A

PROJECT ON

“PRODUCTIVITY AND QUALITY MANAGEMENT”

TOPIC - CUSTOMER

AND

SUPPLIER RELATIONSHIP

SYBMS

DIV- (A)

YEAR - 2009-10
GROUP MEMBERS:-

CERTIFICATE

This is to certify that, Project Report entitled as

“CUSTOMER AND SUPPLIER RELATIONSHIP” has
successfully been completed for the subject
“PRODUCTIVITY AND QUALITY MANAGEMENT”.

We further certify that to the best of our knowledge

and belief that matter presented in Project Report is
bonafied and has not been submitted to this or any
other Degree, Diploma or membership.

(PROJECT GUIDE)

ACKNOWLEDGEMENT

We would like to thank our Professor of

PRODUCTIVITY AND QUALITY MANAGEMENT for giving
us an opportunity to do a project on “CUSTOMER AND
SUPPLIER RELATIONSHIP”.
It is because of this that we got equipped with the detailed
knowledge about the topic.

We would also like to thank the college librarian who proved

to be of great help in helping us find the topic related
books.
 CONTENTS
• WHO ARE CUSTOMERS?

• WHO ARE SUPPLIERS?

• CUSTOMER FOCUS

• CUSTOMER SERVICE

o TEN BELIEFS

• CUSTOMER LOYALTY

o CUSTOMER KNOWLEDGE

• SUPPLIER FOCUS

• SUPPLY CHAIN MANAGEMENT

o SCM FOCUS

o FUNCTIONS

• MATERIAL MANAGEMENT

o OBJECTIVES

o FUNCTIONS

o LOGISTICS

o STANDARDS

o WAREHOUSING
WHO ARE CUSTOMERS?

Customers are the whole reason for continuously improving processes. It is they
who decide whether your product or service offers the best value for money
when they make their purchase decisions, and their purchase decisions
determine whether your business will be a success or not.

While the importance of this relationship is obvious, there are a number of

factors which complicate it. Many companies do not deal directly with the
ultimate users of their products or services; they deal through intermediaries.
These intermediaries (such as wholesalers and retailers) have needs which are
as important to satisfy as those of the ultimate customers. In fact, such
intermediaries are often in a better position than you to know how the ultimate
customer feels about your product or service. Your 'business unit' may also be
part of a larger organisation which means there are even more layers between
what you and your staff do and the ultimate customer. You may provide an
internal support function (such as Administration, Personnel or Accounting) so
your contribution to product or service quality will be even more difficult to
identify. What all this means is that a customer for you is anyone to whom you
provide products or services, whether directly or indirectly.

WHO ARE SUPPLIERS?

Suppliers are all those, whose input you rely on to do your job effectively.
Obvious suppliers are those outside the organisation from whom you acquire raw
materials for production processes, stock for re-sale, capital equipment or
equipment consumables. Not so obvious suppliers are those who provide you with
services or with information essential for you to do your job.

Identifying suppliers external to your company is one thing, but what is often
overlooked is that all those who are inside the company and on whom you rely to
do your job are also your suppliers. The importance of this realisation is that if
you do not treat internal sources of input as suppliers, it is unlikely that you will
develop the attitudes necessary to generate their support for your
improvement efforts
CUSTOMER FOCUS

Many people define a business in financial terms of increasing sales, enhanced

margins and making profits. However, as stated by Peter Drucker, the first
valid purpose of any business id to create a customer. Every business must
satisfy its customers or perish.

It is the customer who helps us to decide what business we should be in. It is

the customer alone whose willingness to pay for goods or services converts
organisation’s economic resources into wealth. What the business thinks it
produces is not of any value, if it doesn’t meet the customers’ expectations.
What the customer thinks he is buying and what he considers its value is
decisive it determines what a business is, what it produces and whether it will
prosper. What the customer buys and considers value is never a product. It is
always utility, that is, what a product or service does for him.

The customer buys utility and productivity components of outputs. Productivity,

at the organisational level, maybe considers a measure of how well the company
satisfies the customer’s utility. Therefore, productivity measurement shows
how well a company is doing. This does not, however, tell anything about why the
company is performing the way it is. To discover why, productivity must be
examine at lower levels such as the work group, which are best suited for using
productivity measures as an indication of change.

In today’s quality management, the focus on customer is very important. A

customer is satisfied when his stated and implied needs are fully met by the
supplier. The effect of customer satisfaction is continued brand loyalty, we
purchase of the product and services. Every single activity of an organisation
needs to be directed towards meeting the customer’s needs and expectations.

