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Objectives of Supplier Development

Supplier Development

According to CIPS, supplier development is considered as the process of working with some suppliers and interacting with them individually with the aim to enhance the performance of the buying organization. Any organizations require supplier development because when relationship with suppliers is improved this directly impact on the business growth, performance and at last profits of both suppliers and organization (Friedl and Wagner, 2012).

Customer Development

Customer development is all about retaining customers through the process of adding value. Customer development is somehow linked to lean methodology as this target to understand the problem of customers and accordingly providing solutions (Chavhan et al., 2017). Thus can be done through product development process that begins with the ideal solution in mind and then implementing it.  Furthermore, customer development can be done by selling more services and products so that customer’s desires and needs are fulfilled. Along with that, organizations can do this by becoming more efficient on cost as when cost of products are reduced and quality of products and services are maintained than customers remain connected with the organization.

Co-development is considered as process in which instruments are used by industries to develop a competitive advantage and to lower the development costs. Customer co development is involvement of customers in new service and product development processes to create innovations and to develop competitive advantage that better matches needs of customers (Chavhan et al., 2017). Supplier customer co development is mainly seen in the new product development as there are many benefits of customer involvement for organizations as well as for buyers.

The objectives for any organization to invest in supplier development includes; to earn competitive advantage, encouraging collaboration between individual suppliers, driving innovation, creating a long term relationship with suppliers, resolving quality issues and performance issues, and enhancing customer satisfaction (Friedl and Wagner, 2012). By connecting individually with suppliers, the company can connect with vendors who can understand their business and requirements from quality aspects to pricing aspects.  Through that organization can excel in a particular area and able to develop strong competitive advantage.  When supplier’s development is focused on than small suppliers can also take benefit from it that leads to collaboration between suppliers and the organization. Moreover, when different suppliers work together for developing products there are higher chances of innovation as better collaboration means out of the box thinking and increasing innovations.  Supplier development needs collaboration and trust and these aspects encourage organizations to enhance and develop better relationship with suppliers for long term (Glavee-Geo, 2019). This helps organizations to gain business resources and economic resources that they need for continuous success and growth. This can with time nurture a healthier and more beneficial partnership for both parties.  At last, the main objective behind supplier development is resolving quality and performance issues. Continuous interaction with suppliers provides opportunities for improvement on both sides that means organization and suppliers (Glavee-Geo, 2019).

 Source: (Glavee-Geo, 2019).

 Source: (Glavee-Geo, 2019).

On the other side, reasons of customer development are to reach to deep issues of customers and understanding what they are demanding.  The main reason behind this is to save the business from wasting its resources, funds and time on products whose chances of becoming a hit in the market (Handfield et al., 2015). It gives a clear judgement on the products of the company that satisfies needs of customers. Through that organizations aim to develop the process of decision making where the company needs to make upfront investment decisions. The objectives behind the customer development can be better understood in a four step framework that includes firstly identification of customer needs and then building the right products to satisfy those needs. After that testing the right methods for converting and acquiring and then deploying the resources in an organization to meet the changing demand of customers by developing the products and services (Handfield et al., 2015).

Objectives of Customer Development

The different types of development that take place because of supplier and customer development are in areas such as process development, design development, capabilities development, communication improvement and relationship development.

The supplier’s development can be process oriented and design oriented as this includes changing suppliers operations immediately in order to solve the problems of suppliers. In addition to that, capabilities development also done under suppliers development programme. This consist of increasing suppliers capabilities in a manner so that suppliers will be able to make its own improvements (Handfield et al., 2015). Many supplier development programmes are design oriented and focus on improving designs so specific problems of suppliers can be solved and overall new product development can be done considering both the aspects. Moreover, the design oriented and process oriented supplier development programme will ensure improvements in suppliers cost and quality. With that increases the performance of suppliers but somehow not help suppliers to improve their capabilities for continuous improvement.  According to Glavee-Geo (2019) the process oriented supplier development is for continuous improvement but result oriented programmes have benefits such as quick identification of problems and quick solutions and fast implementation. But some of disadvantages of this type of development are; less commitment from suppliers, limited transfer of continuous process knowledge to suppliers and less improvement in supplier’s capability to solve problems on their own (Krause et al., 2016).

