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"You can't solve a problem on the same level you created it."
"A person starts to live when he can live outside himself."

- A. Einstein

 

 

 

Integrated QM model

 

Process management

Quality assurance

Supplier management

Quality expertise

Quality awareness

Miscellaneous

 

 


 

 

 

 

FROM SUPPLIER MANAGEMENT TO MUTUALLY BENEFICIAL PARTNERSHIP



Suppliers is an important category of stakeholders of any organization. Every organization needs suppliers. They may be producers, distributors, retailers, vendors, or contractors for certain products needed by the organization including providers of service or information. From the organization's point of view its suppliers represent business to business (B2B) situation that normally differs from the business to consumer (B2C) cases. Outsourcing has created a new interesting category of suppliers, especially those who are globally distributed and far away from the organization ("off shore outsourcing").

Importance of the suppliers for the quality integration (or quality management) of an organization is emphasized in all recognized references of the quality profession, especially in the ISO 9000 standards and performance excellence models.

An organization and its suppliers are interdependent, and their mutually beneficial relationship enhances the ability of both to create value. In fact, therefore in a genuine supplier relationship we may always also find a customer relationship, and we can talk about partnership. A successful partnership between two independent parties presupposes that both of them should benefit of the relationship and cooperation. Both parties should also give something of his / her own resources in order to get the benefit. Both parties have, however, differing value scales based on their own identity and interests for the partnership. Positive net value (value receivables minus loss) is essential to the both parties (see the figure).

Supplier management is not the most suitable expression to describe clearly the cooperation of an organization and its suppliers. Instead of that a win / win approach (according to the figure) is more useful and may be seen as the foundation for a sustainable and successful partnership. Thus, the new emphasis in the concept supplier management should be how to promote through an organization's management practices and decisions the mutually beneficial collaboration with its supplier partners.

An organization's suppliers form a network, and it is useful to consider that also together with the organization's customer network. Still many references talk about supplier chains and value chains but today this is a rather poor view to the organization's supplier situation as a whole. Researchers of modern business management have proved that today's networked forces of business environment - including buyers, suppliers, substitutes, competitors, new entrants, digitalization, globalization, and deregulation - are wreaking havoc on the value chains. One can be sceptical that an organization can even truly execute any plan for optimizing a value chain. In various industries existing competitive advantage is being wiped out as new competitors quickly produce new value creating structures that use new technology especially for communication. Organization's strategy can no longer be based on tinkering with today's value chain but to find ways to alter it radically. The concept of value network has actually much greater power to create benefits and to avoid stumbling when confronting rapid changes in the market place and technology basis for business. Value network is the context within which a firm identifies and responds to stakeholdes' needs, solves problems, procures input, reacts to competitors, and strives for profit. Within a value network, each organization's competitive strategy, and particularly its past choices of markets, determines its perception of economic value of new business solutions, e.g. based on new technology.

Quality assurance refers to measures with which a supplier strives for getting its customer-organization convinced of the fact that the requirements pertaining to products are met and that the supplier has reasonable abilities for that. The practices are quite analogous with which the organization creates and strengthens confidence among its customers. There are many possible solutions for establishing quality assurance but the essence of a good quality assurance - and also as a whole a good supplier relationship - is always an effective communication between an organization and its each supplier.

There are continually business actions between the organization and its suppliers that reciprocally influence each other. The added value to the parties is created by these transactions, but there are always also involved costs, so called transaction costs. The transaction cost theory was created in 1937 by Ronald Coase. He described the issue in his article "The Problem of Social Cost": "In order to carry out a market transaction it is necessary to discover who it is that one wishes to deal with, to conduct negotiations leading up to a bargain, to draw up the contract, to undertake the inspection needed to make sure that the terms of the contract are being observed, and so on." Coase's theory has a strong impact to structures of organizations and their supplier networks. Transaction cost elements are multifariously related to communication between the parties. Increasing communication effectiveness is a great challenge to the development of principles and practices for supplier relationship. In this use of Internet's possibilities is a great challenge because the cost of individual transactions may be decreased to minimum and consequently one may increase the amount of transactions effectively. Internet may also give quite new possibilities for supplier and quality assurance communication, e.g. real time multimedia information, "e-certificate" solutions, and collaborative social networking applications.

Suppliers related information and communication of an organization is needed generally within the organization's business environment as a whole including all stakeholders and also potential new partners, with existing partners, internally within organization's own people, and within organization's own experts for supplier quality. All these areas require different kind and scope of information and communication, such as:

1. Using Internet (organization's supplier quality application / portlet within the enterprise Internet home page / portal), Communication to Internet in general, including potential suppliers, e.g.:
- General policies for supplier relationship
- Organization's own quality direction and intention, information to the suppliers
- Quality assurance requirements to the suppliers
- General quality related news and bulletins
- Registering for preferred suppliers (extranet access)
- Supplier recognition
- FAQ's and answers
- Links to the related interesting www-pages

2. Extranet access (supplier-portal): Communication with the existing registered suppliers, e.g. on:
- Agreements and contracts
- Personalized offerings
- Delivery situation
- Purchase life-cycle management
- Quality plans, manuals
- Self-declarations and certificates ("e-Certificates")
- Supplier's assessments
- Supplier recognition
- Reports
- Inquiries, questionnaires, feedback
- Continuous quality assurance communication

3. General intranet access to organization's internal shared supplier quality information (quality portlet within organization's intranet): Communication within organization's members, e.g.:
- Organization's general quality approach and methodology related to the supplier relationship and purchase
- Internal support information and explanations to the corresponding Internet and extranet information
- Internal guidance e.g. to organization's purchase people for using supplier related methodology and requirements
- Supplier categorization and supplier acceptance situation
- Quality surveillance reports
- Supplier audit situation
- Supplier quality related training
- Inquiries Internal quality bulletins
- Related links
- FAQ's

4. Specific intranet access to maintain organization's internal shared quality information and development (quality expert portlet within organization's intranet): Communication within organization's quality experts, e.g.:
- Maintaining organization's shared supplier quality information
- Situation reports, the overall situation relating to the suppliers' quality
- Managing the quality integration process of the organization, aspects of suppliers' quality
- Win / Win analyses of the partnerships
- Risk management regarding to supplier quality
- Development projects for supplier quality management and assurance
- Assessing and analyzing the supplier quality network
- Quality of the network and its quality management
- Maintaining supplier quality related procedure documents
- Quality experts' documentation

Confidence is a critical key factor for a success in cooperating between partnering organizations. It is also a competitive advantage because it difficult to imitate a genuine confidence and to create it in a short term. Importance of confidence is increasing because:
- Today organizational operation and cooperation are mainly based on knowledge.
- Organizations aim at adding value by combining resources, competences and skills through partnering.
- Global networking of different organizations is continuously increasing.
- Continuous and efficient exchange of information and knowledge is a necessity between organizations' all stakeholders. Both number and variety of stakeholders has increased, and communication between them has increased, intensified, diversified, and speeded up tremendously due to global telecom networks and services. Also company-dedicated internal networks are tightly linked with the public networks. Large part of the information considered is confidential at least to some stakeholders.
- There is always also risk that hostile parties intend to infiltrate to one's networks.

Transparency is the core element for building confidence among cooperating organizations and individuals. Increased risks and uncertainties within the operational environment set raised requirements for confidence. An organization may create and strengthen its confidence abilities through:
- Clearing and reinforcing its own identity
- Developing superior competences and skills
- Developing social networking and collaborating skills
- Practicing open and transparent communication
- Keeping promises and committing to them
- Being interested in, having respect for, and taking care of the others

 



Juhani Anttila