“The customers always come first” and “the customer is the king” are the terms
used by organisations to describe their market oriented spirit. There is a strong
belief that business operations and efficiency can be enhanced by reflecting on
the requirements of customers. Japanese believe it is important for the
engineers who are involved in design and development of new product to go to
the customers and to the locations where the product is being used, and seek
their feedback for improvement. Some of the questions they may ask:

• What do they feel about the product?

• What bothers them?

• What features should new products have?

• What is required to satisfy their requirements?

CUSTOMER SERVICE

In most business activities, a large number of employees don’t see their end-
customers. Even then, their activities could also be directed to satisfactorily
serve these end-customers and ensure that their expectations are met.

It is appropriate to recognise here that whenever someone puts in labour, there

is someone who needs the result of this labour. The later person could be an
internal customer who can be seen, talked to and served. Such customers are
always satisfied and say “thank you” if the supplier provides what they need and
goes out of the way to make life easier for them. If not, they have a cause to
complain.
In the case of end-customers they may either complain, or go to the next best
competitor, without even complaining. It’s worth recalling here that only a
quarter of dissatisfied customers take the trouble of complaining.

Serving the customers exactly in line with their needs is crucial for any
business. When these customers are internal, the way the internal-supplier
serve them would make an impact on the quality of the output, at each process
step, and this affects the final outcome.

To quote Deming here, the customers is the most important part of a

production line, ranking higher than the supplier, though good supplier
relationships are also important. He considers that the customer is more
important than the raw material, as it is easier to replace a supplier than to find
a new customer or reclaim one you lost.

THE TEN BELIEFS

The ten leading companies always focus on serving customers to their

satisfaction. They evolve several beliefs which they attempt to meticulously
follow. Ten prominent ones, among them, are listed below:

1. Treat customers like life-time partners

2. Give customers what they want again and again
3. Create systems to guarantee consistent service
4. Keep your word to customers
5. Always be helpful to them
6. Give customers respect and be polite to them
7. Measure everything the customers says and feels
8. Encourage customers to say when and where you went wrong
9. Empower front liners to handle complaints
10 Let them be partners for continuous improvement
.
CUSTOMER LOYALTY

Knowledge of customers is a prerequisite to develop customer loyalty. Customer

knowledge refers to capturing all the relevant information that helps
understand what customers’ wants, needs and values most and making it
available consistently to all customers and touch points to enable create new
approaches to customer, which help exceed customer expectation.

To achieve customer loyalty and franchise, it is imperative that the company

creates a network of touch points by which it can establish, cultivate and
maintain long lasting and mutually beneficial customer interactions. A value
driven approach to build these interactions comprises of the following
components:

 Understand customer behaviour

 Communicate with the customer to influence his behaviour
 Design and implement new approaches
 Measure their effectiveness

CUSTOMER KNOWLEDGE

The elements of customer knowledge are summarized in the table:

1 Customer database: Helps taking pro-active

. management steps

2 Understanding needs: To constantly update deliverables

.
3 Segmentation: To formulate group-based
. approaches

4 Participation: Involving customers for improved

. service design

5 Understanding competition: To give than what others can give

.
SUPPLIER FOCUS

Supply chain is the customer chain in reverse. Every customer needs a supplier.
He needs to be able to communicate to the supplier, without any ambiguity, what
is required and expected. If the two can co-operate, there is a great chance
that the needs and expectations are met. The three key players involved in any
organizational performance and the supplier interface are illustrated in fig:

SUPPLIER ORGANISATION CUSTOMER

TQM recognizes the need for long term co-operation with suppliers, and has
proven how foolish it is to keep switching the suppliers for temporary price
advantage. Long term relationship means that the suppliers understand what the
material is used for. They don’t just supply their goods and services and
mechanically comply with specifications but understand the application details
related to the customer process.

Long term relationship with supplier has several advantages, including healthy
working relations, easier administration and fewer problems over invoicing and
checking. More importantly, suppliers can also work as extended arms of the
business and get closely associated in continuous improvements.

SUPPLY CHAIN MANAGEMENT

Supply chain management (SCM) is currently the buzz word among the modern
management practices. It integrates raw material supplier on one side with
product and service delivery on the other.

Successful implementation of SCM assists organizations in ensuring products

and services of right quality and quantity, delivered at right place in time,
covering every process step, leading to enhanced customer satisfaction at lower
cost.
Logistics management, evolved during early 1990’s is providing a multitude of
ways to increase efficiency and productivity in any organization, there by
reducing significantly the unit costs. While the traditional route to achieving
cost advantage is volume production and economies of scale, logistics
management, spanning from the management of raw materials through to the
delivery of the final product, is proving to be a boon to world class
managements.

