Supplier Relationship Management strategies

Supply Chain Management

As a supplier, which factors about a buyer (your potential customer) would you consider to be important in setting up a long-term relationship?

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The most critical of all is trust, and there are many aspects to evaluating a buyer to the extent of their trustworthiness. Often Supplier Relationship Management (SRM) and Customer Relationship Management (CRM) strategies rely on the measurable factors in determining which buyers are the best fit for their products or services, and the level of financial viability they have (Hvolby, Trienekens, 2010). Commonly used measures of financial stability including Dun & Bradstreet credit reports, risk reports on their financial stability and credit worthiness, and payment history are all essential (Jacobs, Chase, 2010). The many measurable and quantifiable factors need to be balanced with the qualitative as well (Jacobs, Chase, 2010).

Often the qualitative can outweigh the quantitative, especially when a business has significant growth potential yet has not been generating revenue for an extended period of time. This often happens with start-ups and entrepreneurial ventures. The factor of how well the buyer’s product vision and strategy align with the supplier is critical. This indicates how well the buyers’ and supplier’s future growth will complement each other’s over time (Shang, Lin, 2010). Another qualitative factor is how well the buyer and supplier communicate across organizational boundaries. Organizational leadership, attitudes towards accountability, performance and measuring results must be comparable for a supplier and buyer relationship to be successful. The bottom line is that evaluating a buyer is a multifaceted decision, which needs to include both the highly measurable and the subjective. The best decisions on which buyers to work with are often the result of this type of qualitative and quantitative analysis.


Hvolby, H., & Trienekens, J.. (2010). Challenges in business systems integration. Computers in Industry, 61(9), 808.

Jacobs, Robert, & Chase, Richard. (2010). Operations and Supply Chain Management. Upper Saddle River, NJ: McGraw Hill Higher Education. 13th Edition.

Shang, S., & Lin, S.. (2010). People-driven processes in customer relationship management. The Service Industries Journal, 30(14), 2441.

2. Discuss the basic differences between the mean absolute deviation and the standard deviation.

A standard deviation defines the level if dispersion throughout a given data set or population and is often applied to a given statistical sample. The mean absolute standard deviation is defined as the sum or mean of all deviations throughout a population. More specifically the mean absolute deviation defines the amount of dispersion around the data’s mean (Wallstrom, Segerstedt, 2010). Of these two measures, the mean absolute deviation is the far less used by statistical practitioners in businesses, with academic researchers using the concept the majority of the time. The one exception is in measuring the performance of bond markets and debt-based investments (Zabolotnyuk, Jones, Veld, 2010). The mean absolute deviation can be applied with greatest accuracy to interval-level data as well.

Standard deviation is used far more prevalently and throughout many studies within business, as this concept is taught in many of the fundamental statistics courses (Jacobs, Chase, 2010). Standard deviation can also be reliably applied to ordinal, interval and ratio-level data as well, providing greater insight into its dispersion around a mean value.

In conclusion, the mean absolute deviation is used for more advanced analytics where the summary of dispersion measures around a mean is relevant. This would be the case in multi-segmented studies where multiple measures of deviation need to be aggregated or consolidated into the analysis. The vast majority of studies rely on the standard deviation to communicate dispersion of data around the mean, connoting the level of heterogeneity throughout a data set.


Jacobs, Robert, & Chase, Richard. (2010). Operations and Supply Chain Management. Upper Saddle River, NJ: McGraw Hill Higher Education. 13th Edition.

Wallstrom, P., & Segerstedt, a.. (2010). Evaluation of forecasting error measurements and techniques for intermittent demand. International Journal of Production Economics, 128(2), 625.

Zabolotnyuk, Y., Jones, R., & Veld, C.. (2010). An Empirical Comparison of Convertible Bond Valuation Models. Financial Management, 39(2), 675.

