Innovative Supply Chain Management Practices Essay

Pages: 25 (7165 words)  ·  Bibliography Sources: 25  ·  File: .docx  ·  Level: College Junior  ·  Topic: Business

Chenowith et al. (2012) conducted a literature review and interviewed representatives of commercial firms with successful Supplier Relationship Management (SRM) programs and came to the conclusion that the best SRM practices include the following:

The total business management is done with each supplier by consolidating contracts and tying future businesses to performance.

Performance of the suppliers are measured and shaped by establishing a system to set targets, measure performance, rank suppliers and reward good performance.

Key suppliers are involved early in the design stage to take advantage of their design sensibilities and know-how about innovations and manufacturability of the product to reduce complexity.

Promote dialogue with suppliers by hosting high-level meetings that discuss mutual expectations and possible improvements. Additionally sharing of future plans and roadmaps will demonstrate commitment of both parties involved.

Recruitment of employees with the right quantitative and qualitative skills.

6. The hired personnel are trained adequately and educated about the suppliers and their processes, costs, capacities and capabilities so they are well-equipped to work with them and fix current processes and suggest ways to improve.

Sarnovsky (2015) indicates that the Supplier Management process is intended to gain better value for money and ensure that the supplier performance meets the targets mentioned in the contracts and agreements and falls within its' terms and conditions. The main purposes of the Supplier Management process is to:

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1. Improve cost effectiveness.

2. Make sure the contracts and agreements made with suppliers meet business requirements and the targets agreed upon in the Service Level Requirements (SLRs) and Service Level Agreements (SLAs) in alignment with Service Level Management (SLM).

3. Supplier relationship is boosted.

4. Performance of suppliers is managed.

5. Supplier contracts are negotiated and managed through their term.

6. A Supplier and Contract Database (SCD) is maintained along with the supplier policy.

TOPIC: Essay on Innovative Supply Chain Management Practices Assignment

Comparison of Effective Supplier Management (Chenowith et al. 2012; Sarnovsky 2015)

Chenowith et al. (2012)

Sarnovsky (2015)

Total business management with individual suppliers: When large enterprises analyzed their spending, they realized that many contracts with some suppliers made it difficult to measure performance and manage work with them to improve performance and feasibility. Companies that excel in Purchasing and Supply Chain Management (PSCM) manage their total business with individual suppliers by merging their contracts and agreements with each supplier, suppliers' business unit or action into a single or very few contracts. In this way they can link future transactions to performance on all contracts and relationships.

Get better value for money from contracts and suppliers: Supplier Management processes are intended to ensure that the aims of the contracts and agreements are in harmony with business needs and the targets agreed with the SLAs. This will ensure better value for menu from suppliers.

Performance of the supplier is analyzed and altered: Companies recognized for the best PSCM practices measure and enhance supplier performance and supply base regularly in addition to managing their total business. They achieve this by setting up a performance measurement system that periodically analyzes supplier performance in comparison with their goals. They weigh the performance and cost metric of each supplier and rank them into three to five groups. Awards and/or more contracts are given to higher ranking suppliers who exceed targets.

Make sure that the agreements and contracts agreed upon are cognizant with business requirements: The purpose of the Supplier Management process is to ensure that the supplier upholds the terms, conditions and meets targets of their contracts and agreements while enhancing value for money obtained by the enterprise. Supplier strategy and policy from service strategy must drive all Supplier Management processes.

Key suppliers are involved prematurely in the design stage: Companies that are populate for their Supplier Relationship Management (SRM) employ the practice of involving the higher ranking suppliers at the product design stage itself. Some industries commit about 90% of the product cost at the product design stage when the specifications of manufacturing are decided.

Supplier relationships are managed: Positioning supplier relationships as partnering relationships reflects a changing trend from the traditional hierarchy. The new system is characterized by integration and strategic alignment, mutual trust and flow of information to bring shared risk and reward.

High level meetings are hosted to promote dialogue: Annual, high-level customer/supplier meeting are held to engage in dialogue and discuss the expectations, share plans and highlight wats to improve along with rewarding the high ranking suppliers.

