Supplier relationship management process and governance

supplier relationship management process and governance

"Supplier relationship management is the process that defines how a company . Management processes are needed for the organization, governance and. This article provides a briefing on introducing supplier relationship management Strategic suppliers warrant more governance and monitoring, stages, once suppliers are segmented and a framework to manage them is in. Successful supplier relationship management can have lasting impacts Costs: Less suppliers, means less relationships to manage, and more time saved. Of course, this kind of supplier governance doesn't come without.

Operational SRM dark gray rounded squarescommonly referred to as E-Procurement, includes all necessary tools for ordering and conclusion of a contract such as payment, invoice verification. Typical examples are plan-driven purchasing and desktop purchasing tools e. E-CatalogE-Payment, supplier self-service, and supplier portals.

Supplier Relationship Management: A Case Study in the Context of Health Care

Alongside analytical, collaborative, and operational SRM, other tools are needed dashed rounded squares to support activities, which are not in the core of procurement. For instance, search engines to retrieve all kind of internal and external information related to sourcing, inventory control systems to build the crucial bridge to the logistics department and requester of goods, business process modeling and enterprise architecture solutions for visualizing, simulating and analyzing different structural aspects of the purchasing department, personnel administration systems for managing workforce related information, finance and controlling systems to define targets and supervise the achievement of objectives, and enterprise content management systems to dispense all kind of documentation.

Information systems for supplier relationship management 3. However, the situation in health care is different since procurement, in most instances, is seen as cost driver. The review of empirical studies, journal and newspaper articles, and additional interviews with health care professionals in the field of health care supply management yielded to the following delineation of the status quo of SRM adoption in health care.

The price is still the most important criterion for hospital buying agents for the establishment of a supplier relationship [20]. Surprisingly, product quality and reliability of suppliers seemed to be much less relevant. However, as the short-term price advantages for most material groups of a hospital are largely exploited other criteria for the selection of suppliers will gain in importance [36].

To generate mid-term and sustainable long-term cost-savings hospitals would need to increase networkability by bundling their demand in purchasing associations, establishing with other hospitals and health service providers a cross-organizational category management, thus optimizing the number of suppliers and product portfolios [17]. Introducing the mentioned business concepts in hospitals will not only have an impact on financial issues but also have a fundamental influence on the IT-architecture of a hospital e.

Because of a broader availability and acceptance of operational procurement tools e. According to the German Association for Medical Technology [20], 38 per cent of the German hospitals already implemented an electronic delivery order and 35 per cent an electronic invoice.

Nevertheless, this ratio seems to be marginal when comparing with the aviation industry where 85 per cent of the organizations actively use e-procurement in day-to-day business.

supplier relationship management process and governance

As cost-savings still are the major drivers for change projects in health care, the use of operational procurement tools is set to increase significantly in the next years. Besides the strategic and functional activities in procurement there is also a need for tools to monitor and control the suppliers' and buying agents' performance. Therefore actual and accurate information about prices, delivery times, quantities and quality aspects build the basic input parameters for performance measurement.

Hence, data quality management is becoming increasingly important when establishing SRM.

supplier relationship management process and governance

While in health care improved data quality is mostly linked to better management of health plans and improved treatments, it also can help to increase competitiveness of a hospital e.

Until now, little has been done by the hospital purchasing department managers to implement performance measurement and governance principles in procurement. However, the discussion with the health care professionals showed that the awareness of governance issues is changing [33].

Therefore the case study at hand simply presents a first field report. Nevertheless, it can help to get a better understanding of the importance of SRM in day-to-day business of a health care organization. According to Yin, case study can be defined as "an empirical inquiry that investigates a contemporary phenomenon within its real-life context, especially when the boundaries between phenomenon and context are not clearly evident" [66].

Case study research is widely used and is particularly appropriate for the study of both, social as well as technical phenomena such as the development, implementation and use of information systems and IT within organizations [5], [35], [54].

We used it in an exploratory manner for investigating the possible impact of SRM, i. To obtain the required data, multiple expert interviews were conducted. In addition, personal observational field notes and secondary material e. Initial findings have been published in German at [30].

However, this contribution extends the previous work by referencing and translating current findings of industrial research in the field and by suggesting generic practices the hospital supply managers found essential for implementing SRM in the health care context.

However, as it is impossible to tackle all the respective changes at the same time e. The focus of the presented case study is thus on two topics: Inter-organizational exchange of product information corresponds to the process of initiation in Figure 3and as a preliminary form of strategic sourcing 2.

Supplier relationship management - Wikipedia

Optimization of the internal ordering procedure as a crucial task of operational procurement corresponds to the process of demand determination in Figure 3.

