Supplier Relationship Management Process: System, Tools and Types of Collaboration - AIMS UK

Summary

This script discusses the importance of supply chain relationships, highlighting two types: vertical and horizontal. Vertical relationships are traditional linkages between firms like retailers, distributors, and manufacturers. Horizontal relationships involve independent logistics providers working together based on trust and shared goals. The script outlines steps for forming logistics relationships and emphasizes three types of collaboration: vertical, horizontal, and full. It also introduces seven laws of collaborative logistics that foster successful partnerships.

Takeaways

• 🔗 Supply chain relationships are crucial for achieving coordination and integration among partners.
• 🔄 There are two types of logistics relationships: vertical and horizontal.
• 🏢 Vertical relationships are traditional linkages between firms in the supply chain like retailers, distributors, manufacturers, and suppliers.
• 🤝 Horizontal relationships involve service agreements between independent logistics providers based on trust and shared goals.
• 📊 The intensity of involvement in relationships ranges from transactional vendors to strategic alliances.
• 🔍 A strategic assessment is the first step in forming a logistics relationship, identifying needs and strategies.
• 🚀 The decision to form a relationship is based on core competencies and the assessment of drivers and facilitators.
• 🤔 Evaluating alternatives is key to selecting the most appropriate type of relationship.
• 👥 Partner selection is critical and should consider the credentials of potential candidates.
• 🛠 The operating model of a relationship includes activities, processes, and priorities for building and sustaining the partnership.
• 🔄 Implementation and continuous improvement are essential for the success and evolution of the relationship.
• 🔄 Three types of collaboration are vertical, horizontal, and full collaboration, with full collaboration leading to the most significant efficiency gains.
• 📚 The seven laws of collaborative logistics guide the creation of successful partnerships.

Q & A

What is the significance of developing meaningful relationships in the supply chain?

Developing meaningful relationships in the supply chain is significant as it helps to achieve coordination and integration among partners, which is a high priority for firms to achieve individual and collective supply chain objectives.

What are the two types of logistics relationships mentioned in the script?

The two types of logistics relationships are vertical and horizontal. Vertical relationships refer to the traditional linkages between firms in the supply chain, while horizontal relationships involve service agreements between independent logistics providers based on trust and cooperation.

Can you explain the concept of vertical relationships in supply chain logistics?

Vertical relationships in supply chain logistics refer to the traditional linkages between firms such as retailers, distributors, manufacturers, and material suppliers. These relationships are transactional and involve buyers and sellers in ways that are common across all industries.

What characterizes horizontal relationships in logistics?

Horizontal relationships in logistics are characterized by service agreements between two or more independent logistics provider firms. They are based on trust, cooperation, shared risk, and investments, with the aim of following mutually agreeable goals.

What is the difference between a vendor relationship and a strategic alliance in the context of supply chain logistics?

A vendor relationship is transactional with little or no collaboration, representing a low level of involvement between the parties. In contrast, a strategic alliance involves cooperation where business organizations willingly modify their practices to achieve long-term goals, implying a high level of relational involvement.

What is the first step in forming a logistics relationship according to the script?

The first step in forming a logistics relationship is performing a strategic assessment, which involves becoming fully aware of the manufacturer's logistics and supply chain needs and the overall strategies that will guide its operations.

What factors are considered when deciding to form a relationship with a logistics service provider?

When deciding to form a relationship with a logistics service provider, a careful assessment of the company's core competency is considered, along with the evaluation of apparent levels of drivers and facilitators that suggest the most appropriate type of relationship.

How should a logistics or supply chain partner be selected?

A logistics or supply chain partner should be selected following very close consideration of the credentials of the most likely candidates, ensuring they align with the company's strategic goals and operational needs.

What components are included in the structure of an operating model for a logistics relationship?

The structure of an operating model for a logistics relationship includes activities, processes, and priorities such as planning, joint operating controls, communication, risk and reward sharing, trust, commitment, contract style, and financial investment.

Why is continuous improvement important in the implementation of a logistics relationship?

Continuous improvement is important in the implementation of a logistics relationship because the future success of the relationship is directly linked to the ability of the involved organizations to achieve ongoing and breakthrough improvements.

What are the seven immutable laws of collaborative logistics mentioned in the script?

The seven immutable laws of collaborative logistics are: real and recognized benefits to all members, dynamic creation, measurement, and evolution of partnerships, co-buyer & co-supplier relationships, flexibility and security, collaboration across all stages of business process, integration, open integration with other services, and collaboration around essential logistics flows.

Outlines

00:00

🔗 Understanding Supply Chain Relationships

The first paragraph discusses the importance of supply chain relationships and the focus on working closely with various partners, including customers, suppliers, and logistics providers. It differentiates between two types of logistics relationships: vertical and horizontal. Vertical relationships are traditional linkages between firms like retailers, distributors, manufacturers, and suppliers. Horizontal relationships involve agreements between independent logistics providers based on trust and shared goals. The paragraph also outlines the progression from transactional vendor relationships to strategic alliances, highlighting the benefits and challenges of each. It introduces a process model for forming logistics relationships, beginning with strategic assessment and decision-making, followed by partner selection and structuring the relationship.

