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Summary MNP3703 Condensed Notes
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MNP3703 Condensed Notes
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STUDY UNIT 1 WHAT IS SUPPLIER RELATIONSHIP MANAGEMENT?PURCHASING MANAGEMENT
Purchasing management refers to the systematic process of deciding what, when and how much to
purchase, the act of purchasing it and the process ensuring that what is required is received on time
in the quantity and quality specified.
Purchasing management deals with the process used to obtain goods and services to satisfy the
needs of an enterprise by utilising the following STEPS:
1. identifying the need
2. finding and choosing the right supplier to fulfil the need
3. negotiating matters such as price, quality, and quantity with the supplier
4. ensuring that the goods or services fulfilling the need are delivered according to the agreed
conditions
5. maintaining files and records to document the transaction
STRATEGIC PURCHASING
Strategic purchasing is the process of planning, implementing, evaluating and controlling strategic
operating decisions for directing all activities of the purchasing function towards opportunities
consistent to the firm’s capabilities to achieve its long-term goals.
STRATEGIC SOURCING
Strategic sourcing in the narrow sense can be seen as a process
Strategic sourcing can be regarded as a process whereby spending is analysed and categorised
according to the importance and cost of the purchases, and the complexity of the supplier base. The
supply base is then investigated to ensure that the correct relationship is formed with suppliers in
the various categories of goods. The strategic sourcing process is managed by cross-functional teams
according to best practices in support of strategic business objectives.
THE NATURE OF SUPPLIER RELATIONSHIPS AND THE MANAGEMENT THEREOF
A relationship can be defined as a connection or association. Relationships apply when individuals,
organisations and groups within and external to an enterprise interact. Relationships between
suppliers and buyers differ a great deal – they may range from low-value, transaction-based
interactions to partnerships that are of strategic and financial importance for the business.
THE SUPPLIER’S INFLUENCE ON THE RELATIONSHIP
DEVELOP QUADRANT -if the level of attractiveness of the buying organisation is high, the supplier
will be willing to develop the buyer/supplier relationship by increasing the level of current
performance in the hope of escalating business dealings with the buying organisation; thereby
aiming to move a buying organisation into the core quadrant
CORE QUADRANT - Suppliers located in this quadrant will most likely consider the buying
organisation to be a part of its core business.
,MARGINAL QUADRANT - The marginal quadrant indicates that a supplier views the buying
organisation’s current business as nonessential, and that a buyer/supplier relationship is not worth
developing
EXPLOIT QUADRANT-If the value of business offered however, increases – but the level of
attractiveness is still low – a supplier will tend to exploit the buyer/supplier relationship to maximise
their own gain
THE BUYER’S INFLUENCE ON THE RELATIONSHIP
A buying organisation must ensure that there is a clear link between the category of a specific
product or service, and the perception of the buying organisation reserved by the direct suppliers of
that particular product or service (illustrated by figure 1.3). As a result, a buying organisation’s
comparison of the supplier perception model and the supply positioning model will unfold as follows
Buying organisation wants the suppliers of their critical products or services to envision a
core buyer/supplier relationship between the two organisations.
They would also value the bottleneck products or services supplier’s inclination towards
developing the current buyer/supplier relationship.
Note that it is never preferable that a supplier views the buying organisation’s business as
marginal or worth exploiting – not even when a low monetary value is associated with an
agreement
,The buying organisation would therefore need to endeavour to move the perceptions of especially
their more essential suppliers to either regard the buyer/supplier relationship as a core relationship
with the particular buying organisation, or at least that the buyer/supplier relationship is worth
developing. How do they achieve this? By not focusing just on the actual purchasing or strategic
sourcing efforts of the organisation, but managing all buyer/supplier relationships continuously
throughout the span of the organisations’ involvement with each other.
THE SUPPLY POSITION MODEL also known as the STRATEGIC SOURCING MATRIX
TYPES OF RELATIONSHIPS BETWEEN BUYERS AND SUPPLIERS
A buyer/supplier relationship comprises any interaction between a buying organisation and a
supplier, either positive (good) or negative (bad).
The most successful relationships are those where buyers and suppliers develop trust and an
understanding of their respective requirements and interests accompanied by a concern for both
learning from and providing assistance to each other
, What does supplier relationship management entail?
Kakabadse and Kakabadse (2002:81) identify the following skills required for effectively managing
buyer/supplier relationships:
1. The ability to adopt a shared understanding between partners.
2. The ability to recognise the level of cultural match between partners.
3. The skills to foster high quality relations.
4. The ability to manage relationships through changes in contractual obligations.
5. The skills to manage consortium-based relationships.
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