Supplier Relationship Management in Procurement

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Questions and Answers

What type of items are classified as high in expenditure and high in risk?

Items often bought in large quantities

What is the primary goal of Supplier Relationship Management (SRM)?

To proactively manage the link between buyer and supplier

What are the benefits of breaking down functional barriers in SRM?

Promoting innovation and joint thinking for 'doing things better'

What is the characteristic of the basic relationship approach in SRM?

Single point of contact Signup and view all the answers

What are the three key areas of sustainability that organisations should focus on?

Environment, human rights, and business integrity Signup and view all the answers

What is the benefit of transparent sourcing in the digital age?

It provides great benefits for buyers Signup and view all the answers

What is a key aspect of the interdependent relationship approach in SRM?

Many points of contact between buyer and supplier teams Signup and view all the answers

Why is responsible sourcing important for organisations?

For ethical, financial, and reputational reasons Signup and view all the answers

What is the primary factor that determines a supplier's leverage in negotiations?

The supplier's power, which is influenced by the uniqueness of the component and the availability of alternatives. Signup and view all the answers

What is the purpose of generating a supplier portfolio?

To identify potential suppliers that meet the required criteria, such as size, credit rating, company ethics, or sustainability requirements. Signup and view all the answers

What is the primary goal of categorizing items using the sourcing strategy matrix?

To manage risk by taking different approaches to manage different categories. Signup and view all the answers

What is sourcing in supply chain management?

The interface between suppliers and the buying company, split into two main business activities: selecting new suppliers and managing them over time. Signup and view all the answers

What is the characteristic of bottleneck items?

Low expenditure items that provide significant risk to the organization if there is no supply. Signup and view all the answers

Why is it important to invest time in sourcing leverage items?

To reduce the money spent and make them routine items. Signup and view all the answers

What are the two main types of items that sourcing in product companies often involve?

Direct items (related to the product's manufacturing process) and indirect items (all other products and services needed to run the company). Signup and view all the answers

What is the first step in the pre-order process of the purchasing process?

Need (identifying the customer's need for a product). Signup and view all the answers

What is the primary difference between routine items and critical items?

Routine items have low expenditure and low risk, while critical items have high expenditure and high risk. Signup and view all the answers

What is the purpose of the tendering step in the pre-order process?

To select a short list of preferred suppliers. Signup and view all the answers

What is the role of the supplier portfolio in the category sourcing process?

To identify potential suppliers that satisfy the required criteria. Signup and view all the answers

What is the final step in the pre-order process of the purchasing process?

Contracts (signing a contract with the selected supplier). Signup and view all the answers

What is the primary goal of segmenting different category groups using the sourcing strategy matrix?

To develop different strategies to manage risk. Signup and view all the answers

What are the two main parts of the purchasing process?

Pre-order process and post-order process. Signup and view all the answers

What is the main role of sourcing in supply chain management?

To find and manage suppliers that meet the organization's needs. Signup and view all the answers

What are the benefits of managing sourcing well in an organization?

Many benefits, including improved supply chain efficiency and effectiveness. Signup and view all the answers

Study Notes

Sourcing in Supply Chain Management

Sourcing is the interface between suppliers and the buying company, involving two main business activities: selecting new suppliers and managing them over time.

Supplier Relationship Management (SRM)

SRM is a mutually beneficial process that improves the performance of both buyers and suppliers.
Benefits of SRM include:
- Breaking down functional barriers and functional mindsets
- Promoting innovation and joint thinking
- Improving supply chain visibility
- Sharing assets across supply chain and removing duplications
- Enhancing forward-looking visibility

SRM Models

Basic relationship approach (bow-tie model): single point of contact, easy to manage, but decision-making may take longer and is dependent on personalities.
Interdependent relationship approach (diamond model): many points of contact, main business customer teams work closely with corresponding supplier teams.

Sustainability and Responsible Sourcing

Supply chain companies must invest in sustainability and responsible sourcing strategies for ethical, financial, and reputational reasons.
Sustainability encompasses three key areas: environment, human rights, and business integrity.

Sourcing in the Digital Age

The digital age provides benefits for buyers, such as transparent sourcing.

Purchasing Process

The purchasing process is divided into two parts: pre-order and post-order steps.
Pre-order steps include:
- Need identification
- Specification
- Sourcing
- Tendering
- Negotiation
- Selection
- Contracting
Post-order steps include:
- Placing and handling orders
- Progressing and delivery

Sourcing Strategy

Buyers can choose a sourcing strategy based on the category sourcing process.
The sourcing strategy matrix (Kraljic, 1983) is a tool to segment category groups and set different strategies to manage risk.
The matrix categorizes items into:
- Routine items: low expenditure, low risk
- Bottleneck items: low spend, high risk
- Leverage items: high spend, low risk
- Critical items: high spend, high risk

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Description

Learn about Supplier Relationship Management (SRM), a mutually beneficial process that improves performance between buyers and suppliers, promoting innovation and joint teamwork.