The process of supplier management

The process begins with Supplier Management Services classification. According to the size of the purchase amount and the risk of changing suppliers, suppliers can be divided into strategic suppliers (high purchase amount, high risk), preferred suppliers (considerable purchase amount, considerable risk, good supplier performance, and alternative suppliers) ), unqualified suppliers (such as new technologies, new suppliers) and eliminated suppliers (small purchase amount, low risk, and many alternatives), etc., and then formulate supplier management strategies according to different categories. Under the “small purchase,” market competition can solve many supplier problems, but it is challenging to settle strategic suppliers.

Why? These suppliers either possess key technologies or strategic resources, are large in scale, have monopoly advantages, and have limited market competition, which must be managed by establishing strategic partnerships. This seems to be a simple truth, but it has taken many years to be recognized and accepted. Many “small procurement” companies have left it alone or struggled to differentiate and manage these strategic suppliers systematically.

“Big procurement” can raise procurement to a strategic level because it can straighten out the relationship between the company and strategic suppliers by establishing strategic cooperative relationships, thereby adding value to the company’s development.

The second step in the process is to integrate suppliers and eliminate inefficient ones. Supplier classification often finds too many suppliers, resulting in scattered purchases and complex management. Companies that purchase excellence have all experienced substantial supplier consolidation.

The third step of process nation is supplier management performance management, which is to manage the performance of suppliers from the aspects of cost, quality, delivery, service, technology, assets, process, and so on. The management focus under “Small Procurement” is cost, quality, and delivery. Procurement does not have the ability or energy to manage higher-level services, technology, asset operation, and supplier process construction. Quality, cost, and delivery are the benchmarks, and technology, assets, and processes are the foundation.

The “big purchase” incorporates the latter into the index system and treats the symptoms by addressing the root causes. In addition, management is not only a statistical indicator but also helps suppliers improve (supplier development). Unlike the previous laissez-faire and survival of the fittest, more and more large companies now recognize the importance of helping suppliers improve. For example, industries such as automobile and aircraft manufacturing systematically help suppliers to implement lean production, process control, etc.

This is because large companies generally have more resources and capabilities, which is also the result of learning from Japanese companies. Supplier development is an integral part of long-term supplier relationships, and the financial rewards are considerable: suppliers reduce waste and costs and increase productivity, and buyers ultimately benefit.

The final step in the process is integrating the supplier with the company. In recent years, with the prevalence of outsourcing strategies, many companies increasingly rely on suppliers to produce, assemble, sell products, and provide after-sales services. Objectively, it is necessary to better integrate suppliers into the entire process, from procurement to payment.

E-commerce plays an important role. Integration also means bringing suppliers into the design phase early on. Suppose supplier classification, integration, development, and management deal with existing problems. Early supplier intervention ensures that the most suitable partners are selected, reducing future problems.

The difference between “small purchase” and “big purchase” is also here. Purchasing personnel under the “small purchase” are entangled in affairs all day long because they chose the wrong supplier initially. The supplier’s good ideas were not incorporated into the design, so either the supplier’s daily performance did not meet the standard (high defective rate, delivery time problem),

Benefits 

The benefits of supplier process management are apparent. According to incomplete statistics, integrating optical suppliers can reduce prices by 6% to 12% at once, plus 2% to 4% year-on-year price reductions. For suppliers, integration leads to more business and long-term partnerships. Supplier development on the buyer side can also help suppliers increase efficiency and save money, thereby increasing profit margins.

And the whole process starts from solving the problem, either increasing the purchase amount or helping the supplier system to improve, not the profit transfer under “small purchase” (“5% price reduction, how to reduce it is your business”). These are all helpful in building long-term trusting relationships. Of course, when business is sluggish, and cost pressures are high, buyers and sellers often return to the confrontational situation under “small purchases,” challenging the relationship from time to time.

Therefore, it is difficult to say how much better a particular industry’s supply and demand relationship is.

Even though the aviation industry has won five years of “Procurement” gold medals in the past ten years, the relationship between suppliers and manufacturers is still taut. The key is that the industry has been sluggish for many years, and the cost pressure is too great. A few years ago, the airline industry’s cumulative losses exceeded all profits since the Wright brothers invented the airplane.

Another example is Ford, Chrysler, Motorola, Hewlett-Packard, etc… However, they are all gold medal winners in “Procurement” and have first-class procurement and supply management mechanisms, and they cannot eliminate the current struggling situation. Of course, it would be worse if they didn’t have an effective supplier management system.

As supplier management strategies improve supplier performance and mitigate the risk of procurement decisions, Gordon warns of a common mistake: not sharing results within an organization. “People in the procurement or supplier management field get busy working with suppliers and forget to talk to someone,” she says. “They need to communicate this with other departments [and] involved within the organization.”

Such communications “continue to increase support within the organization,” Gordon said. “Keeping success secret is a surefire way to undermine the Supplier Management Strategy and lose support for it. This often happens.”

Are you tired of not getting enough opportunities, respect, and money from your procurement career? So what do you guess? Nothing will change unless you take action to become a world-class procurement expert.

Obtaining SPSM certification is an action you should take if you want to bring the latest sourcing practices into your organization and realize your career potential. Download the SPSM Certification Guide now to learn how to embark on a journey into a more rewarding sourcing career!

Preventing gift bribery in the supply chain

To promote fair and transparent corporate and procurement activities, our company has formulated the following two points on preventing corruption in the “CSR Guidelines for Cooperative Companies,” We request that all of our cooperating companies truly practice and understand them.

Political donations and donations are implemented in compliance with the laws of each country, and a transparent and fair relationship with politics and administration is established.

We do not accept or offer entertainment or money to seek an unfair transaction.

For the education of employees, while issuing the “Exedy Code of Conduct” to all employees, they regularly read aloud together to deepen their understanding.

In addition, when refusing entertainment and gifts, the situation of unavoidable acceptance must be thoroughly reported to the boss and officers and made public.

Supply Chain Risk Management

In our group, in the event of collapse, closure, accident of a partner company, or disaster due to natural climate change, management activities are carried out to restore the supply chain as soon as possible to minimize supply chain disruption. In particular, to reduce the risk of disasters and other possible occurrences, the location of each Procurement company Mexico based in the supply chain, the location details, the policy status of buildings and production facilities, and emergency contacts (contact means) are regularly checked. , requiring companies deemed in need of improvement to improve their status quo.

Cooperative companies and assistance to disaster-stricken

During the Great East Japan Earthquake, gasoline and light oil were sent as support materials so that the disaster-affected cooperative enterprises could recover as soon as possible. In addition, during the earthquake in the central part of Tottori Prefecture, blue tarpaulins were sent to support the disaster area.

 

Procurement was exhausted, or the product price did not meet the standard, the procurement forcibly reduced the price and transferred the problem to the supplier. There is a big difference between being busy with today’s and tomorrow’s problems. The key to a Sourcing Gold Medal-winning company’s ability to stand out is its ability to deal with tomorrow’s problems more effectively than any other company.

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