MOD 7 Discussion
Relationship management refers to the organizational strategy to maintain constant cooperation between the company and its audience. In this case, the relationship aims to become a partnership, rather than merely to reflect a transaction. In the supply chain, relationship management should be applied both upstream and downstream, thus managing the relationships with suppliers and customers respectively. The overall goal of the relationship is to improve joint profitability, which defines the effectiveness of the supply chain (Lambert, 2008).
The importance of building strong relationships with supply chain partners is manifested in several aspects. Firstly, close collaboration with suppliers allows negotiating lower prices and demanding delivery reliability and special order treatment. The application of lean supply chain practices, such as Just-in-Time, is not possible, unless the company has strong relationships with suppliers, who can supply products with a high degree of reliability and flexibility. Similar logic is applied to the customer relationships. Strong partnership with customers allows the company to reap the benefits of scale economies through bigger order batches, reduces demand variability, controls input quality and improves predictability. These factors enable the company to decrease prices for their customers and to improve profitability by enhancing supply chain efficiency. Close relationships along the supply chain are often supported by common software platforms, which allow fast information exchange, thus fostering communication and synchronizing supply chain activities. In this way the risk of stock-out or inventory increase declines significantly, thus improving predictability and financial performance of the company. An example of a company with strong relationship management is Toyota. Lean production and strong emphasis on quality make it crucial for the company to develop strong ties with its supply chain partners. Eventually, these relationships have become the cornerstone of Toyota competitiveness and success.
References
Lambert, D. M. (2008). Supply chain management, processes, partnerships, performance. (3 ed.,
pp. 27-28). Sarasota, FL: Supply Chain Management Institute.