In concern with above discussion with respect to types of development it can be said that supplier development includes adaption of buyer supplier relationship practices in local industry. In this parties involved are local industry, buyers that is organizations and suppliers and senior managers from various sections within the buying organization. According to Quayle (2015) the supplier development programme can further divided into two types that are direct and indirect supplier development programme. Indirect supplier development leads to improvement in delivery performance and suppliers products whereas; direct supplier development leads to better capabilities of suppliers (Handfield et al., 2015). On the other side, communication development is another type of supplier development programme through which the aim is to through effective communication decrease supplier’s problems and increase performance of suppliers.  As improper or ineffective communication leads to misunderstanding and issues with suppliers and use of incorrect strategies. Hence, there are different types of suppliers development programme such as some are process oriented and design oriented and some are related to communication and capabilities improvements.

The parties involved in supplier development and customer development are; customers suppliers, management, target audience, long term contractors and organization and third parties.

How is it achieved?

Supplier development can be attained by generating new capabilities in suppliers. It is mainly linked to improvement of performances of people. This can be done by continuous interaction with suppliers, providing them feedbacks on daily basis and focusing on cost reduction, continuous improvement and pool for innovation. The easiest way is to focus more on communication, training and on site assistance.

Customer development can be attained by knowing the market and customers. The description and observation of a problem from the different perspectives. Make a measure and prediction possible future results with the casual objectives. Hence, the four customer discovery, customer validation, customer creation and customer building.

Types of Development

Supplier performance can be measured by using different tools through that suppliers work is evaluated on the basis of set criteria or standard.  Some of measures of supplier performance in both goods and services segment are;  in terms of goods are on time delivery of products and necessary information this means measurement on the basis of timeliness. With that, completeness is another area of measurement it includes delivery of completes goods and other one is quality that means delivery of goods with low defect rate and unplanned failure (Sjoerdsma, and van Weele, 2015). As when defects are less this can save time and costs of both suppliers and buyers that means organization. More parameters are; productivity, regulatory compliance, innovation and social responsibility.  The examination of these parameters help in understanding whether suppliers comply with legal standards or not and checking out sustainability aspects ensure the consideration of environment aspects throughout the supply chain (Sjoerdsma and van Weele, 2015).

For instance in case of Nissan the company measure performance of suppliers on the basis of:

Business Requirements

Supplier performance measures

SMART metric

Better services

Product reliability improvement

8% reduction in customer warranty claims

Improved Quality

Customer Experience Improvement

12% higher satisfaction rating from customers or users

Reduced Costs

Specification change resulting in lower operating costs

2% price reduction through vendor initiated reengineering activities

Supplier development measurement also can be done using the qualitative and quantitative variables. Qualitative measures are product quality, customer satisfaction, flexibility, information and material flow integration, and effective risk management. Whereas, quantitative measures are order to delivery lead time, resource utilization, supply chain response time, resource utilization and delivery performance (Quayle, 2015).  On this basis, supplier performance can be measured on yearly and monthly basis.  Moreover, some of other tools that can be used are; Pareto analysis of suppliers performance and weighted point system. Weighted point system includes the performance category such as delivery on time and quantity of items these have given less weightage (Handfield et al., 2015). The quality aspect includes inbound shipment quality and quality improvement in that more weightage is given to the inbound shipment quality. With that, cost competitiveness includes parameters such as supplier’s comparison with others and cost reduction ideas that weighted equally and at last service factors that have given less weightage are; technical ability, corrective action response, problem resolution ability and new product development support.