3. Describe the differences between functional and innovative products.

The greatest difference between a functional and innovative product can be attributed to each product’s approach to meeting needs in the market. A functional product is often designed as a replacement or substitute for any existing product or solution, while an innovative product is designed to completely disrupt a market or create a new one (Bertoluci, Millet, 2009). A functional product in the personal music player space would be a cost-reduced CD player while an innovative one would be a video-enabled iPad or iPod. The difference is that the innovative product completely disrupts the current market, nearly always expands it, and acts as a catalyst for new business models as well. In the case of the iPod and iPad the new business model is the pervasive number of music titles, many forms of video content, and the content providers who increasingly are looking at Apple’s MP3 players as a potential revenue source for licensing their songs and digital content (Bertoluci, Millet, 2009).

Functional products are also deliberately be created to cause price competition and market consolidation as well (Jacobs, Chase, 2010). This is the strategy at the low-end of the automobile markets, where price and minimal levels of features are expected, exemplify this type of product strategy. The functional designs often lack differentiation at the feature or benefit level, relying in price and availability alone to compete. Due to this attribute of functional products, they often become commoditized rapidly. Innovative products however defy price competition and actually support price increases, capitalizing on the inherent differentiation and unique value they deliver based on their design (Bertoluci, Millet, 2009). The comparison of a standard personal CD player made in Taiwan vs. The latest generation of the iPod is a case in point.


Bertoluci, G., & Millet, D.. (2009). Functional product enrichment and supply chain disorganisation: two barriers for sustainable design. International Journal of Product Development, 7(1/2), 149.

Finkle, T., & Mallin, M.. (2010). STEVE JOBS and APPLE, INC. Journal of the International Academy for Case Studies,31-40.

Jacobs, Robert, & Chase, Richard. (2010). Operations and Supply Chain Management. Upper Saddle River, NJ: McGraw Hill Higher Education. 13th Edition.

4. Distinguish between pure and mixed strategies in production planning.

Pure strategies of production planning are based purely on production efficiency and attaining a specified run rate to gain economies of scale during the manufacturing process (Jacobs, Chase, 2010). These strategies also look to gain economies of scale and eventually achieve the experience effect, or an accumulative reduction in costs with the doubling of production volumes over time. Most often pure production strategies are relied on in process-centric industries where there is little if any product variation.

When there is significant variation in product attributes and characteristics, and demand for a product varies significantly, many companies will rely on mixed strategies for production planning (Verdouw, Beulens, Trienekens, Verwaart, 2010). By definition, a mixed strategy combines the attributes of an active and passive strategy to attain the highest level of accuracy and efficiency possible. The active strategy components of handing fluctuations in product orders through demand management, applying pricing strategies to optimize gross margins, and the development of counter-cyclical products are included as the foundation of a mixed strategies. The use of demand sensing and order sensing are also prevalently used to attain insight into how best to manage inventories (Jacobs, Chase, 2010). The passive strategy components of managing to inventory plans and predetermined forecasts is also dominant in a mixed strategy (Bard, Nananukul, 2010). Often when product strategies are designed to support both make-to-stock and build-to-order workflows for customer requirements, mixed strategies become dominant.


Bard, J., & Nananukul, N.. (2010). A branch-and-price algorithm for an integrated production and inventory routing problem. Computers & Operations Research, 37(12), 2202.

Jacobs, Robert, & Chase, Richard. (2010). Operations and Supply Chain Management. Upper Saddle River, NJ: McGraw Hill Higher Education. 13th Edition.

Verdouw, C., Beulens, a., Trienekens, J., & Verwaart, T.. (2010). Towards dynamic reference information models: Readiness for ICT mass customisation. Computers in Industry, 61(9), 833.

5. List the type of stakeholders that would be considered in a payoff analysis.

The internal and external key stakeholders that need to be considered in any payoff analysis include the management teams, employees, and supply chain management cross-functional teams who include finance and accounting staff as well (Jacobs, Chase, 2010). External stakeholders including the institutional investors, individual investors and their shared expectations of the ROI of the payoff need to also be considered as well. Payoff analysis also needs to take into account vendors and their maintenance and support contracts, and the resulting costs associated with these agreements (MacMinn, Han,1990).

