CU-MBA-SEM-III-Customer Relationship Management-Second Draft

6. Both the customer and supplier should decide the method to evaluate the quality of the product or services. 7. Both the customer and supplier should establish in the contract the method by which they can reach an amicable settlement in case of any dispute. 8. Both the customers and supplier should continually exchange information. 9. Both the customer and supplier should perform business activities. 10. Both the customer and supplier should have the best interest of the end user in mind. SUPPLIER SELECTION The suppliers should be selected with the following ten conditions 1. The supplier should understand clearly the management philosophy of the organization. 2. The supplier should have stable management system. 3. The supplier should maintain high technical standards. 4. The supplier should provide the raw materials and parts which meet quality specificationsrequired by the purchaser. 5. The supplier should have the required capability in terms of production. 6. The supplier should not leak out the corporate secrets. 7. The supplier should quote right price and should meet the delivery schedule. The supplier should be accessible with respect to transportation and communication. 8. The supplier should be sincere in implementing the contract provisions. 9. The supplier should have an effective quality system such as ISO / QS 9000. 10. The supplier should be renowned for customer satisfaction. SUPPLIER CERTIFICATION A certified supplier is one which, after extensive investigation, is found to supply material of such quality that is not necessary to perform routine testing. The Eight criteria for supplier certification are 1. No product related lot rejections for at least 1 year. 2. No non-product related rejections for at least 6 months. 3. No production related negative incidents for at least 6 months. 4. Should have passed a recent on-site quality system evaluation. 5. Having a fully agreed specification. 251 CU IDOL SELF LEARNING MATERIAL (SLM)

6. Fully documented process and quality system. 7. Timely copies of inspection and test data. 8. Process that is stable and in control SUPPLIER RATING Supplier Rating is done Ø To obtain an overall rating of supplier performance. Ø To communicate with suppliers regarding their performance. Ø To provide each supplier with a detailed and true record of problems for corrective action. Ø To enhance the relationship between the buyer and the supplier. RELATIONSHIP DEVELOPMENT For establishment of supplier relationship, the following are necessary.  Partnering  Supplier selection  Principles of customer / supplier relations  Certification  Periodic rating For relationship development, the following are necessary. (a) Inspection 100% inspection Sampling Audit Identity check (b) Training (c) Teams (d) Recognition and Reward 14.5 SUPPLIER PARTNERSHIPS FOR COMPETITIVE ADVANTAGE The recession is causing many companies to lean hard on their suppliers for cost reductions. A recent issue of “Supply Chain Strategy,” a newsletter from MIT, reveals that many companies are demanding as much as 15% in price reductions across the board. These 252 CU IDOL SELF LEARNING MATERIAL (SLM)

companies are squeezing their suppliers just to survive. However, the same article cites a number of companies who take another approach, one that involves partnering with suppliers to cut costs in ways that are mutually beneficial. This collaborative method helps ensure that when order volume expands, suppliers won’t have to put buyers on allocation. Supplier Partner Programs are based on an element of trust and require a more advanced level of buyer to administer, often called a Supplier Business Manager. What characterizes a Supplier Partner Program? 1. They are founded on mutual understanding 2. Both partners share information openly 3. They afford a true win/win relationship in which both sides become more profitable The foundation of a sound supplier relationship should take the form of a Memo of Understanding (MOU). The MOU does more than the standard contract most companies use; it defines the relationship and outlines both parties’ responsibilities. An MOU includes information such as the key contacts for both sides, payment terms, quality expectations, delivery, lead-time, cost reduction efforts, participation in design activities, and communications including quarterly meetings. It clearly describes the collaborative environment, yielding a high degree of interaction that benefits both companies. A supplier recently told one of my clients that the MOU was the best partnership-setting document they had ever seen. The second vital component of Supplier Partnerships is Information Sharing. The customer should provide 12- month rolling forecasts so the supplier can plan capacity, labour and materials. This alone can create initial cost reductions of 5% to 20%. In turn, the supplier offers data on cost structures so the customer can improve their designs to reduce costs. Involving the supplier in design reviews and gaining access to information such as technical capabilities can also reduce costs and cut lead times. In addition, customers should review their suppliers’ performance (and vice versa) with regular scorecards. Many suppliers are unaware of the impact their performance has on customers until they receive an honest scorecard. Supplier partnerships Create Win/Win Relationships. I know of one company who strives to be their supplier’s most profitable account, while the supplier provides them with world class pricing. This supplier willingly goes the extra mile, even working on Thanksgiving Day one year to help the customer capture significant market share. Supplier Partnerships afford these advantages: 1. World class pricing 2. Shorter lead-times 3. Enhanced quality 253 CU IDOL SELF LEARNING MATERIAL (SLM)