Risks associated with supplier development include sensitive information sharing, weak communication, lack of commitment, lack of trust in suppliers, insufficient technical skills and bankruptcy in case suppliers become the competitor. Organizations shares sensitive information with suppliers and this become an issue. With that, 75% of senior managers said that lack of trust is another barrier to connect with suppliers (Sjoerdsma and van Weele, 2015). In this way, organizations try to establish trust with suppliers before initiating the supplier development program. In most of cases, suppliers have lack of technical skills this leads to risk in security concerns as large volume of information shared between suppliers and customers. If suppliers lack necessary skills than competitors can hack into the internet and electronic data interchange shared between companies. Therefore, initially the supplier development program face risks in collaboration such as competitive initiatives, lack of support analysis and adequate data, inadequate experience and inadequate control and monitoring systems. The costs associated with supplier development programme include consulting and training costs and equipment and traveling costs (Quayle, 2015).

Supplier Development Programmes

The benefits linked to supplier development initiatives are; sourcing cycle time can be reduced and inventory costs can be lowered this can improve the overall performance of the organization. With that sustainable development improve reliability, quality and manufacturing of new design and increase responsiveness to market dynamics and customer needs (Cousins, 2009). In context to supply chain activities, supplier development leads to improvement in knowledge sharing and collaboration across the extended organizations.  In this manner, the supply chain mangers need to consider the benefits against potential risks and can develop a successful supplier development program.

The supply chain across the world is shifting because of the higher technology advancements such as artificial intelligence and machine learning use.  These tools will be used for predictive analytics that will empower suppliers to make more informed decisions, derive new business models, and real time decisions. Further, technology will alleviate workers shortage and improves performance by improving decision making and productivity. With that, visibility and flexibility are two other aspects as improving visibility can help in consolidating and collecting data related to consumers in real time and this can be used immediately by suppliers in this manner flexibility is also required. Hence, four major trends in supplier development, customer development and co development are; resiliency, sustainability, technology and visibility.

Groove is an organization that has online presence and offer desk software for small and medium enterprises. The organization was able to attract customers but failed to retain them.  Later on , the CEO realized that the churn rate was 3% and this was impacting on the overall performance of the company and restricting the company to meet its goals (Glavee-Geo, 2019). In this situation, the leader used customer development model with the aim to retain customers.  The process followed by the leader included steps such as:  talking to the target customers directly so that more information can be gathered about the target customers and their needs. Then in customer validation, Groove teams connected with customers through email campaigns and face to face conversations to get the real feedbacks related to the products, services and model and businesses. This helped Groove to build its customer base as customers were increased to 5,000 in just 3 months (Glavee-Geo, 2019). Hence, through customer development, Groove was able to attract more customers and retain the existing ones.

References

Chavhan, R., Mahajan, S.K. and Sarang, J., 2012. Supplier development: Theories and practices. Journal of Mechanical and Civil Engineering, 3(3), pp.37-51.

Cousins, P.D., 2009. Supply base rationalisation: myth or reality?. European Journal of Purchasing & Supply Management, 5(3-4), pp.143-155.

Friedl, G. and Wagner, S.M., 2012. Supplier development or supplier switching?. International Journal of Production Research, 50(11), pp.3066-3079.

Glavee-Geo, R., 2019. Does supplier development lead to supplier satisfaction and relationship continuation?. Journal of Purchasing and Supply Management, 25(3), p.100537.

Handfield, R.B., Cousins, P.D., Lawson, B. and Petersen, K.J., 2015. How can supply management really improve performance? A knowledge?based model of alignment capabilities. Journal of Supply Chain Management, 51(3), pp.3-17.

Krause, D.R., Scannell, T.V. and Monczka, R.M., 2016. Avoid the pitfalls in supplier development. Supply chains and total product systems: A reader, 58, pp.25-44.

Direct and Indirect Supplier Development

Quayle, M. ed., 2015. Purchasing and Supply Chain Management: Strategies and Realities: Strategies and Realities. IGI Global.

Sjoerdsma, M. and van Weele, A.J., 2015. Managing supplier relationships in a new product development context. Journal of Purchasing and Supply Management, 21(3), pp.192-203.

Oinonen, M., 2014. Customer involvement in co-development in B2B markets: literature review on key contributions and success factors. In 30th IMP-conference, Bordeaux, France.

