Supplier Relationship Management
Good supplier relationship management is the discipline of strategically planning for, and managing, all interactions with third parties that supply goods and/or services to an company in order to maximize the value of those interactions. In practice, it entails creating closer, more collaborative relationships with key suppliers in order to uncover and realize new value and reduce risk.
Good supplier relationship management involves the systematic enterprise- wide assessment of suppliers’ assets and capabilities with respect to the overall business strategy.
The output from such an assessment should determine what activities to engage in with different suppliers. The focus of supplier relationship management is to develop two-way, mutually beneficial relationships with strategic supply partners to deliver greater levels of innovation and competitive advantage than could be achieved otherwise.
Successful supplier relationships require a win-win. It is important that there is understanding of the costs and value along the entire supply chain. A true partnership leverages these costs and value to both parties’ advantage. Both parties have to accept accountability. Appropriate service levels and metrics need to be built into the Agreements. Equal time needs to be spent aligning incentives and penalties. Critical information should be shared between the two parties as early as possible as information is the grease that makes an integrated supply chain work. It is crucial that there are plans in place for exceptions and major contingencies. Expect and reward honesty and make relationship meetings meaningful and value adding.
Intellectual property must be part of the assessment
All that said, many supplier management exercises fail to properly assess the intellectual property (IP) situation of the supplier, despite the fact that the importance of intangible assets including intellectual property is growing, often equaling or surpassing the value of physical assets for a company. The state of the intangible assets of a company can determine their share and corresponding influence on the market. The way a company is now valued has changed considerably with intangible assets making up approx 80% of the value of the company.
Author: Donal O’Connel
Managing Director, Chawton Innovation Services Limited
