Supply Chain Relationship Management Systems Business Essay

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A supply chain can be defined as a set of relationships among suppliers, manufacturers, distributors and retailers which facilitate and transform the raw materials into final product. Therefore, supply chain system cannot be disconnected from one entity to another as such we should consider them having relationships that exist between the players within the chain. Such strategic will also help supply chain members in deciding who to partner with and what type of relationship would be most useful. Although supply chain management principles advocate close collaboration among all supply chain players this is far from the practice, especially where resources and trust are lacking and the winner takes all attitude that exists. The question of whether to integrate or not to integrate and with whom, can be discussed by investigating effects and trade-offs. Another important factor that we need to consider is Management System (E-Business). A good management information system that flows quickly and smoothly to the upstream and downstream will lead to the success of a business. With the agility and enhancements of the information technology, better visibilities, forecast, historical data are obtained in fingertips which enables in decision making, reduce in inventories and fast customer service with good responsiveness. This paper discusses these issues pertaining to the incorporation of buyer-supplier relationships in supply chain models and the management system in the supply chains.


A supply chain is made up of many players, each with specific roles in converting raw materials into finished goods to meet customer requirements. The type of relationship that exists between and among these players holds the key to the success of the supply chain. Hence supply chain management principles advocates close collaboration among all supply chain players. The practice however, is far from the theory especially where resources and trust are scarce and the winner takes all attitudes still prevail.

Hence the types of supply chain relationships that exist usually falls in between arms lengths negotiation to full collaboration or integration. Another development is the consideration of power exerted by certain players in a supply chain. Today the barrier of communication is easily overcome with the help of Information Technology (I.T) in the area of supply chain; real time with data simulation makes the firm to demand better services with more accurate.


Utilizing the concept of supply chain structure discussed in Mukhtar et al. (2001) we will now discuss the concept of relationship structure. There are of course various variables that contribute or define the type of relationship between the players in the supply chain. These include formalization, intensity, frequency, standardization and reciprocity (Chow et al.1995). A combination of these variables will give rise to various different buyer-supplier relationship structures be it collaborative or arms length type of relationships.

Supply chain management literature abounds with evidence of how close collaborative relationships will enhance or benefit the supply chain. (Scott and Westbrook 1991) emphasize that the scope for supply chain enhancement will depend on the nature of the supplier relations in the chain of which the closeness of the relationship is one of two defining factors. (Pilling and Zhang 1992) stated that long-term cooperation appears to produce more net benefits for the exchange partners than are available from traditional competition-based arrangements. These benefits often enhanced the competitive position of both the manufacturer and supplier, resulting in a win-win situation. Recent research (Maloni and Benton 2000; Cox 2001) uncovers the role of power and how it affects the relationship strengths and hence the performance of the supply chain. Hence, power is a variable that cannot be ignored in the consideration of buyer-supplier relationships in the supply chain. With this in mind, and taking note of the fact that a supply chain relationship might be anywhere in the continuum of arms length to full collaboration [1] , the two variables i.e power and degrees of collaboration, can give rise to particular relationship structures as shown in Figure 1.

Relationship Perspective

Figure 1

2.1 Types of Relationships

Vertical: The traditional linkages between firms in the supply chain such as retailers, distributors, manufacturers, and raw materials suppliers.

Horizontal: Business arrangements between firms that occupy "parallel" positions in the supply chain (e.g. two ocean carriers that share ship capacity)

Full Collaboration: Business arrangements between firms that occupy both vertical and parallel positions in the supply chain (e.g. consortium of carriers and shippers working to reduce empty truck movement)

2.2 Range of supply chain relationships

Transactional: Both parties are at "arm's length", with limited commitment

Collaborative: Two or more business organizations cooperate to drive better long term combined results.

Strategic: Represents deep and long term commitments among supply chain partners. Firms willingly modify their business objectives and practices to help achieve shared long-term goals and objectives.

2.3 Working Together

The key to a successful partnership is for both sides to work together to achieve a common goal. That is to secure business which is profitable for both. If this business is not mutually beneficial there is little point in pursuing it. As one corporate buyer remarks "The supplier needs to make a profit and the buyer must receive good value".

One side cannot "win" if the other "loses". It is imperative that they are equal and recognize each other as such for there can be no "win" if any and every agreement is not advantageous to both. In the words of one incentive house buyer "Enlightened buyers realize that the long term success of their business depends upon, among other things, strong relationships with financially healthy, growing, quality suppliers. Squeezing the last dime out of a supplier every time will not result in a successful relationship".

In addition to understanding that both must make a profit, it is also imperative to appreciate the constraints under which the other is working. For example, a buyer may need a proposal within a very short turnaround time yet the supplier may be working on several proposals at the same time. Give and take is therefore needed to alleviate pressure while at the same time fulfilling the needs of the end user. One method would be for the supplier to send basic costs and availability then follow up in a couple of days with more detailed descriptive.

