Chapter 7

Question 1

What is Supplier Relationship Management

Answer 1

The process of strategically planning for, and managing, all interactions with the third party organizations (ie suppliers) that supply goods or services to organization, in order to maximize the value of those interactions

Question 2

SRM is typically used with suppliers who

Answer 2

• Provide high volumes of a product/service
• Provide lesser quantities of a crucial product/service
• Serve many business units of a company or organization
• Where intensive engineering, manufacturing, and/or logistics interaction is essential

Question 3

Successful Strategic Partnerships include

Answer 3

a mutual commitment and trust over an extended period of time to work together to the mutual benefit of both parties, sharing relevant information and the risks and rewards of the relationship

Question 4

10 Keys to successful strategic partnerships

Answer 4

Building Trust: with trust, partners are more willing to work together, find compromise solutions to problems, work toward achieving long-term benefits for both parties, and go the extra mile

Question 5

10 Keys to Building Successful Strategic Partnerships

Answer 5

Shared Vision and Objectives: both partners must share the same vision and have objectives that are not only clear but mutually agreeable (grow their respective businesses)

Question 6

10 Keys to Building Successful Strategic Partnerships

Answer 6

Personal Relationships: strategic partnerships begin with the development of personal relationships between key people at each company, it is people who communicate and make things happen

Question 7

10 Keys to Successful Strategic Partnerships

Answer 7

Mutual benefits and needs: partnership should result in a win-win situation, which can only be achieved if both companies have compatible needs

Question 8

10 Keys to Successful Strategic Partnerships

Answer 8

Commitment from Top Management to Support the Strategic Partnership: commitment must start at the highest management level, partnerships tend to be successful when top executives are actively supporting and participating in the partnership

Question 9

10 Keys to Successful Strategic Partnerships

Answer 9

Managing change: companies must be prepared to manage change that comes from the formation of new partnerships

Question 10

10 Keys to Successful Strategic Partnerships

Answer 10

Information Sharing and Establishing Lines of Communication: both formal and informal lines of communication should be set up to facilitate the free flow of information

Question 11

10 Keys to Successful Strategic Partnerships

Answer 11

Understanding Capabilities: key suppliers must have the right technologies and capabilities to meet cost, quality, delivery requirements in a timely manner

Question 12

10 Keys to Successful Strategic Partnerships

Answer 12

Continuous Improvement: making a series of small improvements over time results in the elimination of waste in a system. buyers and suppliers must be willing to continuously improve their capabilities in meeting customer requirements

Question 13

Keys to Successful Strategic Partnerships

Answer 13

The process commonly utilized in continuous improvement is: Plan, Do, Check, and Act

Question 14

Plan

Answer 14

identify each specific improvement that is needed, what change is necessary to make the improvement and, then plan for that change

Question 15

Do

Answer 15

implement the change on a small scale to see if the change improves the process before moving forward with full implementation

Question 16

Check

Answer 16

Use data to analyze the results to see if the change made a positive impact

Question 17

Act

Answer 17

If the change was successful, implement it on a wider scale and continuously assess your results If the change did not work, the most likely the root cause was not identified, or the change was not the correct solution, and you may need to begin the cycle all over.

Question 18

Keys to Successful Strategic Partnerships

Answer 18

Measuring Performance: you can’t improve what you don’t measure

Question 19

Total Cost of Ownership

Answer 19

made up of all the costs associated with the acquisition, use, and maintenance of a good or service

Question 20

Total Cost of Ownership

Answer 20

made up of all the costs associated with the acquisition, maintenance, and use of a good or service

Question 21

Supplier Evalutation

Answer 21

a process to identify the best and most reliable suppliers, sourcing decisions are made on data and facts and not on perceptions or opinions

Question 22

Supplier Evaluation: Performance Criteria

Answer 22

It is important to actively monitor a supplier’s performance and provide visibility and feedback on supplier performance at each stage of the evaluation process

Question 23

Relevant Metrics for Performance Criteria

Answer 23

Price performance, life cycle cost, product quality, delivery performance, contractual compliance, participation in product development initiatives, level of cooperation in third-party production management, support of ethics and sustainable practices

Question 24

Why Certify Suppliers

Answer 24

To ensure quality before the product is shipped by the supplier and to avoid duplicate quality testing by the buyer

Question 25

What is a certified supplier

Answer 25

a source that, through prior experience and qualification, can provide material of such quality that it needs little, if any, inspection or testing before going into approved stock or the production process

