Managing Buyer-Supplier Relationships
Question :
How is inventory management helping Colgate-Palmolive to deal with uncertainty and why is this important?
Managing buyer-supplier relationships for cost/value advantage
Answer :
Balancing inventory turnover and management of uncertainty is handled through supply chain planning tools and safety stock. Demand planning helps in dealing with demand forecast and volatile demand. Market demand is synchronized with production activities with the help of supply network planning tool. Availability planning tool is the most effective supply chain planning tool to deal with uncertainty. This helps in creating strategic planning facility that matches with demands and also help in designing delivery commitment. As the company’s goal is to reduce inventory and maintain the same at a balanced turnover level, the risk of understock remains on the face of uncertainty (Man-Yi & Xiao-Wo, 2006). These tools are important because of certain reasons. These help in dealing with uncertain supply situation such as delay in supply or sudden exit of a supplier. As the company has a long supply chain, which can face disruptions and safety stock prevents such situations (APQC, 2017). There can be trouble in demand forecasting leading to less actual demand or excess actual demand and such situations can be managed with the help of these tools and an added advantage here is the maintenance of the intended service levels. Finished goods are the key in maintaining the company’s value and cost advantage but these are highly dependent on the manufacturing process and supply of raw materials. Hence, these inventory management tools are necessary to deal with any kind of manufacturing disruption.
While managing buyer supplier relationship, Colgate is focussed at obtaining the optimum value advantage. Supply chain integrity plays an important role in this process. The company carries out supplier audits prior to establishing buyer supplier relationship to review the supplier operations. This process uses audit tools for assessment of quality. The company also maintains a strict code of conduct for both sides. The role of buyer-supplier relationship involves governance efficiency which controls costs and improves performance. Value advantage is achieved when suppliers work for the interest of the buyers, i.e. Colgate. Transactional relationship exists between Colgate and its suppliers which helps in dealing with uncertainty as well, thus providing cost and value advantage (Vasudevan, 2015). Here, buyer supplier also plays an important role in improvement of information flow and product quality. It is critical because the company’s industry environment is highly competitive and it aims to achieve sustainability in the long-run. The supply chain offers multiple dynamics based on which this relationship can grow. Cost advantage is treated as financial value creator and to achieve this buyer supplier relationship is mandatory. This relationship is also extended towards customer relationship management where the main aim is gaining value advantage which is done through identification and satisfaction of their demand using methods that are better than those of the competitors. Thus the dual aspect of buyer-supplier relationship is a complex concept that offers multiple benefits to the company.
1 References
Colgate-Palmolive Company, 2012. LivingOurValues: Sustainability, s.l.: s.n.
Colgate-Palmolive Company, 2020. ACCELERATING GROWTH: 2019 Annual Report, s.l.: s.n.
MacroTrends, 2020. Colgate-Palmolive Financial Ratios for Analysis 2005-2020 | CL.