4. Greater profitability 5. Increased inventory turns To reap these benefits, both parties must actively participate in win/win relationships. When the economy picks up, companies whose supplier/customer relationships are built on solid partnerships will be ready to respond quickly, snap up market share, and gain strategic advantage. Supplier Partnerships are the foundation. 14.6 HOW TO BUILD A BETTER SUPPLIER PARTNERSHIP? The days of going it alone in manufacturing are long gone, if ever they existed. As companies cast off all but their core competencies or extend their supply networks across oceans and continents, their inherent risks increase, and their assemblage of suppliers becomes increasingly important. Partnering with suppliers (or customers) to develop deep, mutually beneficial relationships over the long-term is frequently cited as a means by which to lessen that risk and develop true supply chain excellence. The reality has been less pretty. \"The term customer-supplier 'partnership' has been used very loosely over the years. I've heard it referred to as the 'P word' with a negative connotation,\" says Sherry Gordon, author of \"Supplier Evaluation and Performance Excellence\" and president of management consulting firm Value Chain Group. \"Suppliers are sometimes wary of some customers using the term, as customer firms may erroneously view partnerships as a way to get more out of the supplier\" -- price concessions, for example -- without any mutual give and take. Sherry Gordon: \"Customers must learn to listen to suppliers rather than think that they are firms needing to be 'managed.'\" Gordon likes the Institute for Supply Management's definition of supplier partnership: a commitment over an extended time to work together to the mutual benefit of both parties, sharing relevant information and the risks and rewards of the relationship. By that definition, \"very few customer-supplier relationships qualify as partnerships,\" she says. Then there are companies such as consumer-goods giant Procter & Gamble and Toyota, which often are cited as companies with a strong regard for partnering and collaboration. During P&G's supplier summit last fall, the company spoke of its view of suppliers as an extension of the company. \"We expect the best from our business partners, and we are focused on growing long-term relationships that are sustainable, innovative and create joint value,\" said Rick Hughes, chief purchasing officer. With a true customer-supplier partnership as a goal, how does a manufacturer proceed to achieve that end? Several manufacturing and supply chain authorities weighed in. 254 CU IDOL SELF LEARNING MATERIAL (SLM)

The Customer Must Change, too. A partnership is not only about the supplier making changes on its side of the equation, but Gordon also says. \"Customers must learn to listen to suppliers rather than think that they are firms needing to be 'managed,'\" she says. \"An example of this is a supplier day that I was recently involved in where key suppliers came to offer their best ideas to the customer and the customer was just supposed to listen without refuting what the suppliers were saying. This day resulted in big and small, strategic and cost- saving ideas being offered to the customer. So why hadn't these ideas ever come up before? Some of them had, but the customer wasn't open to them or looking to reap the value of the ideas.\" CEOs Play an Important Role. An excellent supply chain strategy or truly gifted supply chain leader rarely reaches full potential without the CEO setting the tone, and the same holds true when it comes to collaborating with external suppliers, according to \"The New Supply Chain Agenda: The Five Steps that Drive Real Value.\" \"The CEO must create an environment for collaboration with suppliers and customers to flourish,\" write authors Reuben E. Slone, J. Paul Dittmann and John T. Mentzer. Similarly, Gordon says that mutual access and communication between senior leadership is important to developing partnerships. It's a signal at each firm that the relationship is important, and it provides a means to quickly resolve challenges that may arise, she says. \"Real partnerships are difficult to nurture without senior-management access and involvement,\" according to Gordon. Develop Mutual Benefits. If both parties don't benefit by the relationship, there is no partnership. \"If a relationship is cannibalistic, some day dinner is going to run out. You're going to eat the [company] up,\" says Steve Peplin, CEO of Talan Products, a Cleveland- based metal-stamping company that embraces the partner concept. A cornerstone of the firm's philosophy is to develop relationships in which it becomes an integral part of its customers' success. Peplin can quickly present the benefits his firm brings to a partnership: quality, integrity and a problem-solving nature, among them. \"We do things right, and we're always getting better. We're a top performer. That's part of being a partner,\" Peplin says. In return, Talan Products boasts a cadre of key customers who bring loyalty and long-term relationships on their side of the equation, and they pay their bills on time. Relationships with several key customers date back 20 years or more. One such partnership with a long-term customer is built on an evergreen contract that automatically renews each year for two years. That means it takes two years to escape the contract in the absence of a mutual decision by the parties. \"If somebody decides to non- perform, you've got to live with the other guy for two years. What that means is you are going to fix the problem,\" Peplin says. 255 CU IDOL SELF LEARNING MATERIAL (SLM)