Question 26

Benefits of Supplier Certification Programs

Answer 26

1. Reducing the amount of time and labor necessary for the buyer to conduct incoming inspection of products and materials from certified suppliers, creates cost savings 2. Building long-term relationships 3. Recognizing excellence 4. Decreasing the supplier base

Question 27

COA

Answer 27

Certificate of Analysis: buyer trains supplier on approved test methods so that supplier can test product before shipment

Question 28

Supplier Certification

Answer 28

Supplier Certification programs are also used as verification that select suppliers operate, maintain, improve, and document effective procedures that relate to the buyer's requirements for supply elements such as cost, delivery, flexibility, etc

Question 30

External Certification

Answer 30

International Organization for Standardization is the world's largest developer of voluntary international standards - ISO certification is highly sought after as it represents achieving and maintaining a standard of excellence verified by an independent third party organization

Question 31

External Certification Program

Answer 31

Two Common ISO Standards - ISO 9000: a series of management and quality standards in design, development, production, installation, and service - ISO: 14000: a family of standards for environmental management

Question 32

ISO 9000 Quality Management Principles

Answer 32

1. Customer Focus 2. Leadership 3. Involvement of People 4. Process approach 5. Systems approach to management 6. Continual Improvement 7. Factual approach to decision making 8. Mutually beneficial supplier relationship

Question 33

ISO certified suppliers are preferred by procurement departments because

Answer 33

- They have to conform to an externally defined set of standards for quality and delivery of service - They are easier for procurement to initially qualify and periodically audit - They are usually more open to sharing supply chain information - they welcome building relationships w customers - they have formal processes in place for continuous improvement of their products, services, and processes - certification is done by an independent third party agency - firms have to be re-certified every three years

Question 34

Why Develop Suppliers

Answer 34

So that they can provide the products and services reliably, with quality at the right price when you need them

Question 35

What is supplier development

Answer 35

the business, technical, and financial assistance given to existing and potential suppliers to improve quality, delivery and overall performance - a buyers commitment and activities to improve a suppliers capabilities

Question 36

Two most important functions of a supplier development program are:

Answer 36

- Providing information about products, expected sales growth, etc. Suppliers need to become extensions of their customers - Training suppliers in the application of GMP (Good Manufacturing Practices), lean and six sigma/ quality tools

Question 37

Supplier Development process steps

Answer 37

1. Identify critical products and services a company buys 2. Identify the suppliers of those critical products and services 3. Form a cross-functional team internally to work with the supplier 4. Identify what issues or gaps exist and what specific improvements need to be made 5. Meet with the supplier's top management to get their support and involvement 6. Define details of the agreement and action plan 7. Monitor the status of the projects and action plan and modify strategies as necessary

Question 38

Early Supplier Involvement

Answer 38

Key suppliers become more involved in the internal operations of the buyer's company, particularly with respect to new product and process design, concurrent engineering, and design for manufacturability

Question 39

Value Engineering

Answer 39

activities that help the buyers company to reduce cost, improve quality, and reduce new product development time beginning with the initial design

Question 40

Why recognize suppliers

Answer 40

to motivate them to perform at their best in meeting your needs for products and services efficiently and effectively

Question 41

Supplier Recognition Programs

Answer 41

A program to recognize suppliers who achieve the high performance standards necessary to meet customer expectations

Question 42

Three attributes of supplier recognition programs

Answer 42

1. Companies should recognize and celebrate the achievements of their best suppliers 2. Award winners exemplify true partnerships, continuous improvement, organizational commitment, and excellence 3. Award winning suppliers serve as role models for other suppliers

Question 43

Benefits of Supplier Recognition Programs

Answer 43

1. Motivated suppliers- a supplier recognition program can motivate suppliers to excel in terms of their quality, pricing, and delivery commitments 2. Improved Supplier Loyalty- supplier support is important to ensure that customer delivery commitments are maintained 3. Encourage Suppliers to adapt to the companys culture (treat them as part of the family) 4. Helps to create entry barriers for competitors- if the suppliers trust the company, they may be more inclined to sign deals of exclusivity with the company for certain crucial components 5. Encourages Supplier Participation in product innovation

Question 44

5 characteristics to consider in the development and implementation of an SRM system

Answer 44

1. Automation 2. Integration 3. Visibility of info 4. Collaboration 5. Optimization

Question 45

Trends in Supplier Relationship Management

Answer 45

1. Alignment of Supplier Relationship Management with Strategic Sourcing 2. Focus on cross-functional engagement 3. Focus on innovation 4. Investment in people and soft skills