Article analysis - Assignment Example

In both scenarios, the business success for both companies and suppliers will depend on the depth and strength of their relationship. This paper starts with an explanation of the common mistakes companies commit in dealing with their suppliers. Several factors that companies should consider before getting a supplier or outsourcing a business process will follow. Different types of supplier relationships are then explored. The paper ends with a discussion of properly managing supplier relationships. 2. Mistakes to avoid in supplier relationships The first mistake that companies commit even before entering into supplier relationships is the lack of organizational/business process analysis.

Companies often enter into supplier relationships without first knowing what the company really needs. These “unevaluated processes” blind a company from the areas where it excels and areas where it needs improvement (Aron and Singh 136). A company, then, might mistakenly outsource core processes which are vital to its functioning, or manufacture in-house those components which can be sourced from suppliers at lower costs with same quality, for instance. Another mistake companies make involves getting into supplier relationships for the wrong reasons. . Venkatesan talks about the fear of some companies on being “hollowed out” once they establish a relationship with a supplier (99).

These companies fear that sourcing components from suppliers makes their products lose their unique qualities which make them less competitive. While this fear may have a rational basis, companies tend to forget the purpose of getting a supplier in the first place. 3. Factors to consider in sourcing Several factors need to be analyzed first before coming up with a decision of whether or not to source. A thorough analysis of a company’s areas of strength and weakness should be accomplished first.

This analysis will help the company determine which processes are vital and, therefore, should be kept in-house, and those processes that don’t necessarily add value to the product and, therefore, are better left at the hands of a service provider or a supplier. Aron and Singh suggest differentiating the “core, critical, and commodity processes” of a business organization (136). Core and critical processes usually involve management and analytical processes while commodity processes are clerical in nature.

Venkatesan, meanwhile, differentiates “strategic and non-strategic components” (100). When it comes to manufacturing companies, the decision to source from suppliers usually come from an understanding of the products strategic and non-strategic components. Strategic components, as decided by management, are those that make the product stand-out from the market. These components have a direct impact on the product’s quality, differentiation, and market position. Non-strategic components, on the other hand, don’t necessarily affect the outcome of the final product.

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