Payoff analysis impacts the internal stakeholders the most however, often changing workflows and the approach to completing tasks daily in an organization after a payoff is completed (Aragon-Correa, Rubio-Lopez, 2007). This is over a longer-term time horizon as a payoff is completed and an asset is no longer used. There is often resistance to change when the payoff is achieved on a given asset, as many companies will look to replace it and automate the entire process, changing employee’s roles as a result. This shift in responsibility that a payoff can force over time needs to be dealt with from a business process management and change management standpoint over the long-term (Jacobs, Chase, 2010). By concentrating on the unique requirements and needs of the internal stakeholders, payoff analysis can be profitable and productive over the long-term.


Juan Alberto Aragon-Correa, & Enrique a Rubio-Lopez. (2007). Proactive Corporate Environmental Strategies: Myths and Misunderstandings. Long-Range Planning, 40(3), 357.

Jacobs, Robert, & Chase, Richard. (2010). Operations and Supply Chain Management. Upper Saddle River, NJ: McGraw Hill Higher Education. 13th Edition.

MacMinn, Richard D., & Han, Li-Ming. (1990). Limited Liability, Corporate Value, and the Demand for Liability Insurance. Journal of Risk and Insurance, 57(4), 581.

6. What strategies are used by supermarkets, airlines, hospitals, banks, and cereal manufacturers to influence demand?

There is an abundance of strategies used by retailers and members of distribution channels, healthcare providers, service providers and consumer packaged goods manufacturers to influence, shape and drive demand for their products, services and upsell programs (Jacobs, Chase, 2010). The most common of these strategies is to concentrate on selling solutions and benefits over just features and price. This strategy concentrates on value over just price alone.

Influencing demand through the use of customer endorsements is also considered one of the most effective strategies each of these types of companies rely on to influence demand. Endorsements convey trust and invite prospective customers to see their unique requirements also reflected in the needs of customers who have already bought the products as well. Customer testimonials are very powerful as a means to influence demand through trust and relevance.

A third approach all of these businesses rely on to influence demand is their reliance on the unique experiences each of these businesses and their products and services offer (Tynan, McKechnie, 2009) . Each of these companies attempt to influence demand by providing well-communicated marketing messages that describe the experiences their products or services deliver. They are each attempting to influence demand through the marketing of exceptional experiences using their products or services, leading to trust being created with the brand (Tynan, McKechnie, 2009). Ultimately, each of these companies is attempting to become a trusted advisor in the markets they compete in (Urban, 2005).


Jacobs, Robert, & Chase, Richard. (2010). Operations and Supply Chain Management. Upper Saddle River, NJ: McGraw Hill Higher Education. 13th Edition.

Tynan, C., & McKechnie, S.. (2009). Experience marketing: a review and reassessment. Journal of Marketing Management, 25(5/6), 501.

Glen L. Urban. (2005). Customer Advocacy: A New Era in Marketing. Journal of Public Policy & Marketing, 24(1), 155-159.

7. In discussing characteristics of efficient plants, Goodson, developer of rapid plant assessments, suggests that numerous forklifts are a sign of poor space utilization. What do you think is behind this observation?

Dr. Goodson is the former CEO of Oshkosh Truck and has decades of experience in defining lean manufacturing and fulfillment systems throughout the automotive industry. Based on his previous experiences and the insights he delivers in Read a Plant — Fast, an article he published in the Harvard Business Review in 2002 (Goodson, 2002) his contention is correct. In that article he argues that when there are many smaller components being used throughout a production process, hand-carts or automated fulfillment systems would be a better choice. He also contends that forklifts are expensive to operate, maintain and pose safety risk to those working in the warehouse area as well. All of these factors point to a systemic problem with the efficient use of space (Jacobs, Chase, 2010).

I agree with his assessment due to the following observations. First, forklifts are often purchased as capital assets and are therefore very expensive, maintain and depreciate over time (Metalworking Production Management, 2005). Having too many of them can cost a company more than the benefits these devices deliver. Second, Dr. Goodson is correct that this indicates a lack of efficiency in the use of space and signals that a distribution or warehouse center could be made significantly more efficient. Third, the use of automated systems for retrieving parts from inventory would have a higher ROI than a forklift investment as there would be no ancillary costs to adding additional production shifts. Dr. Goodson is correct in his assessment.


R Eugene Goodson. (2002, May). Read a plant – Fast. Harvard Business Review, 80(5), 105-113.

