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CHAPTER 5
SUPPLIER RELATIONSHIP MANAGEMENT
Supplier development also promotes continuous improvement as buyers work
with key suppliers to improve the supplier’s performance and define a roadmap
with actions leading to improved processes and outcomes.
Despite the fact that supplier development requires a substantial injection of
funds, it should have a direct financial benefit once it is put in place. Building
leading practices and indicators into the supply base helps to unlock substantial
value and cost reduction. In the retail industry, for example, a typical Return
on Investment (ROI) of up to five times within one year can be achieved by
investing in supplier development programmes. Furthermore, these savings
can be sustained on an ongoing basis [20].
Supplier development schemes can facilitate a reduction in the supplier’s
operational and financial risks, especially those related to the buyer’s increasing
dependence on its key suppliers, supplier quality issues, supply shortage
issues and unanticipated price volatility. Increased responsiveness to customer
needs and market dynamics should also be a direct outcome from supplier
development.
Supplier development facilitates the entrenchment of a quality culture in the
supplier organisation, making sure that quality is factored into the process,
and helping buying organisations to move towards supplier independence. In
some cases, buying organisations can typically achieve 1 015% of First Pass
Yield (FPY) improvements in retail, and 30-40% improvement in first pass part
approval rate in the industrial equipment industry [20].
Supplier development initiatives should also result in improved collaboration
between clients and their suppliers as well as efficient and effective use of
resources by adopting lean practices. Removing waste across the whole supply
chain helps to make it ‘lean’ and ‘green’. In the global fashion retail industry,
for example, marker utilisation can typically be improved by 3-4% by making
appropriate adjustments in width and length, end losses, etc. This will save a
significant amount of fabric that would otherwise have gone to waste [20].
Understanding the risks/barriers and benefits of supplier development is
useful to supply management practitioners as it enables them to measure the
effectiveness of supplier development programmes by assessing the benefits
against the risks.
5.6.4 BLACK BUSINESS SUPPLIER DEVELOPMENT (BBSDP)
Black Business Supplier Development (BBSDP) is a programme that was
initiated by the SouthAfrican Government under the auspices of the World Bank
and taken over by the Department of Trade and Industry in 2002. An offshoot
of the Black Economic Empowerment Programme (BEE), BBSDP is a financial
incentive scheme meant to assist small enterprises that are owned by black
people in the country [21].