The Role of Supplier Relationships in Supply Chain Management - Term Paper Example

Supplier relationships are important to supply chain management. The relationship between business and supplier must be cultivated at all costs. If a manufacturer and supplier have a good relationship solution can be found within the relationship. This allows for personal contact between manufacturer and supplier in order to solve any conflicts that might arise (Fynes et al., 2005). A manufacturer depends on suppliers. If a supplier does not deliver than trust is lost. Once trust is lost, the manufacturer and supplier relationship suffer.

The Porter Five Force state five forces impact a business. The five forces are bargaining power of customers, the threat of new entrants, bargain power of suppliers, the threat of substitute products, and competitive rivalry within the industry. A supplier’s bargain power ranks with customer power, the threat of new entrants, substitute products, and rivalry. Supplier bargaining power is important. That is why the supplier and manufacturer relationship is so important. Input prices deviate from those that would prevail in a perfectly competitive input market in which input suppliers act as price takers due to the lack of competition.

When the market has three major suppliers, the individual suppliers cannot negotiate prices. If the individual suppliers get contracts, the main goal is keeping the business. The larger suppliers can give bigger discounts due to the volume of business done. The individual suppliers cannot afford to not make a profit, whereas a bigger supplier can absorb profit loss better. Thus bigger suppliers can provide lower prices than individual suppliers. In a competitive input market, the product can be offered at a level rate.

For example, if product X costs a specific amount to make. Suppliers would be able to offer product X for about the same amount. Suppliers can make or break a business. Suppliers only have a concern for the individual business in regard to what will happen to their supply business. Suppliers are only as good as the supply of product given for the least amount of money. If a business fails, the supplier can find someone else to supply. Businesses rely on good suppliers.