Leveraging on Supplier Relationships

Business today has become customer centric. Organizations are investing heavily into getting to know and building a relationship with the customer in order to retain the customer and extend the relationship.

Use of technology and CRM tools, Organizations are able to customise communication to individual customers and target specific customer segments to focus upon. As far as the end customer or consumer is concerned, Companies are engaging in several activities including Customer service as well as Marketing services that come up with new schemes everyday to reach out to the customers.

As far as the Organization and Marketing function is concerned building and managing the relationship with the end customer alone is not enough. There are many more key players in the entire chain that call for Relationship Management ad Marketing too. In this section we shall briefly examine the two key players being Suppliers.

Supplier Relationship

The need for keeping the cost low and make the business viable has thrown open several options for the Company as far as the product development and production go. Companies which have gone global have started setting up plants in countries which offer significant cost advantage in terms of labour and cost of inputs.

Another model that the Companies work with is to engage in contract manufacturing which is a well established practice in Pharmaceuticals as well as Electronics, white goods and other bulk manufacturing items. Keeping the costs down has led the Companies to come up with newer methods and processes in tweaking with the raw material supply chains.

JIT or Just In Time supplies was one of the earliest methods employed by Companies to do away with maintaining inventory of raw materials. Identified suppliers are provided with advance supply schedules requiring them to supply raw materials to the shop floor just in time for production. This way the manufacturing company saves on inventory build up as well as frees up space and other resources to manage raw material inventory.

Companies like Nokia and other electronic manufacturers have hundreds of suppliers whom they source materials globally for their various locations. Supplier materials are shipped to the various plants taking into account overseas transportation and other lead times to deliver the materials. Nokia follows a VMI or Vendor Managed Inventory Concept wherein third party service provider sets up warehouse adjacent to Nokia plant, holds inventory on behalf of all overseas vendors and on receipt of drop list from Nokia, draws materials and supplies in kits just in time for production. In such a situation there are multiple agencies, multiple partners, systems, resources involved to make sure the entire system works in tandem. The Nokia facilities work on 24 × 7 basis on all days.

Manufacturing is done on Built to Order as well as Built to Stock basis with frequent line changes. In such dynamic situation the entire business model is held in place only due to the relationship management that Nokia engages with at all levels.

Nokia has got to manage relationship with the Suppliers as well as the VMI partner and take on the lead as principle buyer. The dynamics of such operations is very complex having to deal with timely procurement and call off with suppliers, international transportation and customer clearance besides the operational dynamics involved in the third party management of inventory as well as operational efficiency.

The success of such a supply chain model has been made possible only due to the lead taken by Nokia in setting up the business model as well as building relationships and engaging the partners at all levels including Management at various levels as well as operational teams working on the ground.

Most of the Companies today are dependant highly upon efficient Suppliers who are willing to bend backwards and invest into the relationship for it calls for quite a bit of investments on the part of the Supplier to set up such supply models. Suppliers who are confident of the relationship with the principle buyer alone would be willing to invest into dedicated facilities and other arrangements to cater to the customer demand. Supplier and Buyer relationship becomes the basis on which such collaborative models work.

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