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In the Name of Allah, the Most Beneficent, the Most Merciful

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Suppliers Selection & Relations Management

BYNasir Mahmood

Kashif AhsanTalha Riaz

Awais MajidTariq Mehmood

introduction

Supplier relationship management 

(SRM) is the discipline of strategically planning for, and managing, all interactions with third party organizations that supply goods and/or services to an organization in order to maximize the value of those interactions.

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Supplier selection• Previous experience with the product/service to be

purchased.• Relative level of sophistication of the quality system

requirements , quality system registration (for example, ISO 9001, QS-9000).

• Ability to meet current and potential capacity requirements, and do so on the desired delivery schedule.

• Financial stability.

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Why it is necessary

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Quality: 

Supplier components can positively or negatively affect the quality of your product.

Timeliness: Their timely deliveries are crucial to how customers view your reliability.

Innovation: Suppliers can make major contributions to your new product development

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Competitiveness: They can give you the one-up on your

competition based on their pricing, quality, reliability.

Finance: If you've proven to be a considerate, loyal and

paying customer, you may be able to tap into your suppliers for additional financing.

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Literature review• The globalization of markets and the rapid rate of

technological change have led to an increased focus on the product development process. Competitive pressures are forcing companies to consider strategies which reduce costs and compress time between each stage of the value chain. In such a competitive environment, suppliers are an increasingly important resource for customers.

• Quality, delivery, price of materials and services, responsiveness and service consistently emerge to be the important criteria for supplier selection.

• An efficient supplier management that begins with the identification of potential suppliers is of central importance for successful supply chain management. Also, proper supplier selection significantly reduces the purchasing costs and improves corporate competitiveness.

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Researchers have found that a number of benefits are attained through supplier involvement in the product development process.

• Firstly, incorporating suppliers on project teams enhances the information and expertise regarding new ideas and technology. In addition, it allows early identification of potential problems.

• Secondly, supplier involvement provides a possible route for outsourcing that can reduce the internal complexity of projects and provides for extra resources that can lead to a reduction in the critical path of the project.

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• Thirdly, it leads to improved communication and information exchanges that reduce delays and ensure that the project is completed on time

• Fourthly, it can lead to improved buyer–supplier relationships, since suppliers internalize project concerns and subsequently smoother working relationships on future projects.

• Finally, it can reduce development costs, provide early availability of prototypes, allow for standardization of components; reduce engineering changes and lead to higher quality with fewer defects.

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• Developing specifications Suppliers can contribute to the design process

by helping customer organizations meet functional requirements, without including excessive specification requirements that lead to unproductive additional costs. Suppliers may assist in designing out of a product nonessential feature

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• Interchangeable parts

Suppliers can identify parts and components that have common specifications that can be used interchangeably to produce the same product without impairing the intended product utility or function. The advantage of this approach is that it can lead to a reduction in the number of suppliers, a decrease in defect rates and a reduction in total procurement costs.

• Part standardization and simplification Suppliers can provide suggestions on parts and components

that standardize routine design procedures, thus allowing the designers more time to spend on increasing a product’s overall performance and effectiveness

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• Part exclusions Suppliers can help in identifying items that

have long or unstable lead times. The speed of a manufacturing system is dependant on the weakest link in the process. It is advisable to avoid any parts or processes that significantly reduce the smooth flow operation. Any shortages of an item can seriously affect line balancing, resulting in costly delays and inefficient use of resources.

Methodology for supplier involvement in the design process

Satisfaction Index(SI) is a measure of the extent to which a customer requirement is satisfied by a supplier capability. In effect this is providing a measurement of the degree to which customer specifications are being satisfied. The larger the value of SI, the greater the potential for the customer and supplier to develop a collaborative long-term relationship. The SI is based on the overlap between the customer requirements and supplier capabilities.