Talan Products' embrace of partnering paid dividends during the recent recession, when in 2008 soaring steel prices preceded a fourth-quarter price dive and a suddenly tanking economy. The abrupt change in fortunes left many companies, including Talan Products, with pipelines clogged with high-cost material and customers that weren't taking any product. A bad situation could have been worse if Talan Products' partners along the supply chain hadn't worked together to mitigate the hurt. \"We developed a creative way to deal with a unique problem,\" Peplin says. Arizona State University's Mark Barratt, meanwhile, provides a word of caution with regard to the notion of win-win propositions. Barratt, assistant professor in supply chain management at the university's W.P. Carey School of Business, doesn't believe \"mutually beneficial\" automatically translates into a 50-50 proposition. \"That's unrealistic, and that's part of the problem. People enter into [a collaboration] thinking win-win and split down the middle, and it's not\" necessarily so. There is still a power balance in the supply chain, he says. Barratt's caution is not one about which Peplin worries. \"If we're both happy, that's 50-50,\" Peplin says. \"If either one has a problem, they pick up the phone and say, 'Look, we have a problem.' And then everyone works to fix it.\" Share Decision-Making. Barratt warns against the idea that simply sharing information is a collaborative relationship. Without joint decision-making, sharing information tends to raise expectations for improved performance without delivering significant reward, Barratt says. Mark Barratt: \"If you think about personal relationships, a lot of the characteristics or traits of successful personal relationships apply [to collaboration].\" \"It's easy to share information and have the expectation that things are going to improve, but if you don't go through that whole process of deciding when, with whom, where, how, in what format, often the results are disappointing,\" he says. Constant Care and Feeding Required. Partnerships come down to relationships. \"Maintaining a relationship requires constant care and feeding, a bit like a marriage,\" Gordon says. \"Like any relationship between people, customer-supplier partnerships take time and effort. This may mean that both the customer and supplier regularly evaluate each other and the relationship, just to make sure that issues are resolved and that they stay on track. Mutual respect, a two-way flow of information and listening are important. Ideally there should be alignment between firms on the value of the relationship, business ethics, standards of excellence and commitment to continuous improvement.\" Barratt uses a similar analogy. He outlines a need for mutual effort and understanding, as well as shared key objectives. \"If you think about personal relationships, a lot of the characteristics or traits of successful personal relationships apply [to collaboration],\" he says. 256 CU IDOL SELF LEARNING MATERIAL (SLM)

All that said, the \"people\" aspect can be challenging, and to some extent it's because people are \"not the rational beings most employers imagine us to be,\" Barratt suggests. As an example, he asks how often in personal relationships do people respond more quickly to someone they like than dislike. \"In a supply chain context, that very much happens,\" he says. \"Relationships we have with customers and suppliers vary considerably, and how they act and respond varies accordingly. And it's not always the biggest customer or biggest supplier that gets preferential treatment.\" To that end, managing people is vitally important to building a collaborative customer- supplier relationship, Barratt says. It is imperative, therefore, to get the right people in the right positions. Use Technology Wisely. Without a doubt, technology offers opportunities for increased visibility and speed of information sharing. And while Barratt acknowledges good technology tools exist to advance collaboration, he believes they are not a requirement in the early stages of developing supplier collaborations. On a small scale, a spreadsheet and e-mail should suffice, he says. His Reasoning is Simple: Early on, collaboration can be a hard sell; therefore, the focus should be on developing the initiative, getting people on board with the initiative and gaining some momentum. Get the technology involved too early, and focus shifts to the technology rather than the initiative, \"and that's not where it should be,\" Barratt says. Once supplier collaboration has gained some momentum, technology can be a significant enabler of sharing large volumes of information, the assistant professor says. Be prepared to develop new types of partners in the international arena. This tip is provided as a concluding thought because it speaks to more than building relationships with traditional partners. In this instance, it addresses a need to broaden supplier relationships to include non- traditional partners such as foreign governments. Management Consulting Firm Accenture suggests that partnering with non-traditional sources may become necessary in the search for scarce resources, or resources concentrated in one region or country. For example, the consulting firm notes, Bolivia has more than half of the existing stores of lithium, an essential resource required for lithium-ion batteries. Tightly controlled resources \"means that manufacturers will have to dynamically reshape their operations to accommodate different supply arrangements and new partners in the international dance,\" Accenture states in the white paper \"What's Your Plan for 2025?\" The report addresses a host of new risks, challenges and complexities manufacturers will face as they manage global supply chains. \"Scarce resources will entail greater political diplomacy on the part of manufacturers in dealing with governments, regulators and citizen groups.\" Manufacturers that depend on these scarce commodities should be thinking now about how to interact with these \"new\" supplier types, by investing in the host countries \"either through 257 CU IDOL SELF LEARNING MATERIAL (SLM)