05:01

🔄 Steps in Forming Logistics Relationships

The second paragraph continues the discussion on forming logistics relationships by detailing the steps involved. It emphasizes the importance of selecting partners carefully and structuring an operating model that includes planning, communication, and risk-sharing. The paragraph also discusses the implementation and continuous improvement of relationships, which is crucial for future success. Furthermore, it introduces three types of collaboration: vertical, horizontal, and full collaboration, explaining how each contributes to the efficiency of the supply chain. The paragraph concludes with the seven laws of collaborative logistics, which guide the creation of successful collaborative relationships by ensuring benefits for all members, flexibility, and integration across business processes.

Keywords

💡Supply Chain

A supply chain is a network of organizations, people, activities, information, and resources involved in moving a product or service from supplier to customer. In the video, supply chain relationships are emphasized as crucial for coordination and integration among partners to achieve mutual objectives. The script discusses how firms are increasingly focusing on developing meaningful relationships through the supply chain.

💡Logistics Relationships

Logistics relationships refer to the connections between different entities in the supply chain that are involved in the logistics process. The video distinguishes between two types: vertical and horizontal. Vertical relationships are traditional linkages between firms like retailers, distributors, and manufacturers. Horizontal relationships are agreements between independent logistics providers based on trust and shared goals.

💡Vertical Relationships

Vertical relationships are the traditional connections between different levels of the supply chain, such as between manufacturers and their suppliers. The video script mentions that these relationships are crucial for achieving individual firm and supply chain objectives and that significant attention is directed toward enhancing these relationships.

💡Horizontal Relationships

Horizontal relationships are service agreements between independent logistics providers at the same supply chain stage. The script describes these relationships as being based on trust, cooperation, shared risk, and investments, aiming for mutually agreeable goals. These relationships are contrasted with vertical relationships and are seen as a way to enhance coordination among similar entities.

💡Strategic Alliance

A strategic alliance in the context of the video refers to a highly relational form of partnership where two or more businesses cooperate to achieve long-term goals. This involves a willingness to modify business objectives and practices to help each other. The script explains that strategic alliances can reduce uncertainty, improve communication, increase loyalty, and establish a common vision.

💡Partnership

A partnership, as discussed in the video, is a customized business relationship that aims to produce results more acceptable than what could be achieved individually. Partnerships are described as collaborative and are an essential part of forming a supply chain relationship. The script outlines steps for forming such relationships, emphasizing the importance of selecting the right partners.

💡Strategic Assessment

Strategic assessment is the process by which a manufacturer becomes fully aware of its logistics and supply chain needs and the overall strategies that will guide its operations. The video script describes this as the first step in forming a logistics relationship, involving a logistics audit to identify business goals, needs, environmental factors, and industry trends.

💡Implementation

Implementation in the video refers to the process of putting into effect the logistics relationship after all the necessary assessments and decisions have been made. The script highlights that the future success of the relationship will be a direct function of the ability of the involved organizations to achieve both continuous and breakthrough improvement.

💡Collaboration

Collaboration is a key theme in the video, emphasizing the importance of working together within the supply chain. The script outlines three types of collaboration: vertical, horizontal, and full collaboration. Full collaboration, which combines both vertical and horizontal efforts, is said to lead to dramatic efficiency gains and benefits for all members.

💡Laws of Collaborative Logistics

The video introduces seven immutable laws of collaborative logistics that guide the creation of successful collaborative relationships. These laws include ensuring real and recognized benefits to all members, dynamic creation and measurement of partnerships, and flexibility and security in collaboration across all stages of the business process.

💡Continuous Improvement

Continuous improvement is the ongoing effort to enhance processes, products, or services. In the context of the video, it is mentioned as a critical component of the implementation phase of logistics relationships. The script suggests that the ability to achieve continuous improvement is directly linked to the success of the logistics relationship.

Highlights

Firms are focusing more on working closely with supply chain partners, including customers, suppliers, and logistics providers.

Developing meaningful relationships throughout the supply chain has become a high priority for firms.

Two types of logistics relationships are identified: vertical and horizontal.

Vertical relationships are traditional linkages between firms in the supply chain, such as between retailers, distributors, manufacturers, and suppliers.

Horizontal relationships are service agreements between two or more independent logistics providers, built on trust, cooperation, and shared risk.

Vendor relationships are transactional with little collaboration, and are described as being 'at arm's length.'

Strategic alliances are highly relational and involve cooperation between two or more business organizations to achieve long-term goals.

Partnerships, which involve a high level of collaboration, produce more desirable results for all parties than individual efforts.

The process of forming a logistics relationship begins with a strategic assessment, which includes identifying logistics needs and business goals.

Careful assessment of a company’s core competencies is important when deciding to form a relationship with an external logistics provider.

Drivers and facilitators in the relationship determine whether it should be transactional or collaborative.

Selecting logistics partners requires careful consideration of their credentials and compatibility.

