wscm chapter 5 buyer seller relationships

8/9/2019 WSCM Chapter 5 Buyer Seller Relationships

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5-1 World Class Supply ManagementSM, ISBN 0-07-229070-6, Copyright 200! "y #he M$%ra&-'ill Companies, In$( )ll rights reser*ed(

McGraw-Hill/Irwin Copyright 2003 by The McGraw-Hill Companies, Inc. ll rights reser!e".


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5-2

Chapter +

BUYER-SUPPLIER

RELATIONSHIPS


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ey Con$epts

A Transformation in Relationships Three Types of Buyer-Supplier

Relationships

. Transational Relationships

. !olla"orati#e an$ Alliane Relationships

. !olla"orati#e Relationships

. Supply Allianes

. %hih Relationship is Appropriate& The Supplier's Perspeti#e

(e#elopin) an$ *ana)in) !olla"orati#e

an$ Alliane Relationships


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/*ol*ing to WCSM #hrough )llian$es

Systematially selete$ supply allianes1 1"uilt on institutional trust222

1help or)ani3ations omplete their

e#olution to %orl$ !lass Supply*ana)ementS*2


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Strategi$ /lements o a 1elationship

Is one supplier hea$ an$ shoul$ers a"o#e therest in terms of the #alue it pro#i$es4 inlu$in)

prie5 inno#ation5 a"ility to a$apt to han)in)

situations5 apaity to +or, +ith your team5 tas,

6oint ris,s5 et&

Are some suppliers .strate)i/ to your "usiness&

%oul$ your ompany "enefit )reatly if the

supplier +ere more .inte)rally onnete$/ +ith

your ompany&

(o your ustomers reuire hi)h $e)rees of

fle7i"ility an$ spee$ of responsi#eness&


7/415-7 World Class Supply ManagementSM, ISBN 0-07-229070-6, Copyright 200! "y #he M$%ra&-'ill Companies, In$( )ll rights reser*ed(

#he Suppliers 3erspe$ti*e

Supplier8s +ant )oo$ ustomers Se#eral issues affet their assessment5

amon) them are9

. !ash 0lo+

. Openness an$ Approaha"ility

. A#aila"ility

. Professionalism


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4uestions to "e )ddressed Beore 3ro$eeding

Is the or)ani3ation prou$ to "e ali)ne$ an$assoiate$ +ith the supplier&

Is the or)ani3ation omforta"le +ith the le#el of

ris, assoiate$ +ith re$uin) the supply "ase&

Are "oth supplier an$ "uyer ali)ne$ in +hat theirultimate ustomer onsi$ers to "e #alua"le&

If there is su"stantial ris, for the supplier to

$e#elop ne+ tehnolo)ies5 pro$uts5 proesses5

or ser#ie support& Are "oth supplier an$ "uyer ali)ne$ in their

respeti#e #isions&

Are there suffiient operational points of

interation&



#he 1ole o 3o&er

Po+er is a topi that ma,es peopleunomforta"le

Po+er is at the heart of all "usinessrelationships

Po+er plays a ,ey role in t+o importantsu"lasses of "uyer-supplierrelationships9. !apti#e Buyer9 "uyer is hel$ hosta)e "y a

supplier free to s+ith to another ustomer. !apti#e Supplier9 ma,es in#estments in or$er

to seure a portion of the "uyer's "usiness5+ith no assurane of suffiient "usiness toreoup the in#estment



Ne& S5ills and )ttitudes 1euired

(e#elopin) an$ mana)in) olla"orati#ean$ alliane relationships reuire supply

professionals that possess the follo+in)

s,ills an$ attitu$es9

. Reo)ni3e the "enefits of olla"oration

. A"ility to i$entify5 o"tain an$ use $ata

. A"le to +or, in haos an$ unertainty

. A)ile5 fle7i"le5 an$ hi)hly a$apti#e



) #ransormation in 1elationships

The transformation from reati#e an$mehanial purhasin) to proati#e

prourement an$ on to %!S* parallels a

similar transformation in relationships

"et+een "uyers an$ suppliers Prior to the :;



3ro"lems &ith the #erm 3artner

(urin) the late :;



#hree #ypes o Buyer Supplier 1elationships

Transational !olla"orati#e

Alliane



Continuum o Buyer-Seller 1elationships

0i)ure >-:0i)ure >-:

Comm#nicationCompetiti!e "!.Connecte"nessContin#o#s Impr.Contrib#tions to $%&

&i''ic#lty o' ()itration()pe"iting*oc#s+e!el o' Integration

High pot. for problems Systematic approachLow HighIndependence InterdependenceLittle A focusFew Many ESI

Low ifficult high impactShort Long!eacti"e #roacti"e#rice $otal costLittle or none High or total