Like the Darwinian ethic of the ‘survival of the fittest’, most organizations
continue to view themselves as entities that exist independently from others
with the need to compete with them in order to survive. With the business
world fast shrinking, such a philosophy can be self-defeating, more so when it
leads to unwillingness to cooperate, in order to compete. Behind this seemingly
paradoxical concept is the development and implementation of supply chain
management.

“Supply chain creates the necessary network of organizations that are involved,
through upstream and downstream linkages, in different processes and
activities that produce value in the from of products and services in the hands
of the ultimate customer.”

Global business is providing dynamically changing logistics environment. It is also

bringing with it new complexes and concerns for managements. Dynamic
customer expectations, faster responses, flexibility, partnerships and
organizational integration are throwing several challenges towards developing
appropriate and relevant supply chain management models.

Supply chain focuses on managing and coordinating the movement of materials,

information and funds across the organizational functions. SCM, therefore, is
the management of interconnected operations involved in ensuring right quality
of products and services as required by the end customers. SCM therefore
spans all the movement of materials, including raw materials, storage, work-in-
process inventory and finished goods, starting from the first input point to the
final output point.

SCM encompasses the planning and management of all activities involved in

sourcing, procurement, storage, conversion and logistics management. More
importantly, SCM functions include collaboration with business partners,
including suppliers, manufacturing and service departments and customers.

SCM also addresses to distribution strategy, configuring the networking and

replenishment.

SCM FOCUS

Global organizations are increasingly finding the need to rely on efficient and
effective supply chains to successfully compete in global markets and in
networked economy. During the past few decades, focusing on globalization,
outsourcing and application of IT is enabling many organizations to successfully
operate collaborative supply networks in which each specialized business
partner focuses on only a few key business activities.

FUNCTIONS

Thus, SCM is a cross-functional approach to manage the movement of raw

materials into an organization, internal processing of material into finished
goods, and moving them out to the end customer. As more and more
organizations are focusing on core competences, they are reducing their
ownership of raw material sources and distribution channels. These functions
are increasingly being outsourced to other entities that can perform the
activities better and with cost effectiveness.

Thus, focusing on the concept of logistics and supply chain management,

recognized globally as a necessary tool for implementation of a competitive
strategy, is timely and contemporary.

MATERIAL MANAGEMENT:

In today’s management practices, materials management is considered to

be relatively narrow functions. While it has significant impact on productivity
and quality, this function is integrated within the broader canvas of supply chain
management, which has an organizational perspective. However, it will be
beneficial to appreciate the keys aspects of materials management.
 Materials management deals primarily with purchasing, inventory and
stores related activities. They broadly include planning, coordination and
control.

Materials management can be defined as that part of management function

which is primarily concerned with acquisition, control and use of materials
needed and flow of goods and services, connected with production process,
having definite and pre-determined objectives.

OBJECTIVES:-

There are many objectives of materials management function, which can be

grouped into two categories:-

Primary: like ensuring quality and quantity of materials.

Secondary: like alternate sourcing, cost reduction and coordination.

FUNCTIONS:-

After setting out the objectives, the concerned activities should be defined,
such as:-

• Material budgeting, planning and programming.

• Scheduling, purchasing and procurement.

• Receiving material and receiving inspection.

• Inventory control, storage and warehousing.

• Material handling.

• Dispatch, shipping and disposal.

The above described simple concept of managing materials was later

extended to Total Material Control, aiming at ensuring the right material of the
right quality, at the right price in the right quantity, at the right time and place.

LOGISTICS:-

Currently, materials management is a branch of logistics that deals with the

tangible components of a supply chain. Specifically, this covers procurement of
raw materials, spare parts and replacements, creating appropriate procedures
for purchasing and ordering such parts, establishing standards involved in
ordering, shipping and warehousing the said materials and parts.

Procuring and supplying right quality and quantity of raw materials in time
and at competitive price are the primary responsibilities of materials
management. It also ensures that materials and spares are tested; both before
purchase orders are placed and during use, to ensure there are no short terms
or long term issues that would disrupt the supply chain, throwing off schedules
of production.

STANDARDS:-

Another major component of materials management is standards

compliance. There are material standards that need to be strictly followed and
are critical to supply chain’s functions. A supply chain that uses just-in-time or
learns replenishment requires absolute perfection in the shipping of parts and
the material, from purchasing agent to warehouse and to place of destination.

WAREHOUSING:-

Materials management also ensures that the warehousing and shipping take
place strictly as per well laid out procedures and standards. This component of
materials management is changing fast, due to the recent innovations in logistics
and in supply chain management, including outsourcing management of
warehousing.
 BIBLIOGRAPHY

• Websites referred-

www.wikipedia.com

www.managementparadise.com

• Book referred-

Productivity and quality management

- R.H.G RAU