The structure of a logistics relationship includes planning, joint controls, communication, trust, and risk-sharing.

Three main types of collaboration exist: vertical (buyer and seller), horizontal (competitors or same supply chain stage), and full collaboration (combining both).

Full collaboration, which combines both vertical and horizontal collaboration, leads to the most significant efficiency gains.

Transcripts

supply chain relationships firms have

directed significant attention toward

working more closely with supply chain

partners including not only customers

and suppliers but also various types of

logistics suppliers to achieve

coordination and integration among

partners development of meaningful

relationships through the supply chain

has become a high priority there are two

types of logistics relationships

vertical and logical vertical

relationships refer to the traditional

linkages between firms in the supply

chain such as retailers distributors

manufacturers and parts of materials

suppliers

these firms relate to one another in the

ways that buyers and sellers do in all

industries and significant attention is

directed toward making sure that these

relationships help to achieve individual

firm and supply chain objectives

horizontal relationship may be thought

of as a service agreement between two or

more independent logistics provider

firms based on trust

cooperation shared risk and investments

and following mutually agreeable goals

these companies belong to the same

supply chain stage and normally produce

or trade the same product

intensity of involvement as suggested by

the figure the range of relationship

types extends from that of a vendor to

strategic alliance in context of

traditional vertical context a vendor is

represented by a seller or provider of a

product or service and there is little

or no collaboration with the buyer or

purchaser a relationship with the vendor

is transactional and parties to a vendor

relationship are said to be at arm's

length that is at a significant distance

this form of relationship suggests a

relatively low or non-existent level of

involvement between the parties an arm's

length relationship is appropriate for

certain types of transactions for

example one time or multiple purchases

of standard products or services

alternatively the in relationships

suggested by a strategic alliance two or

more business organizations cooperate

and willingly modify their business

objectives and practices to help achieve

long term goals and objectives strategic

alliance is highly relational in terms

of the firms involved this form of

relationship typically benefits partners

by reducing uncertainty improving

communication increasing loyalty and

establishing common vision alternatively

the challenges strategic alliance

include the fact that it implies heavy

resource commitments by the

participating organizations and high

switching costs leaning toward the

strategic alliance a partnership

represents a customized business

relationship that produces results for

all parties that are more acceptable

than would be achieved individually

partnerships are frequently described as

being collaborative

forming a supply chain relationship the

figure outlines the steps in a process

model to form a logistics relationship

let us assume a model for a

manufacturing firm as it forms a

relationship with a supplier of logistic

services for example a transport firm

where Houseman etc step one perform

strategic assessment this first stage

involves the process by which the

manufacturer becomes fully aware of its

logistics and supply chain needs and the

overall strategies that will guide its

operations a logistics audit at this

stage may bring following useful

information business goals and

objectives needs assessment from

customer to supplier environmental

factors and industry trends

identification of gaps between current

and desired performance

step2 decision to form relationship at

this stage a decision is made to form a

relationship for example in a

manufacturing firm when the decision

relates to using an external provider of

logistics services such as the trucking

firm or Express logistics provider then

careful assessment of company's core

competency is considered step 3

evaluates alternatives apparent levels

of drivers and facilitators may suggest

the most appropriate type of

relationship to consider if neither the

drivers nor the facilitators seem to be

present then recommendation relationship

is transactional alternatively when all

parties to the relationship share common

drivers and when the facilitating

factors are present then relationship is

justified step 4

select partners selection of a logistics

or supply chain partner should be made

only following very close consideration

of the credentials of the most likely

candidates

Step five structure operating model

structure of the relationship refers to

the activities processes and priorities

that will be used to build and sustain

their relationship components of the

operating model may include planning

joint operating controls communication

risk and reward sharing trust and

commitment contract style and financial

investment

step 6 implementation and continuous

improvement the implementation process

may be relatively short or it may be

extended over a longer period of time

future success of the relationship will

be a direct function of the ability of

the involved organizations to achieve

both continuous and breakthrough

improvement

types of collaboration the three

important types of collaboration are

vertical horizontal and full vertical

collaboration refers to collaboration

typically among buyers and sellers in

the supply chain this refers to the

traditional linkages between firms in

the supply chain such as retailers

distributors manufacturers and parts and

materials suppliers horizontal

collaboration refers to a relationship

that is buyer to buyer and/or seller to

seller and in some cases even between

competitors essentially this type of

collaboration refers to business

arrangement between firms that have

parallel or cooperating positions in the

logistics or supply chain process full

collaboration is the dynamic combination

of both vertical and horizontal

collaborations only with full

collaboration do dramatic efficiency

gains begin to occur with full

collaboration it is intended that

benefits accrue to all members of the

collaboration

laws of collaborative logistics there

are seven immutable laws of

collaborative logistics that suggest

housing most effectively creates

successful collaborative relationships

real and recognized benefits to all

members dynamic creation measurement and

evolution of collaborative partnerships

co buyer & co supplier relationships

flexibility and security collaboration

across all stages of business process

integration open integration with other

services and collaboration around

essential logistics flows

you