Supply Chain Optimization considering the pull and push applications

The supply chain is an important part of any business and in this competitive environment, managing and designing supply chain effectively is equal to managing the complete business. The strategy used by the organization helps in supply chain optimization. The strategies that are used by organizations for moving from upstream to downstream sites are; pull and push strategies or mix of both. Push strategy is a strategy in which organization production is based on estimated production plan and in this the organization flow information to the market in the way in which the materials flow (Birhanu et al., 2014). Whereas, pull strategy is when the organization production is based on the customers demand on daily basis and in this way the information flows from market to management.

 Source: (Lin et al., 2022)

Source: (Lin et al., 2022)

Push based supply chain strategy

In application to this strategy, the raw material is pushed to the supply chain on the basis of demand forecasts as this is the push from initial raw material to the end customers. This means at the end of the process the finished goods are lined up and waits for customer purchases (Kim et al, 2012). In this manner, natural inventory in various forms exists throughout the supply chain such as in the way of finished goods, work in progress and raw materials. In simple terms, push strategy is used when demands of customers are not clear and the organization operates in uncertain environment (Birhanu et al., 2014).

Pull based supply chain strategy

In this strategy materials pull into the supply chain because of customer orders. However, the point is that here the customers have to wait till the product is delivered. If waiting time is more for customers from the side of the organization than this strategy might fails. This pull based strategy can be applied in a situation where customer demand is known and here the major scenario is that there are zero inventories throughout the supply chain (Kim et al., 2012).

How organization change focus from mass production to mass customization

In order to shift from mass production to mass customization there are many challenges that the organization face. To shift the focus on mass customization the company start focusing on developing products that helps in satisfying needs of customers. In the current business environment, large production runs are not required rather companies target special customer needs (Mahapatra et al., 2012). The mass production environment mainly designed to handle small batches and large jobs that reduces efficiency and increases waste. Because of lower efficiency it is difficult to work as per the production schedules. With that costs for organization also increase because for handling more inventories there is need to hire more people and acquiring more space so that accordingly supply chain can be managed (Kim et al., 2012). In this way, in order to reduce costs and to improve efficiency organizations shift to the mass customization. Mass customization is considered as the process in which customers’ demands are fulfilled by offering them unique custom made products (Roh et al., 2014).

Conclusion

 Source: (Birhanu et al., 2014)

Source: (Birhanu et al., 2014)

Situation where organization has a very slow reaction to changes in customer demand

The mobile telephone industry constitutes the world largest consumer electronic industry. This is characterized by high volume production, use of advanced manufacturing technologies, increasing product features and complexity, extremely short product life style and an increasing requirement for customization and variation (Roh et al., 2014). One of the examples is Compaq as this was the largest personal computers seller at the global level even the company manufacturer first IBM PC compatible computers. But the company was not able to meet up the changing demands of customers and due to that other competitors such as Dell and HP took the advantage and captured the customer base of Compaq (Roh et al., 2014). This indicates the company was not able to adopt pull strategy in supply chain due to that struggled to operate in the market.

The organizations take decision for moving to anyone strategy on the basis of some factors. Such as when they have excessive level of inventory and higher complaints from customers and with that poor performance in term of delivery aspect. The characteristics of pull environment are given and how this can improve the situation in an organization is discussed. Firstly, demands play a significant role (Lin et al., 2022). As when demand is known the organization adopts pull strategy and when demand is unknown it is better to go for push strategy.  With that prices of goods are also important as when the company offers expensive and luxury items it is important to go for pull strategy (Lin at al., 2022). The best example is of high end cars as customers demand for luxury cars are limited so supply of products requires use of pull strategy. Few more elements are competition and product life cycle. If competition for the organizations is higher they go for push strategy because customers will not going to wait for longer time and switch to other alternatives (Lin et al., 2022). Further, when any product has shorter cycle in this situation organization should follow push strategy. However, use of push strategy leads to excessive level of inventory as demand of customers is unknown. But characteristics of pull environment that includes zero inventories can help in managing this situation (Lin et al., 2022). With that issue of poor delivery and high complaint can be solved by using pull strategy as through that product will be delivered in the market when demanded this lead to on time delivery of products. This is the key feature of the pull strategy as in that because of certain environment and predicated demand it become easy to delivery at the right time (Lin et al., 2022). When customization is at the high levels than products are customized as per demand of customers and this leads to better quality of products and one to one interaction with customers can lead to reduction in customer complaints.