2.4 Knowing Your Partner

In order to work together, buyers and suppliers must understand one another. They must understand each other's business, needs and services and, equally as important, each other's limitations. In addition to recognizing a mutual need to be profitable, it is important to recognize how the other makes money. It is important to understand your partner's business needs and relate accordingly. For example, in sales presentations it would behoove a hotel representative to focus more on what the property can do to solve the buyer's business challenges rather than simply discussing its facilities. If the property did not have enough rooms or did not have all the expected incentive facilities and amenities, it would not have been considered in the first place. The buyer needs to know the hotel's unique selling position and how it can help win business for the buyer. In short, "benefit selling" not "product selling" will enhance partnerships.

2.5 Communication

The essence of any successful relationship is communication. Clear, brief communication enables buyers and suppliers to understand each other and to answer each other's needs efficiently and effectively. Buyers and suppliers should ask each other questions and listen to the answers so that they can learn what they need to do to grow their mutual business. As one buyer said of an outstanding supplier "they are continuously asking questions and proposing ideas to help us work better together and more efficiently". By asking probing questions about buyer and end-user needs, suppliers can better target their products and services to the buyer's exact requirements. Conversely, by readily supplying this information, buyers can expect more customized responses to their needs.

The importance of information sharing is clearly illustrated in the proposal request.

3.0 E-Commerce,

E-Commerce's, helps a network of supply chain partners to identify and respond quickly to changing customer demand captured over the Internet. E-procurement allows companies to use the Internet for procuring directly or indirect materials as well as handling value-added services like transportation, warehouse, custom clearing, payments, quality validations and documentations.

3.2 E-Procurement

The Internet offers a natural platform to facilitate efficient procurement as numerous buyers and sellers find each other and transact according to some pre-specified protocols. The following are the procurements strategies available for a manufacturing.

Strategic Partnership- Strategic partnership strategy is the develops a long term supply relationship with a specific supplier.

Online Search Strategy- Online search strategy is to shop online for a better price.

Combined Strategy- The combination strategy is to combine both- sign a long-term purchase contract with a supplier up to a certain level, but if necessary additional quantity may be purchased online.

3.3 E-Collaboration

This includes information sharing and integration, decision sharing, process sharing and resource sharing. There are many new cases that examine different elements of collaboration from information sharing and integration to process and resource sharing,


In summary Supply Chain Relationship and Management System have to work hand in hand in order to maximize the profit and to satisfy the customers. Building relationship is not a one day attempt; it is the process of growing together at the times of good and bad. The way we respond to the suppliers opens opportunity for better understanding with one another. To overcome these human skills problems IT plays an important role whereby, IT will be able to communicate by sending triggering messages and auto update of the status of the delivery. These will reduce and ease up the tensions for both upstream and downstream.


In conclusion, we believe that businesses are starting to realize, suppliers are an essential part of success. Without the right materials being delivered in a timely fashion, a manufacturing plant can literally come to a complete halt. Without reliable shipping agents, none of the created goods can reach their destination on time and in good condition. As more businesses are recognizing the importance vendors play in their success, they are also beginning to implement more strategies for helping them deal with sellers in ways that make the relationships mutually beneficial. These approaches have come to be known collectively as supplier relationship management.

Usually done with the assistance of software, supplier relationship management can have a number of benefits for both parties. For buyers, they gain a reliable source of the goods they need at a reasonable price and with dependable results. They also don't have to look for a new vendor each time they want to buy those goods. For sellers, they receive a steady source of business and revenue. While these benefits may already sound impressive, they are merely the beginning of the possible benefits an organization can realize. Further collaboration between suppliers and buyers can bring even more advanced benefits, such as constantly monitored inventories and real time information.

All of these benefits are only possible, however, when the buyer has taken the time to successfully implement SRM software and has planned how the program can work to make the relationship better for both groups. It is important that companies that successfully adopt SRM systems have also taken the plunge into ERPs and SCM as well. These other systems help organize and prepare the data in advance that the SRM software will need to function to its full potential. Without an ERP in place, the SRM will have to rely on spreadsheets or other legacy systems in order to function and this requires more time and preparation and often delivers less satisfactory results.

Suppliers must be able to interact with the SRM software in real-time if both parties are to use the system to their advantage. Vendors can use the software to check inventory supplies and can reorder goods when it is apparent that the levels require it. This eliminates one less thing a buyer has to monitor. Additionally, real-time data transfer means that orders can be placed much faster. For example, one company actually reduced the transaction time of order placement from an average of thirty minutes down to five in a relatively short period of time.

Finally, buyers must have an attitude that is open to collaboration. Many companies still view vendors as simply another resource, and they don't take their needs seriously. Suppliers want to feel secure in their relationship with buyers, but they also don't want to become involved in one-sided deals. Buyers must be willing to consider how a strategy will benefit both parties in the collaboration, and they need to be able to clearly express those benefits. Because excess inventory does not need to be kept on hand and because orders only need to be placed when the demand arises, businesses have been able to increase their profit margins and to be more competitive in the market.

Using software and implementing it into an existing ERP system, businesses are able to give vendors real-time access to important data that helps both parties accomplish their tasks in a more efficient manner. When vendors and buyers work together, the results can be impressive, particularly if they plan in advance for success.