Building Supply Chain Relationships - Essay Example

CASE: “Building Supply Chain Relationships” CASE QUESTIONS What are the characteristics of different types of buyer-supplier relationships and how do they differ from each other? There is a broad range of characteristics highlighted for each of the eight examples covered in the case. The buyer-supplier relationships are characterized mainly as being short-term or long-term [1]. They may also be characterized from a different perspective as being partnership like relationships or relationships which are closer to open markets. Some examples in the case lie between these relationships i.e. they are not even characterized as having extremely long-term or extremely short-term relationships. These two characteristics differ in the point that mostly short-term relationships are the kind that was employed in GM, Microsoft, Hollywood motion picture industry and the Hong Kong container terminals. GM and Microsoft were extreme examples of having a short-term buyer-supplier relationship. These relationships were more of an adversarial, non-interfering and “live and let live” kind of buyer-supplier relationships. There was less face to face interaction, less trust and there existed less commitment for the supplier to the buyer and vice versa. Only information that was necessary was communicated. The result of such relationships was simply that the suppliers tended to keep their best ideas for the companies who value the suppliers. There existed an open market for the suppliers. On the side of buyers, the buyers would go for any supplier who has an outstanding reputation in the international market or the supplier that has got the lowest bid. These kind of relationships while having a negative aspect but the companies were able to make profits. Why was it so? The reason to this is explained in the second question. On the other hand long-term relationships were those that were practiced in Toyota, Prato Wool Textile Industry, Airbus and Acer group. These relationships are based on trust, bilateral dependence and mutual friendship and are a more partnership like. There existed more face to face communication, continuous feedback, more collaboration and a high level of commitment from both sides. There is a lot of information sharing in long-term relationships which tends to enhance the level of trust between the buyer and the supplier. The long-term buyer-supplier relationships result in long-term contracts between the parties, fragmentation of processes which enhanced performance, structured and standardized policies and processes for the suppliers so that the supply chain process can be managed and monitored properly. In long-term buyer-supplier relationships, there is a more room for corrective measures and improvements. This is because the same suppliers were present so their performance can be gauged properly. The different characteristics differ in terms of the way of dealings that the buyer does with the supplier and the supplier response. Different characteristics of the buyer-supplier relationships differ mainly because of the profits that are made by both the buyer and the suppliers [2]. 2. Which type is the best approach to buyer-supplier relationship and why? The best approach to buyer-supplier relationships must be determined on the basis of the advantages that both the parties seek form the relationship, the profits that both make and the market reputation and the market reputation that they gain by being part of the relationship. The benefit that the buyer-supplier gains through their relationship is the factor on which the best approach to buyer-supplier relationship can be determined. As we examine the examples presented in the case, we predict that there exists no one best approach to buyer-supplier relationships [3]. This is because, after examining the characteristics of each of the buyer-supplier relationships and the benefits and the profits they achieve as being part of the relationship does not determines their practice as being not the best or worst. For example, the adversarial behavior of GM with its suppliers is predominantly not fair and even the suppliers don’t like it but that does not effect GM’s profits or its standing in the market. Rather GM is a market leader. Does that prove that having an adversarial behavior is a good practice? Of course not! The same example of having a short-term relationship of Hollywood Motion picture Industry on the other hand was making it difficult for the production houses to hire a different team for each project. Even Microsoft’s relationships with its suppliers were not good but still it is maintaining almost a monopoly in the market. Same is the case for Hong Kong container terminals that after having a short-term buyer-supplier relationship have the highest share in the market. However, in general terms, we can suggest that the buyer-supplier relationship that existed of Toyota and its suppliers is the best. As in spite of the reduction in costs due to the selling off automotive parts on the internet, Toyota preferred to have a face-to-face communication and meeting with its suppliers. This resulted not in a high level of profits for Toyota but it did give Toyota loyal suppliers who were ready to supply Toyota at crucial times and resulted in long-term relationships and contracts with the suppliers. Thus, the best approach to buyer-supplier relationship is the proper management of any kind of relationship that the buyer has with the suppliers [3]. Each kind of relationship should be managed individually in a way that is appropriate in particular to that specific relationship. Thus proper management is needed in any kind of buyer-supplier relationships. This approach can result in not necessarily having partnership with the suppliers nor even to have an open market for the suppliers. It is therefore, important to understand the nature of the buyer-supplier relationships and deal with each relationship individually. The buyers and suppliers both use different strategies and manage in different ways each other’s relationships. Either the buyer-supplier relationship is short-term or long-term, it can be well managed to achieve greater profits and benefits. 3. In which direction do you think buyer-supplier relationship is likely to move in the future? In the future, the buyer-supplier relationships will take more kind of a long-term relationship but not necessarily the short-term buyer-supplier relationships will disappear completely. The trend will more be towards managing proper relationships with the suppliers irrespective of the fact if it is short-term or long-term. This is because it is the suppliers who are the main factor the buyers depend on to decrease their costs. At present, that will continue in future, due to the increasing towards globalization, advancement of technology and growth of the industries and thus the competition, every company wants to maintain or either increase its market share. The increase in market share is possible only if there are more profits for the company and the customers are able to get their products at lower prices and the best quality. There is an extreme emphasis on quality at present, which will continue to grow in future. More collabrative approach between the buyer-supplier relationships will continue to increase in the future. The global competition across the different countries is continuing to grow at a very fast pace in the future that s making the processes involved in businesses more and more complex in nature and is increasing the cost for businesses to do the businesses all by themselves [4]. The suppliers are important sources for the companies in order to mange their businesses. Therefore it is important for each and every company to manage good relationships with its suppliers if it expects to survive in the continuously growing market. The companies need to focus on their core business to achieve success. Whether the buyer-supplier relationships are long-term or short-term, they offer different benefits to the companies in different ways. This is the reason why it is selected as a best approach and emphasized to pay prop attention to the management of the relationship with the suppliers. Unless the companies do not achieve better relationships with their suppliers, they will no be able to survive in the competitive upcoming future. BIBLIORGRAPHY: [1] Shan Wang and Norm Archer. “Strategic Choice of Electronic Marketplace Functionalities: A Buyer-Supplier Relationship Perspective”. 16 June 2007 . [2] Jai-Beom Kim and Paul Michell. “Relationship marketing in Japan: The Buyer-Supplier Relationships of Four Automakers”. 1999. Journal of Business & Industrial Marketing. pp.118-130. 16 June 2007 . [3] M. Bensaou. “Portfolios of Buyer-Supplier Relationships”. 1999. Operations Management and Research. 16 June 2007 . [4] Marjolein C.J. Caniëls and Cees J. Gelderman. “Buyer-Supplier Relationship Development – Empirical Identification and Quantification”. 2004. 16 June 2007 . Read More