Supplier performance management: overall business service levels are achieved by clearly establishing targets and boundaries for individual suppliers by the management of supplier performance.

Recruit Skilled Personnel: Companies that lead the markets are known to hire skilled personnel from engineering, manufacturing, and purchasing. Seeking out employees with good "soft" skills like communications and problem solving also pays off.

Negotiate contracts with suppliers and manage them through their lifecycle: To ensure delivery and development of the business, formal contracts must be agreed upon with the suppliers. They provide binding legal obligations for the life span of the contract.

Train personnel to have a thorough knowledge of suppliers: SRM employees must be educated of the suppliers' processes, costs, capacities, and capabilities. They must be equipped to deal with suppliers and develop or fix processes and improve them to meet future needs.

Maintain policies that support the Supplier and Contract Database (SCD): An effective Supplier Management process is adaptive and spends more resources on higher ranking suppliers. The Supplier Manager must ensure the relationship works beyond the initial contract (Sarnovsky, 2015).

Module 2 -- SLP

The cost and value of the entire supply chain must be understood. Evaluation of a supplier cannot be achieved without an thorough analysis of the costs from materials to the end product (Blanchard, 2009). With the globalization of businesses, enterprises must operate their supply chains on a global scale in order to compete by procuring and distributing in world markets. An exponential rise in off-shoring and outsourcing by North American manufacturers, retailers, and distributors is evident as the number of containers entering the U.S. alone in April 2007 approached 1.4 million. International trade is expected to keep growing even though economic conditions and world politics may hamper the growth in some cases, the overall trend is not likely to change. With global sourcing of materials and components and the rise of newer markets, longer supply chains are created. These "12,000-mile long supply chains" as they are referred to in International trade, bring in complexities regarding managing costs and risks (Managing the Total Costs of Global Supply Chains, 2008).

As many industries have become global, companies must keep increasing international sourcing and distribution. Changing business environments have necessitated that the decisions regarding international operations be made accurately and in a timely manner with comprehensive cost information. This is of utmost importance in the area of Supply Chain Management. When decisions to expand in the global market are made without accurate information about the costs involved, profitability and share holder valid are adversely affected. Going global adds as much as a few weeks to the value chain. This ties up about 30% of the product price in working capital. Additional compliance costs with constantly changing trade regulations, quotas, and tariffs can be incurred.

The enterprise-wide scope of Supply Chain Management includes transactions with partners involved. The functions included are: Buying, selling, and sourcing;

Planning of the production stages; Transport;

Distribution and storage; Fulfillment of the order; Customer service;

Planning of the supply chain and its budgeting; and Finance and capital management.

Where traditional accounting was transaction oriented, SCM flows across the organization to cross boundaries between departments and extending into trading partners. Flowing products necessitate a continuous SCM (Managing the Total Costs of Global Supply Chains, 2008).

Supply Chain Management (SCM) has become more and more complex and requires precise and decisive strategic leadership from the top. Companies cannot achieve targets without strong leadership and effective guidance (Heckmann, Shorten & Engel, 2003).

With the world turning into a big supply chain, SCM facilitates rapid growth of Multinational Corporations (MNCs) and strategic partnerships; global expansion and procurement; fluctuating gas prices and environmental concerns. These issues dramatically affect corporate strategy. Because of these trends, SCM is fast becoming a critical business discipline in the world (University Alliance, n.d).

The effectiveness of the purchaser working in the SCM environment depends on the interested suppliers. "Soft" skills like persuasion, influence, communication, coordination, and relationship management are key components for success as a supplier chain manager. This plays a pivotal role within the organization as it spans demands right from the supplier to the end customer. Supply chain management can sometimes involve going beyond suppliers that interact with the enterprise to their suppliers, in order to make improvements. This can improve value for money and quality and ensure social responsibility units. Organizations seldom work closely with their suppliers' suppliers; working at more than two suppliers removed is unusual (CIPS, n.d.).

Module 2 -- Discussion Question

Both customers and suppliers have a common goal that is to cater to the end user. Because they both have limited resources, working… [END OF PREVIEW] . . . READ MORE

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