Ati#ity?Attri"ute Transational !olla"orati#e Alliane



Continuum o Buyer-Seller 1elationships

$#mber o' #pplierspen oo/s#ality1elations

1eso#rceser!icehare" *orecasts#pply &isr#ptionsTechnology In'lowsType o' Interaction

Many %ne or few&o 'esIncoming inspection esign (uality in systemInward loo)ing *oncern w+well being

Few low s)ill le"el #rofessionalMinimal ,reatly impro"ed&o 'es#ossible -nli)ely&o 'es$actical Strategic synergy

Ati#ity?Attri"ute Transational !olla"orati#e Alliane

0i)ure >-: !ontinue$0i)ure >-: !ontinue$



#ransa$tional 1elationships Chara$teristi$s

An a"sene of onern One of a series of in$epen$ent $eals

!osts5 $ata an$ foreasts are not share$

Prie is the fous of the relationship A minimum of purhasin) time an$ ener)y

is reuire$ to esta"lish pries

Transational purhases len$ themsel#es

to e-prourement



)d*antages o #ransa$tional 1elationships

Relati#ely less purhasin) time an$ effortare reuire$ to esta"lish prie

Lo+er s,ill le#els of prourement

personnel are reuire$



isad*antages o #ransa$tional 1elationships

Potential for ommuniation $iffiulties E7pe$itin) an$ monitorin) of inomin) uality

Infle7i"le +hen fle7i"ility may "e reuire$

Ten$ to result in more $eli#ery pro"lems

@uality +ill "e only as )oo$ as reuire$

Suppliers pro#i$e the minimum ser#ie reuire$

Less effeti#e performane "y suppliers

!ustomers are su"6et to more supply

$isruptions

Supplier is not moti#ate$ to in#est time an$

ener)y $e#elopment of "uyer8s pro$uts



Colla"orati*e and )llian$e 1elationships

!olla"oration is the ne+ imperati#e5$elares *ihael (ell

!olla"orati#e an$ alliane relationships

ten$ to result in lo+er total osts an$

impro#e performane of the supply hain



#hree Su$$ess 8a$tors

Researhers Stanley an$ Pearson foun$that the three most important fators in a

suessful "uyer-supplier relationship

are9

. :C t+o-+ay ommuniation5

. DC the supplier's responsi#eness to supply

mana)ement's nee$s5 an$

. C lear pro$ut speifiations


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Colla"orati*e 1elationships

Typially use$ for the prourement of non-ommo$ity items an$ ser#ies

A olla"orati#e relationship freuently is

an appropriate first step on the roa$ to a

strate)i alliane


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Colla"orati*e 1elationships

!olla"orati#e relationships ten$ tofoster12

. Lon)er term ontrats

. Re$ution of ris, for suppliers

. Re$uin) total osts

. Impro#ement of proesses

. Impro#ement of pro$uts

.Inrease$ in#estment in R F (

. Inrease$ in#estment in trainin)

. Inrease$ in#estment in euipment

. Better fous on ustomer nee$s


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Supply )llian$es

The fun$amental $ifferene "et+eenolla"orati#e relationships an$ supply

allianes is the presene of institutional

trust in allianes

The failure to $e#elop an$ mana)einstitutional trust is the priniple reason

that so many supply allianes fail


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#he )llian$e ptions

*erhant supplies the total pro$ut2 Self-manufature +ith ,ey ra+ material

suppliers2

In-house plant operate$ "y a supplier2


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)llian$e )ttri"utes

!ontinuous impro#ement Inter$epen$ene an$ ommitment2

Atmosphere of ooperation

Informal interpersonal onnetions Internal infrastrutures to enhane

learnin)

Openness in all areas of the relationship

A li#in) system


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)llian$e )ttri"utes Continued

A share$ #ision of the future Ethis ta,e pree$ene o#er e7pe$ieny

A$apta"le in the fae of han)e

(esi)n of e7periments an$ supplierertifiation

%in-%in ne)otiations

E7euti#e le#el ommitment


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Beneits o Supply )llian$es

Lo+er total osts2 Re$ue$ time to mar,et

Impro#e$ uality

Impro#e$ tehnolo)y flo+ from suppliers Impro#e$ ontinuity of supply


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Whi$h 1elationship is )ppropriate:

%hat are the .Strate)i Elements of a Relationship&/ Are there many relati#ely un$ifferentiate$ suppliers

pro#i$in) +hat amounts to inter-han)ea"le

ommo$ities&

(oes the potential supplier possess eonomi po+er+hih it is +illin) to employ o#er its ustomers&

If there is reo)nition "y "oth parties of the potential

"enefits of an alliane5 "ut a$euate ualifie$ human

resoures are not a#aila"le at one or "oth firms&

S


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Situations Wherein )llian$es may not "e