References

Birhanu, D., Lanka, K. and Rao, A.N., 2014. A survey of classifications in supply chain strategies. Procedia engineering, 97, pp.2289-2297.

Kim, S.H., Fowler, J.W., Shunk, D.L. and Pfund, M.E., 2012. Improving the push–pull strategy in a serial supply chain by a hybrid push–pull control with multiple pulling points. International Journal of Production Research, 50(19), pp.5651-5668.

Lin, J., Zhou, L., Spiegler, V.L., Naim, M.M. and Syntetos, A., 2022. Push or Pull? The impact of ordering policy choice on the dynamics of a hybrid closed-loop supply chain. European Journal of Operational Research, 300(1), pp.282-295.

Mahapatra, S., Yu, D.Z. and Mahmoodi, F., 2012. Impact of the pull and push?pull policies on the performance of a three?stage supply chain. International Journal of Production Research, 50(16), pp.4699-4717.

Roh, J., Hong, P. and Min, H., 2014. Implementation of a responsive supply chain strategy in global complexity: The case of manufacturing firms. International Journal of Production Economics, 147, pp.198-210.

Rossin, D., 2012. Push-Pull Boundary Location, Information Quality, and Supply Chain Performance: An Exploratory Analysis. Journal of Global Business Issues, 6(1).

Research and Implementation Gap to the lean tools

Lean tools are implemented in order to eliminate unproductive tasks and replacing those tasks with more efficient ones. With the help of lean implementation, companies can streamline their processes (Bhamu and Sangwan, 2014). Thus, lean improves the work and quality and resultant in adding value for customers.  In theoretical terms lean implementation is all about doing more with less or efficient utilization of resources by minimizing waste and maintaining quality and reducing manufacturing costs.

 Source: (Ribeiro et al., 2019)

Source: (Ribeiro et al., 2019)

In case of SME’s, globalization and emerging technologies impacted to a greater extent. SME’s apply these concepts to fulfil continues performance. But large numbers of SME’s not applied this concept because of various factors. According to Garza-Reyes et al., (2018) the critical successful factors of lean implementation within SMEs are; financial position, organization culture, performance of evaluation system and expertise and skills and management and leadership style. But some of issues that SMEs face while implementing lean are; using wrong tool, misunderstanding the situation, poor decision making, poor support from government, customers and suppliers and  wrong consultants (Redeker et al., 2019). All these collapse the implementation of lean in SMEs. However, large enterprises are able to implement this tool more effectively. Large enterprises use tools such as just in time, total quality management, 5S and this resultant in improvement in lead time, delivery cycles, rejection rates, quality levels, and satisfaction of the customers. Leksic et al., (2020) stated that in case of SMEs the lean execution lag with theoretical aspects.  Because lean implementation in SMEs is limited to the Just in time concept that means improvement in the operation through waste reduction and this is only thing that is included into the supply chain. Due to that, the lean implementation in case of SMEs only limited to promoting the JIT process and influencing supply chain.  

Organizations by optimizing their supply chain using different tools able to get benefits such as; cost reduction, boost revenues and profitability. Improved supply chain collaboration and improved supplier performance. With that, integrated supply chain management, improved quality and enhancing supply chain planning. When supply chain is optimized this lead to optimization of logistics and warehousing processes and costs related to infrastructure can be controlled and managed in a better way. Moreover, supply chain optimization leads to delivery of products and services at the right time to the right customers. Optimization of supply chain means organizations have more insight into activities and are able to boosts customer satisfaction and respond faster to the needs and wants of customers (Redeker et al., 2019). 

