suppliers to strengthen the supply base. For example, a market service company in the United States purchases $ 400 million in promotional materials each year. Before the reform, the purchasing practice followed was that each supplier had 3 suppliers to compete, and then the lowest price was selected. Orders are less than 10,000 US dollars, and most suppliers order about 50,000 US dollars each year, so a lot of energy has been invested in many orders to negotiate business with suppliers. Fortunately, the company reoriented and succeeded. After carefully selecting the process, it began to sit down with the best suppliers to negotiate and build a win-win relationship with them. It outsourced a total of 400 million US dollars of promotional procurement projects to 2 suppliers to complete. This change prompted a change in the organizational structure of the company, but the effect was significant. Outsourcing reduced operating costs by 12%, and the on-time delivery rate of promotional materials rose from 60% to 85%. Subsequent investigations showed that both parties were very satisfied with this new way of doing business.

Partnership-the product of maximizing contributions

More and more companies, including General Motors, have also joined this rank and are actively pursuing this strategy of "creating a big pie together and eating bigger pie". Some visionary CPOs started asking interesting questions: "Why do we have to fight with suppliers to die and live to eat this existing pie? Must this pie of interest be as big as this? Why not join forces to make it Making it bigger makes both parties benefit at the same time, how about eating bigger pie together? ". Although there are many hidden costs to changing suppliers, including search time and quality assurance issues, in the long run, treating suppliers fairly and fairly seems to be a more cost-effective option.

In some industries, such as high-tech industries, electrical industry logistics and professional services, such partnerships have been established more generally, and this influence is constantly expanding, but in some industries this transformation It is just emerging. However, this is still a trend that cannot be ignored. Leading companies in this wave, relying on the results and advantages of partnerships, have beaten other dull competitors.

For companies that can transcend the traditional concept of organizational boundaries, partnerships give them generous rewards, while companies that are confined to traditional trading relationships are punished. Pierre Mitchell, a senior analyst at AMR Research, commented that by strategically organizing your supply chain and implementing your supply chain, you can significantly reduce potential costs and significantly affect a company's competitive position. Partnerships enable suppliers and customers to have long-term competitive advantages in their respective markets. They are gradually consolidating in this more efficient and effective business relationship, and step by step out of competitors. At the same time, customers can sell products faster and cheaper, and suppliers can also provide competitive products to customers with more flexible channels and methods and a more stable position while obtaining long-term contracts. When partner organizations can continue to pursue lower costs and more new value, they also create an advantage that traditional transaction forms can never match. Therefore, in theory, partnership is also a product of the adaptation contribution of the enterprise.