So hey, everyone, in this video we will understand about supplier relationship management.
And the reason we are talking about supplier relationship management is because every single company
that is there in this world need a collaborative relationship with their strategic supplier.
Even if you look at the successful companies like Apple, Apple is a $2 trillion company and it still
need all of these strategic alliances or partnership with these different supplier.
If you look at your iPhone, but iPhone have more than 5000 components.
Now, to meet these or to assemble these 5000 components, you need to have strategic alliance or partnership
or relationship with all these different suppliers.
And all those partners are also known as your OEMs or additional equipment manufacturers.
When you talk about OEMs in the coming videos, but if you look at your iPhone, your iPhone is made
by more than 50 different brands.
So Samsung is there.
So almost 70 to 80% of all display in any smartphone in this world are made by Samsung.
Almost all the memory chip, so-called RAM is made by Samsung.
Camera module camera sensor are also made by Sony.
Your assembly line or assembly of all your product is done by TSMC.
So you can see that you have so many companies that are involved in making of an iPhone.
And we'll talk about that in the OEM video, which is your original equipment manufacturer.
But let's look at all of these partnership and why we have strategic alliance in the first place.
So if you look at the supplier relationship management, the cost of doing these strategic partnership
or forming these alliances is to reduce down the cost, because nowadays you need specialization and
every single company is specialized in performing just one function.
So the first aim is to reduce down the cost.
Second aim is to improve the process because one company cannot manufacture so many different components
of a device, and that is why they are having these strategic alliances.
And third one is to increase innovation in product and services.
But you may have one question in mind that nobody how can we decide that whether we need to outsource
a specific component or a process or, B, to go do those things by ourself?
I mean, how do you balance out two defense situation between forming an alliance or partnership with
a different supplier or doing that specific process by arson?
Well, to solve that specific problem, you have this specific diagram.
So in this diagram, you have money or the amount of money you can spend in that specific process on
X axis and you have value creation on y axis.
So if you have to spend more amount of money and that specific process or part of component will create
more value, then you will have a strategic partnership.
And we'll talk about all of these different types of partnership in the coming video.
But if you have low amount of spending and that is also creating less value to your brand, then you
will have non-critical partnership.
And similarly you will have lavish partnership and more like partnership.
And we'll talk about all of these different types of partnership in the same video.
So if I summarize this video, you have your strategic supplier that will create a high impact and that
will help you achieve a long term goal.
So Samsung is a strategic supplier to Apple, specially in memory component and all that display.
Then you have leverage supplier know leverage supplier will help you use their expertise in economies
of scale and economies of scope so that you can reduce down your cost.
If you look at companies like Foxconn now, Foxconn assembles majority of the Apple devices and Foxconn
also assembles devices for other companies like OnePlus, oppo vivo and so many different companies.
Now, the reason Apple is using Foxconn is because Foxconn have the expertise in assembling all of these
different devices, and that is your leverage supplier because you are using the supplier to minimize
your cost.
And these suppliers have economies of scale and economies of scale.
And we will understand about those two important terms what is economy of scale and what is it going
to be of scope in the coming videos?
Then you have your bottleneck supplier that are not strategic but provide supplies that have a high
dependence on the customer.
If you look at companies like Arm, ARM is a company that outlines these semiconductor chips.
Apple is using the arms technology in these semiconductor chips.
Obviously, these semiconductor chips are made by some other manufacturer, but the technology in the
semiconductor chips is made by ARM.
And that's a huge bottleneck because tomorrow, if ARM do not provide these technologies to Apple,
Apple may not have some of the partner who can also provide the mapping of the semiconductor.
Then you have non-critical supply and if you look at the charger of your iPhone or the output.
A box of your iPhone you can any time replace the supplier because you can easily find a replacement.
But with bottleneck, it is super difficult to find replacement because Apple have to use the arms technology
in their semiconductor because there is no other alternative.
And that is why in the next review we will understand about horizontal relationship and vertical relationship
that will be super critical for your business.