Jacobs, Robert, & Chase, Richard. (2010). Operations and Supply Chain Management. Upper Saddle River, NJ: McGraw Hill Higher Education. 13th Edition.

Metalworking Production Management (2005). How good is your plant?. Metalworking Production, 149(1), 9.

8. In which way does the time horizon chosen for an aggregate plan determine whether it is the best plan for the firm?

The time horizon chosen for an aggregate production plan must reflect and take into account the constraints of the business model itself, the available resources to complete the plan’s specific build requirements, and the variation in demand (Jacobs, Chase, 2010). All three of these factors must be quantified as much as possible for the aggregate production plan’s time horizon to be accurate and lead to a profitable operation over time (Lim, Ozelkan, 2010). Aggregate production plan time horizons vary significantly across industries and across market leaders vs. mainstream companies within an industry as well. There is no single best practice or metric that defines the optimal aggregate production plan. Instead, the triangulating of demand sensing, constraints on resources, and the business model characteristics all must be taken into account (Jacobs, Chase, 2010). . In optimizing to these three strategic constraints, companies are able to attain the best possible time horizon for their unique requirements. The use of the Sales & Operations Planning (S&OP) process as a means to optimize for these constraints is also pervasively being used (Ivert, Jonsson, 2010). S&OP is also increasingly being used to anticipate and response to demand variation including the development of accurate build forecasts and faster inventory turns based on better in-production synchronization of plans. In this way, the S&OP process gives a company the opportunity to manage their aggregate production plan time horizons with greater precision than they have in the past.


Jacobs, Robert, & Chase, Richard. (2010). Operations and Supply Chain Management. Upper Saddle River, NJ: McGraw Hill Higher Education. 13th Edition.

Linea Kjellsdotter Ivert, & Patrik Jonsson. (2010). The potential benefits of advanced planning and scheduling systems in sales and operations planning. Industrial Management + Data Systems, 110(5), 659-681.

Lim, C., & Ozelkan, E.. (1 January). Applying Flexibility Requirements Profile for Stabilizing Production Plans. IIE Annual Conference. Proceedings,2042-2047.

9. What are the pros and cons of relocating a small or midsized manufacturing firm (that makes mature products) from the United States to Mexico in the post-NAFTA environment?

NAFTA opened up many advantages to relocating a manufacturing business from the U.S. To Mexico, yet it also created entirely new risks for this type of outsourcing strategy as well. The advantages and risks are discussed in this analysis. First, the advantage of a lower cost per production is significant, and has been shown throughout many labor cost analyses completed by manufacturing companies considering this strategy (Jacobs, Chase, 2010). For manufacturing companies who compete in mature product industries there is also the potential to significantly reduce the supply chain costs. The downside is the increasingly levels of violence in Mexico towards Americans in general and corporation managers and officers specifically, who have been the target of kidnappings and violence (Simons, Isely, 2010). The advantages of this strategy based on NAFTA is that a U.S.-based company can significantly reduce its tax expenses by moving manufacturing to Mexico (Jacobs, Chase, 2010). In addition, with the cost savings, many manufacturing companies are investing in next-generation products and manufacturing processes, leading to greater competitiveness globally over the long-term (Jacobs, Chase, 2010). NAFTA has also led to tax reductions that have amounted to approximately $960 on average for a family of four as well. Finally, the advantage of no tariffs on goods produced in Mexico has also been a significant advantage for manufacturing companies competing in price-sensitive mature markets. The risks include the backlash from customers who buy from mature American-based manufacturing industries seeing this strategy as draining the country of jobs (Bogan, 2009). There is also the risk of security to the manufacturing plant and its workers, the risk that supply chains will become more expensive in Mexico given sever inflation there today (Bogan, 2009).


Bogan, J.. (2009, October). From Bad to Worse in Mexico. Forbes, 184(6), 31.

Jacobs, Robert, & Chase, Richard. (2010). Operations and Supply Chain Management. Upper Saddle River, NJ: McGraw Hill Higher Education. 13th Edition.

Simons, G., & Isely, P.. (2010). The effect of offshoring on knowledge flows in the U.S. automobile industry. Economics of Innovation and New Technology, 19(6), 553.

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