The first aspect was selected due to the fact that the availability of timely and accurate information about purchasing conditions of other hospitals strongly enhances the bargaining power of buying agents and therefore can be seen as an enabler for the transformation of the current structure of an archaic seller's market to a more competitive buyer's market cp.

The second aspect is a common issue, which also can be found in other sectors of economy. The emphasis therefore is on the demonstration that existing solutions of other sectors can also favorably be applied in the health care context cp. On the other hand, the optimized handling of internal orders can be seen as an important contribution of the hospital's purchasing department to enhance the overall quality of health service delivery, since a medical treatment without the proper material and drugs can significantly affect the therapy of a patient.

Every day, the purchasing department handled orders either by phone or per fax. Therefore the great part of a buying agent's labor time was used to manually process these orders. Inthe purchasing department manager decided to introduce the concept of SRM as an organizational and technical response to the actual drawbacks. Thereby two major objectives should be attained: Cost of supplies approximately 93 million Euros annual material costs a year should be reduced, 2.

Procurement and logistical processes should be optimized across the different clinics from ordering to in-house delivery. Relationships to other hospitals and suppliers were informal, unclear, and inefficient.

As price margins for a single hospital are constantly declining, a purchasing association with three other hospitals, comparable in size and maturity level, was founded in fall It quickly became clear that for the conjoint negotiation a standardization of and concentration on selected products and suppliers was needed.

On the basis of a product portfolio, the supply managers of the four hospitals decided to center on the procurement of therapeutic and diagnostic equipment in a first step Figure 5. In a second step, the procurement of other commodities will follow in Switzerland the provisioning of pharmaceuticals is ceded to the hospital pharmacists in most instances; for more information please refer to [32] Figure 5: Example of a hospital's product portfolio for demanded goods To have a better basis for negotiation, the information needs with reference to products, prices, and suppliers were defined.

However, in order to facilitate comparison for the conjoint determination and pooling of the demand, a common material and supplier classification was needed. It was obvious that the development of a proprietary classification will cause a lengthy and disharmonizing debate about material denominators, supplier evaluation properties etc. Therefore the supply managers decided to participate in an electronic marketplace, which categorized items neutrally, and free of manufacturer-specific terms Figure 6.

In doing so, information about product prices, trade allowances, and consumption became transparent and is now actively being used for negotiation with suppliers.

Supplier relationship management

However, as the used electronic marketplace only facilitates electronic ordering not electronic exchange of information between the hospitals, this is only seen as a first step towards a conversion from a seller's to a buyer's market. Structuring of business relationships by the use of an electronic marketplace 4.

Hence, with the aim of optimizing efficiency of the overall logistical processes two major deficiencies were addressed. First, to ease the buying agents of doing unprofitable work e. For this purpose, a desktop purchasing tool was implemented, which contained all product data with the former, hospital-specific denomination of the items not the new classification scheme of the electronic marketplacesince this was one of the key requirements to ensure the acceptability of the solution.

To guarantee the consistency of the neutral as well as the hospital-specific product data, a synchronization mechanism between the two databases was needed. On the other hand, simplicity of handling was another essential requirement. For this reason, the whole ordering procedure on the part of the wards had to be effected on a simple web browser. By using this tool the search for determined products was significantly simplified and extensive add-on information about products and suppliers provided.

Executive-to-executive meetings Strategic business planning meetings, where relationship leaders and technical experts meet to discuss joint opportunities, potential roadblocks to collaboration, activities and resources required, and share strategies and relevant market trends.

Joint business planning meetings are often accompanied by a clear process to capture supplier ideas and innovations, direct them to relevant stakeholders, and ensure that they are evaluated for commercial suitability, and developed and implemented if they are deemed commercially viable. Operational business reviews, where individuals responsible for day-to-day management of the relationship review progress on joint initiatives, operational performance, and risks.

One tool for monitoring performance and identifying areas for improvement is the joint, two-way performance scorecard. A balanced scorecard includes a mixture of quantitative and qualitative measures, including how key participants perceive the quality of the relationship. These KPIs are shared between customer and supplier and reviewed jointly, reflecting the fact that the relationship is two-way and collaborative, and that strong performance on both sides is required for it to be successful.

Advanced organizations conduct degree scorecards, where strategic suppliers are also surveyed for feedback on their performance, the results of which are built into the scorecard. A practice of leading organizations is to track specific SRM savings generated at an individual supplier level, and also at an aggregated SRM program level, through existing procurement benefit measurement systems. Part of the challenge in measuring the financial impact of SRM is that there are many ways SRM can contribute to financial performance.

These include cost savings e. More disciplined and systematic, and often expanded, information sharing Joint demand forecasting and process re-engineering has unlocked savings of percent for leading organizations. The benefit is a more comprehensive and objective picture of supplier performance, which can be used to make better sourcing decisions, as well as identify and address systemic supplier performance problems.