Flexibility Index (FI) is a measure of the extent to which a supplier capability exceeds a customer requirement. The use of interchangeable parts or part standardization can enhance the degree of flexibility. The larger the value of FI, the more flexible is the supplier in satisfying the changing customer requirements. The FI represents the surplus in supplier capabilities.

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• Risk Index (RI) is the measure of the extent to which a supplier capability fails to meet a customer requirement. Part substitution or exclusion can lead to a reduction in the level of risk to the customer.

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Confidence Index (CI) is a measure of trustworthiness, with regard to the supplier meeting the customer requirements over a specified period of time. The higher the value of CI, the more reliable the supplier is viewed by the customer.

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• The indices developed measure the extent to which both the customer requirements and the supplier capabilities match or mismatch and therefore reflect the potential or risk of signing a project contract.

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Always pay on time. Pay your bills on time! You can negotiate for favorable payment

terms before you place an order, but once the order is placed, don't renege or attempt to change the rules

Provide adequate lead times. Try to give suppliers as much lead time as possible on your orders.

How to Build a Valued relationship 

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o Personalize the relationship. Visit suppliers' offices. While you're at it, include them in some of your strategy meetings. Invite them to break bread and invite them to your office parties and picni.

o Share information. Keep the good suppliers aware of what's going on in your companycs

• OMORÉ Ice Cream is a famous ice cream brand in Pakistan. It is manufactured by Engro Foods Limited. As a brief introduction, Engro Foods Limited is a multipurpose manufacturing company.

• The brand OMORÉ has been well established since 2009. OMORÉ has a fully automatic ice cream manufacturing facility, and has a production capacity capable of producing more than 4.5 million liters of dairy ice cream a year.

• OMORÉ Ice Cream is one of the few brands in Pakistan to manufacture pure dairy ice cream

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• Supplier relationship management and selection in omore.

There are various methods that can be used to achieve the goals of supply chain management. Engro foods believe in making its suppliers partners in the firm’s strategy to be able to satisfy an ever changing market place. It believes in forming long term partnering relationship with its suppliers rather than engage in price wars and procuring raw material in short term basis.

Omore procures fresh milk from both informal and formal sources. The informal sources include traditional milk collectors, small, medium and large dodhis.The formal source include third party milk collectors.

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Omore reinforces its strategy of forming long term relationships with its suppliers by winning their trust and loyalty. It does through by helping their farmers when they are going through difficult time for example in flush seasons.

• By helping them in purchasing urea and other materials.

• By giving them loans on times of need.

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Vendor development.

• Team at Engro is highly dedicated to vendor development and is involved in providing education and training to farmers regarding better treatment and handling of livestock.

• Distributors.• Company appoints distributors to reduce risk factors,

investment risk, ware house risk and cost of transport. They divide the Pakistan in five regions of ice-cream distribution namely Karachi, Lahore, Islamabad, Multan, and Peshawar. Due to an appealing scheme which stands out in the clutter and thanks to strong relationship building and special discounts.

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Only in Lahore the company is not dealing with any distributor they itself maintaining the distribution network so here AGILITY is delivering the transportation services.

MOBILINK is their official supplier providing telecommunication and net facilities.

PACKAGES offering packing material.

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For the sake of transportation of the fished goods right from the plant warehouses are situated right next to the facility until the distributors a fleet of trucks is maintained by themselves while outsources as well as third party . Relation with social organizations.Engro Foods is working with different NGOs to meet the Corporate Social Responsibility in country. They are working with UNDP to initiate women’s veterinary workers program They also signing a micro financing model for dairy farming with Pakistan Poverty Alleviation Fund (PPAF) BENCHMARKING AT ENGRO FOODS

Cold Chain department manage PEL and other partners in cold chain.Omore is having a cold chain department which is dealing with PEL and other

maintenance service partners.PEL is in contract with omore to provide defreazers for cold chain department and this is internal department of omore which works on systematic approach to build relation with these suppliers and

build the reports according to their service efficiency and reported it to the head office the maintenance is also done by a third party HRS whose check

and balance is also done by this department.

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