their own operations or in partnership with state-owned or local enterprises.\" Entirely new supply chain designs may emerge with these new realities, Accenture predicts. 14.7SUMMARY  The relationship between customer and supplier should be based upon trust, dedication to common goals and objectives, and an understanding of each party’s expectations and values.  Three types of supplier sourcing are: Sole sourcing; multiple sourcing, and single sourcing.  Customers must learn to listen to suppliers rather than think that they are firms needing to be 'managed.  Customers must learn to listen to suppliers rather than think that they are firms needing to be 'managed.  Relationships we have with customers and suppliers vary considerably, and how they act and respond varies accordingly. And it's not always the biggest customer or biggest supplier that gets preferential treatment. 14.8 KEYWORDS Supplier Partner Relationship A commitment over an extended time to work together to the mutual benefit of both parties, sharing relevant information and the risks and rewards of the relationship. Supplier CertificationA certified supplier is one which, after extensive investigation, is found to supply material of such quality that is not necessary to perform routine testing. Supplier Partner Programs are based on an element of trust and require a more advanced level of buyer to administer, often called a Supplier Business Manager. 14.9 LEARNING ACTIVITY 1. What is Supplier-Partner Relationship? ___________________________________________________________________________ ___________________________________________________________________________ 2. What is Customer-Supplier Relationship? ___________________________________________________________________________ ___________________________________________________________________________ 3. What is single sourcing? 258 CU IDOL SELF LEARNING MATERIAL (SLM)

___________________________________________________________________________ ___________________________________________________________________________ 14.10 UNIT END QUESTIONS A. Descriptive Questions Short Questions 1. Define supplier-partner relationship? 2. List the key elements to partnering. 3. State the three types of supplier sourcing. 4. What is supplier rating? 5. What is supplier selection? Long Questions 1. Describe supplier partnerships for competitive advantage 2. How to build a better supplier partnership? 3. Explain Supplier-Partner Programme? 4. How to develop supplier relationship? 5. Explain the ten principles of customer-supplier relations B. Multiple Choice Questions 1. …………………… advertising is used to build selective demand for a brand by convincing consumers that it offers the best quality for their money. a. Informative b. Persuasive c. Comparative d. Reminder 2. When a company launches a new product in the market, it uses …………………… advertising. a. Informative b. Persuasive c. Comparative d. Reminder 259 CU IDOL SELF LEARNING MATERIAL (SLM)

3. Which of these is not a stage in the Hierarchy of Effects Model? a. Awareness b. Knowledge c. Perception d. Preference 4. …………………… method of setting advertising budget helps management to think about the relationships between promotion spending, selling price, and profit per unit. a. Affordable b. Percentage of sales c. Competitive parity d. Objective and task 5. The creative message or the concept in advertising is commonly referred to as the ……………………. a. Great idea b. Superb idea c. Brilliant concept d. Big idea Answers 1-b, 2–a, 3-c, 4–b, 5–d 14.11 REFERENCES Reference Books • Customer Relationship Management: A Strategic Approach to Marketing by Mukherjee K • Customer Relationship Management: Concepts and Technologies by Francis Buttle and Stan Maklan • Customer Relationship Management by S Sheel Rani • Data Mining Techniques: For Marketing, Sales and Customer Relationship Management” by Gordon S Linoff and Michael J ABerry 260 CU IDOL SELF LEARNING MATERIAL (SLM)

• Customer Relationship Management: Concept, Strategy, and Tools by V Kumar and Werner Reinartz Text Book References • Day, G.S. (1986). Analysis for strategic market decisions. St Paul, MN: West Publishing. 4 Cokins, G. (1996). Activity-based cost management: making it work. New York: McGraw-Hill. • Gupta, S. and Lehmann, D.R. (2005). Managing customers as investments: the strategic value of customers in the long run. Upper Saddle River, NJ: Wharton School Publishing. • Gupta, S. and Lehmann, D.R. (2005). Managing customers as investments: the strategic value of customers in the long run. Upper Saddle River, NJ: Wharton School Publishing. • Rust, R.T., Lemon, K.N. and Narayandas, D. (2005). Customer equity management. Upper Saddle River, NJ: Pearson Prentice Hall. • Saunders, J. (1994). Cluster analysis. In G.J. Hooley and M.K. Hussey (Eds). Quantitative methods in marketing. London: Dryden Press, pp. 13-28. Websites • https://www.intotheminds.com/blog/en/experiential-marketing/ • https://study.com/academy/lesson/experiential-marketing-definition-strategies- example.html 261 CU IDOL SELF LEARNING MATERIAL (SLM)