Learning Objectives
10-1: Identify the goals of supplier management.
The goals of a well-managed supplier management program are to improve an organization and its supply chain performance by enhancing the quality of goods and services, ensuring their timely delivery and reducing their cost, fostering sustainability, improving product and process innovations, and promoting ethically and socially responsible behavior.
10-2: Describe the various tasks of the supplier management process and demonstrate how metrics are used to rate supplier performance.
The key elements of the supplier management process are:
a. Strategic sourcing
b. Purchasing
c. Supplier performance management
d. Supplier information management
e. Supplier risk management
f. Supplier relationship management
g. Supplier phase out
There are numerous measures that can be used for rating supplier performance, including quality performance, cost and service performance, and supplier capability assessment.
10-3: Evaluate the issues involved in managing service providers.
The process of managing service providers is similar to the one used for managing suppliers in the manufacturing sector. Yet, given the intangible nature of services, there are also some unique challenges that organizations have to address. Service risk management and relationship management are two key components in managing service providers.
10-4: Describe the unique challenges involved in managing global suppliers.
Unique challenges have to be addressed when managing global suppliers. They include differences in languages and cultures, long lead times, and security threats. Additionally, political instability in other countries, natural disasters, dock or port strikes, communications failures, power failures, currency risks, cyber-attacks, terrorism, and piracy are all unique characteristics that can affect a firm’s ability to proactively manage its global suppliers.
10-5: Identify some reasons why firms actively promote ethically and socially responsible behavior in supplier management.
Supply chain sustainability is important because approximately 50% of all energy and carbon emissions for a company are related to its supply chain. Because many countries now require companies to report their sustainability practices, these firms are demanding that suppliers reduce their carbon emissions and disclose the impact their products and processes have on the environment. In addition to concern for sustainability in supplier management operations, it is important to recognize ways in which they can promote ethically and socially responsible behaviors. Companies face immense pressure from consumers, investors, business partners, regulators, and media organizations to behave ethically. These stakeholders expect not only individual companies but their entire supply chains to be ethical. Companies can face fines or public shaming (with resulting loss of sales) when they are found to operate without regard to ethical business practices.