Eskom Procurement Book 2015

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. 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. 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.

5.3.4.7 Ineffective Allocation of Roles

5.3.4.8 Ineffective Supplier Segmentation

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

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