The Role of Suppliers’ Relationship Management in Supply Chain Competiveness

An anonymous quote says:

“Supply chain is like nature, it is all around us“.

Nearly any discussion of a company’s strategy and business improvement is combined with addressing the effectiveness and efficiency of its supply chain.

Supply Chain Management (SCM) can be defined as:

“A set of three or more entities (organizations or individuals) directly involved in the upstream and downstream flows of products, services, finances and/or information from a source to a customer” (Mentzer et al. 2001).

 Accordingly, the upstream side is concerned with the supply while the downstream side is corned with the demand (Slack et al. 2013, p.424). The purpose of this post is to discuss the role the upstream side of a supply chain, supplier relationship management (SRM), in gaining and improving company’s competitiveness.

Supply Chain Management as a Competitive Advantage

Since the first appearance of the concept SCM by Oliver and Webber in 1982 (Dawei 2011, p.8) up to today’s dynamic business environment, SCM plays a key role in the success of any company and even can be one of its competitive advantages (Kirovska et al. 2016). Competitive advantage is the condition in which the company achieves a superior position over its competitors (David 2013, p.38).

Why is that? An efficient and effective supply chain helps the company to not only improve customers’ value and satisfaction (Mentzer et al. 2001), but also to respond to external changes in customers’ demand (Quinn & Hilmer 1995; Thatte et al. 2013) and even ensure business continuity in case of any business disruption (Jain et al. 2015).

What are the factors that help in creating a competitive advantage of a supply chain? the body of literature in this area is very rich with different factors related to the supply side and the demand side of the supply chain (Thatte et al. 2013; Anatan 2014; Kirovska et al. 2016). A common aspect that was widely addressed is the role of SRM in improving the cost, quality, time to market and innovation (Thatte et al. 2013) with the shift from an ‘arm’s-length relationship’ to a collaborative and ‘strategic partnership’ one (Bensaou 1999).

SRM is used to describe the collection of activities to identify, manage and segment the different players in the downstream of a supply chain (Rezaei & Ortt 2012) therefore, it is considered as a key element to achieve supply chain integration (Dawei 2011, p.103).

The discussion about suppliers’ relationships is not only important in SCM discipline such as achieving lean supply chain (Dawei 2011, p.52) and managing sourcing decisions (Venkatesan 1992; Platts et al. 2002; van de Water & van Peet 2006; Fawcett et al. 2007; Dawei 2011; Vagadia 2012), but also it is a critical success factor in New Product Development (Sjoerdsma & van Weele 2015) and one of the key five forces that are needed to analyse any market competitiveness (Porter 2008).

As a conclusion, SRM can be a competitive advantage when helping the company to not only stratify its customers’, managing them within a dynamic business environment but also surviving in business disruption events. An efficient and effective SRM is a key element in achieving that by helping the company to reduce cost, improve time to market, increase quality and achieve innovation.

References

Anatan, L., 2014. Factors Influencing Supply Chain Competitive Advantage and Performance. International Journal of Business and Information, 9(3), pp.311–335.

Bensaou, M., 1999. Portfolios of buyer-supplier relationships. Sloan Management Review VO – 40, 40(4), pp.35–44.

David, F., 2013. Strategic Management Concepts and Cases: a Competitive Advantage Approach 14th ed., Harlow: Pearson.

Dawei, L., 2011. Fundamentals of Supply Chain Management [e-book], Dr. Dawei Lu and bookboon.com. Available at: http: //bookboon.com/en/fundamentals-of-supply-chain-management-ebook.

Fawcett, S.E., Ellram, L.M. & Ogden, J.A., 2007. Supply chain management: from vision to implementation 1st ed., Upper Saddle Rive: Pearson Prentice Hall.

Jain, N., Girotra, K. & Netessine, S., 2015. Recovering from Disruptions: The Role of Sourcing Strategy. INSEAD Working Papers Collection, (85), pp.1–33.

Kirovska, Z., Josifovska, A. & Kiselicki, M., 2016. Efficient management of supply chain in achieving a significant competitive advantage in the market. Journal of Sustainable Development, 5(14), pp.5–22.

Mentzer, J.T. et al., 2001. Defining supply chain management. Journal of Business Logistics, 22(2), pp.1–25.

Platts, K.W., Probert, D.R. & Cáez, L., 2002. Make vs. buy decisions: A process incorporating multi-attribute decision-making. International Journal of Production Economics, 77(3), pp.247–257.

Porter, M.E., 2008. The five competitive forces that shape strategy. Harvard Business Review, 86(January), pp.78–94.

Quinn, J.B. & Hilmer, F., 1995. Make versus buy: strategic outsourcing. McKinsey Quarterly, 1(1), pp.48–70.

Rezaei, J. & Ortt, R., 2012. A multi-variable approach to supplier segmentation. International Journal of Production Research, 50(16), pp.4593–4611.

Sjoerdsma, M. & van Weele, A.J., 2015. Managing supplier relationships in a new product development context. Journal of Purchasing and Supply Management, 21(3), pp.192–203.

Slack, N., Jones, A. & Johnston, R., 2013. Operations Management 7th ed., Harlow, England: Pearson.

Thatte, A.A.., Rao, S.S.. & Ragu-Nathan, T., 2013. Impact of SCM practices of a firm on supply chain responsivness and competitive advantage of a firm. Journal of Applied Business Research, 29(2), pp.499–530.

Vagadia, B., 2012. Strategic Outsourcing: the alchemy to business transformation in a globally converged world 1st ed., London: Springer.

Venkatesan, R., 1992. Strategic Sourcing: To make or not to make. Harvard Business Review, 70(6), pp.98–107.

van de Water, H. & van Peet, H.P., 2006. A decision support model based on the Analytic Hierarchy Process for the Make or Buy decision in manufacturing. Journal of Purchasing and Supply Management, 12(5), pp.258–271.

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