)ppropriate

Sta"ility. Prie Golatility

. (eman$ Golatility

. Hi)h S+ithin) Li,elihoo$ +ith Hi)h S+ithin)

!osts

!apa"ility

. No Partnership?Alliane-!apa"le Supplier for

the Item

. No Partnership?Alliane-!apa"le Supplier in

the eo)raphi Area

. Rapi$ Tehnolo)ial !han)e

. *ismath of !lo, Spee$

Si i Wh i )lli "


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Situations Wherein )llian$es may not "e

)ppropriate

!ompetition. Non-!ompetiti#e *ar,et

. Supplier (epen$eny !reation

. Ne)lete$ Areas

. Suppliers See,in) to Re$ue !ompetition

Benefits

. No le#era)e from Partnership

. No Har$ Sa#in)s from Partnership Internal Buy-In

. No Internal !ustomer Buy-In


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#he 3ortolio )pproa$h

Suessful supply hain mana)ementreuires the effeti#e an$ effiient

mana)ement of a portfolio of relationships

Three en#ironmental fators to onsi$er9

. :C the pro$ut e7han)e$ an$ its tehnolo)y5

. DC the ompetiti#e on$itions in the upstream

mar,et5 an$

. C the apa"ilities of the suppliers a#aila"le

/ C d th ;1i ht< #


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/-Commer$e and the ;1ight< #ype o

1elationship

Ho+ $oes BDB e!ommere affet ourseletion of the 'ri)ht' type of

relationship&.

. Seletion must "e a funtion of the

reuirement5 not of the Internet. BDB e!ommere is an ena"ler


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/-Commer$e #raps to )*oid

Trap J:9 uil$in) the pi). Ta,e an arhai5 um"ersome prourement

proess an$ .+e""i3e/ it

Trap JD9 The *a)i pill

. Loo,in) for the one solution that an "e use$to sol#e e#ery prourement situation

Trap J9 Supplier euality

. Supplier relationships ran)e from

transational to allianes


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5-35

Chapter +)ppendi=

INSTITUTIONAL

TRUST


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#rust

Trust is one of the ,ey fators that$ifferentiates the three lasses ofrelationships2

The simplest $efinition of trust is ."ein)

onfi$ent that the other party +ill $o +hatit says it +ill $o2/

Some le#el of trust must "e present in allthree types of relationships

The le#el of trust inreases +itholla"orati#e relationships an$ "eomesan essential harateristi +ith strate)iallianes


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)ttri"utes o Institutional #rust

(e#elope$ o#er time Internal trust is $e#elope$ "efore e7ternal

trust

Base$ on in$i#i$ual an$ institutional

inte)rity It is )reater than in$i#i$ual trust2

Trust an$ relationship are #ie+e$ asin#estments

Partners ha#e aess to other's strate)iplans

Rele#ant osts an$ foreasts are share$


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%hen ,ey in$i#i$uals lea#e5 fin)erprintsare left "ehin$ that hol$ the relationships

to)ether

Trust is #isi"le

Informal a)reements are as )oo$ as

+ritten

Both parties are sensiti#e to the ultural

"ri$)e Relationship is a$apta"le in the fae of

han)e

Both firms reo)ni3e the inter$epen$eny


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Sharin) information is a means of $e#elopin)trust

!onflit in the relationship is openly a$$resse$

Ri)hts5 $esires5 an$ opinions are onsi$ere$

0irms ha#e mutual )oals A bank accountof trust is reate$

Reo)ni3es trust has $ifferent ultural meanin)s

Both !EO's ma,e a personal in#estment

Senior mana)ers from "oth firms ommit

Ethial issues are freely "rou)ht up +ithout fear

An om"u$sman is assi)ne$ at "oth firms


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)$tions to e*elop and Manage #rust

An inter-firm team is appointe$ (isussions on$ute$ in an atmosphere ofrespet

Inter-firm team reei#es )ui$ane an$ trainin) inthe implementation of praties

Listenin)5 un$erstan$in)5 time5 ener)y arein#este$

Senior lea$ers at "oth firms at as hampions

A ommuniation system is $e#elope$

Ations to $e#elop an$ measure trust are reate$ Ris,s an$ re+ar$s are a$$resse$ openly

Ne)otiation is use$ as a trust-"uil$in)opportunity


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)$tions to e*elop and Manage #rust

Both firms +or, to)ether on tehnolo)y plans Tehnial personnel from "oth firms #isit the

other

!ontratual relations are $esi)ne$ to enhane

trust !ontrat relations fous on ontinuous

impro#ement

Team an$ relationship s,ills are $e#elope$ early

!ompany lea$ers reate a formal relationship A ontratin) philosophy an$ a le)al

infrastruture are $esi)ne$ to the relationship

Institutional trust is measure$ an$ mana)e$

wscm chapter 5 buyer seller relationships

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