 Source: (Rodrigues et al., 2020)

Source: (Rodrigues et al., 2020)

Effective collaboration in supply chain is all about building relationship with trading partners. This needs an unique end-to-end supply chain optimization solution that helps in connecting with all partners, suppliers and customers. Everyone on the platform has the latest data in order to make quicker, smarter decisions and work together to deliver supply chain continuity and mitigate risks (Rodrigues et al., 2020). The most important aspect of supply chain optimization is improving product quality. As quality management can be done in end to end activities such as from raw materials to delivery of finished items to customers. At last, optimization of supply chain also includes supply chain planning (Redeker et al., 2019). As when optimization is done this leads to more transparency and visibility in ti the supply chain performance and dynamics. This allows for the better plan the location of different supplier facilities and in this manner an organization can decide better about the warehouses and plant position to ensure effective delivery of products and services to customers and at the same time reducing the supply chain costs.

Some of benefits of lean tools implementation are improvements in inventory reductions, cash-to-cash cycle time, on time in full, order fulfilment, lead time reduction and profitability. The lean implementation helps in removing waste such as waste in these seven segments; Transport, Inventory, Motion, Waiting, Over-processing, Overproduction, and Defects (Redeker et al., 2019). All of these wastes impact direct on costs and are considered as non-value adding items due to that eliminating these can help in reducing costs and improving profitability of the firm. Mainly lean implementation is about eliminating unproductive tasks and replacing those tasks with more efficient ones. With the help of lean implementation, companies can streamline their processes (Rodrigues et al., 2020). Thus, lean improves the work and quality and resultant in adding value for customers. Mainly lean improve quality performance and ensures fewer reworks and defects. In addition to this, reduce process and machine breakdowns and lowering the levels of inventory. In a nutshell, it leads to higher efficiencies and more outputs and improve delivery performance of any organization with the faster development and higher customer satisfaction followed by higher employee development and morale. At last all these resultant in higher profits and increased business at the global level (Rodrigues et al., 2020).

Most companies work on the formula that is selling prices= costs plus profits when selling price is high customers may struggle to pay higher amount this impact on sales of product. If you don’t offer products at the right price than this may not help in retaining customers. Lean works to drive down costs and this helps in saving the higher profits (Rodrigues et al., 2020). As every costs saved will lead to more profits and implanting these lead to cost savings. Hence, from the above discussion it is clear that lean implementation is all about the eliminating unproductive tasks and replacing those tasks with more efficient ones. In case of SMEs the company financial position, organization culture, performance of evaluation system and expertise and skills and management and leadership style are key factors in the success of the strategy. The improvements are; some of benefits of lean tools implementation are improvements in inventory reductions, cash-to-cash cycle time, on time in full, order fulfilment, lead time reduction and profitability.

References

Bhamu, J. and Sangwan, K.S., 2014. Lean manufacturing: literature review and research issues. International Journal of Operations & Production Management.

Feld, W.M., 2018. Lean manufacturing: tools, techniques, and how to use them. CRC press.

Garza-Reyes, J.A., Kumar, V., Chaikittisilp, S. and Tan, K.H., 2018. The effect of lean methods and tools on the environmental performance of manufacturing organisations. International Journal of Production Economics, 200, pp.170-180.

Leksic, I., Stefanic, N. and Veza, I., 2020. The impact of using different lean manufacturing tools on waste reduction. Advances in Production Engineering & Management, 15(1).

Redeker, G.A., Kessler, G.Z. and Kipper, L.M., 2019. Lean information for lean communication: Analysis of concepts, tools, references, and terms. International Journal of Information Management, 47, pp.31-43.

Ribeiro, P., Sá, J.C., Ferreira, L.P., Silva, F.J.G., Pereira, M.T. and Santos, G., 2019. The Impact of the Application of Lean Tools for Improvement of Process in a Plastic Company: a case study. Procedia Manufacturing, 38, pp.765-775.

Rodrigues, J., Sá, J.C., Silva, F.J., Ferreira, L.P., Jimenez, G. and Santos, G., 2020. A rapid improvement process through “quick-win” lean tools: A case study. Systems, 8(4), p.55.

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