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CHAPTER 5
SUPPLIER RELATIONSHIP MANAGEMENT
to improve their performance; or omit important steps that the organisation can
take to improve the performance of suppliers. In addition, such organisations
often do not know how to correct the problem of under-performing suppliers.
5.3.4.6 Inadequately Skilled Employees
Despite the fact that procurement personnel have a broad range of procurement
skills, few, if any, have the know-how and skill necessary to undertake day-to-
day supplier relationship management effectively. In most cases, there is a gap
in the knowledge and skill of the best practice of SRM. As a result, there are
many shortcomings in so far as the management of relationships with suppliers
is concerned. Training of staff and development of management can go a long
way to increasing competence in these areas.
5.3.4.7 Ineffective Allocation of Roles
In some organisations, an alarming number of procurement personnel
inadvertently spend a large part of their time and effort performing the role
of a supplier relationship manager. This is usually because internal roles
and responsibilities are ill-defined and unclear. A second reason is that many
people in procurement believe that the management of suppliers is a preferable
job to others that need to be done. A third reason is that suppliers attempt to
strengthen their relationships with buyers. However, an objective assessment
of this scenario will reveal that some of these supplier management tasks are
redundant, inefficient and even unnecessary, and can lead to increases in
operational costs.
5.3.4.8 Ineffective Supplier Segmentation
The failure to classify suppliers correctly can attract problems for the
organisation. In some organisations, it is difficult to distinguish strategic
relationships accurately, which means that basic suppliers who do not merit SRM
attention nevertheless receive it. Strategic relationships are those which, when
managed effectively, deliver impressive returns and competitive advantage to
the buyer and supplier. When strategic relationships are not distinguished, there
may be no formal and clearly spelt out procedures on how to deal with each
class of supplier. Consequently, all suppliers are treated the same. This results
in precious time being devoted to managing relationships with non-strategic
suppliers, while relationships with strategic suppliers are either neglected or
do not receive the attention they deserve.
5.3.4.9 Lack of Supplier Development Programmes
When an organisation has no formal supplier development programmes, its
ability to create a win-win situation with suppliers is seriously hampered. This
is because it will not have the opportunity to tap into the supplier’s capabilities
and competencies. For example, when a company’s suppliers develop a new