In the supply chain literature as well as in business environments Supplier Relationship Management and Buyer Supplier Relationship have multiple definitions, shapes and extensions. There are diverse interpretations, especially considering that the determinants and their perceptions changed throughout the time. Yet, due to the globalisation, economic and political turmoil, a stable and intense Supplier Relationship Management is more imperative than ever. Hence, we tried to find the benefits and key approaches and techniques for enhancing the Buyer Supplier Relationship.
Firms put emphasis on having good supplier-relationships and profit by doing so in long-run. Previously, however, this technique is sometimes instinctive, based on “good-feel” and not systemized or standardized analysis and sciences. There is no fundamental difference in the holistic nature of Buyer Supplier Relationship, yet the extent of requirements and objectives vary as claimed by Eltantawy, et al., (2014). Some researchers like Gadde, et al. (2010), add that Buyer Supplier Relationship is not static, but cultivates over time.
Hence, Supplier Relationship Management gains enormously on relevance. Corporations offer seminars and trainings to demonstrate how to improve Supplier Relationship Management for maximizing supply chain efficiency, cost-effectiveness, operational-progress, breakthroughs and joint-innovation creations to mutual benefits.
Furthermore, Rizza, (2015) indicates that Supplier Relationship Management augments a faster time-to-market, transactional-efficiency, competitiveness, financial benefits, etc. This is why, also Enterprise-Resource-System providers added tools and applications to their programs for the concerns to have an overview over their supplier-bases. Given that, Supplier Relationship Management -technology provides unparalleled visibility and assists in reducing and sharing risks, which subsequently yields the strategic point of view of sourcing in supply chain firms.
The businesses invest, depending on the level of required services and products, a massive amount of money in their suppliers, including, among others, time, money, the actual loss of a material resources and opportunities, etc. The goods and services they source do not solely affect the procurement-realms, but the entire cooperation according to Easton, et al., (2014). Therefore, they must be selective, when deciding with whom to collude. Consequently, both sides need to endeavour to attract the best strategic partners.
6 STEPS OF ESTABLISHING AND OPTIMIZING BUYER SUPPLIER RELATIONSHIP
In order to evolve the Buyer Supplier Relationship, Liker & Choi, (2004) built “The Supplier-Partnering Hierarchy”, while doing a research on the Japanese carmakers “Toyota” and “Honda” and found that they have identical scaffoldings, when building partnerships with their suppliers. This hierarchical model is a six step instruction to reach the maximum potential in Buyer Supplier Relationship.
The Supplier-Partnering Hierarchy (Liker & Choi, 2004)
Thus, even though if the buyers are required to approach and take several steps for building a strong Supplier Relationship Management, a precondition of a well-established Buyer Supplier Relationship is that the suppliers are committed to satisfy their customers in order to obtain a preferred status and create value along the chain.
BUYER SUPPLIER RELATIONSHIP – COMPOSITION
In general, it can be stated that the relationship level with the suppliers depends on how long and often the interaction takes place. So, with some suppliers where they work daily, the relationship is definitely closer, compared to supplier´s that are referred to only occasionally.
In order to identify the features and appropriateness, several investors apply the “Kraljic Matrix”, which is a supplier-stratification and segmentation, in terms of the product specifications, extent of power, or involvement of costs. Accordingly, depending on categorisations, each supplier base has its own challenges, problems and risks, with regard technical, demand considerable, administrational terms, etc.
As reported by Harland, et al., 2013, when the buyer has high and supplier low power-resources, the buyer is in in the position to dominate the suppler and vice versa. Regardless the degree of power-resources, the parties are independent, nevertheless by having high power-resources, a strategic alliance and competitiveness can be built.
In the same context, Gadde, et al., (2010) refer to the “spend analysis”, which is related to the investment on the vendors and it is suggested to determine the position of the relationship correspondingly.
Different Categories of Supplier Relationship (Gadde, et al., 2010)
Hence, when costs are low, the convergence requires low-involvement, and the Buyer Supplier Relationship is not necessarily profitable for both sides. In contrast, high-involvement-relationship is costly but gives higher revenues at the same time. Here, this alliance requires both parties to decide and converge to strengthen the Buyer Supplier Relationship. Bearing in mind, that high-involvement-relationship is related to resource-intensity, the buyers can only pay attention to limited contractors. This relationship-positioning method oversimplifies the relationship, by separating the suppliers into certain categories and focus on the relevant ones.
It is fundamental to have reliable, appropriate and cooperative partners, who are paying attention to opposite concerns and opinions, mutually trust and involve each other in business-processes. Here, even if the purchasers have the greater leverage within the Buyer Supplier Relationship, they should be amenable for new ideas and innovation, suggested by their vendors who may offer Value Added Services, since they are the party who have expertise and resources. Yet, when the client`s expectation differ from supplier`s performance, it is recommended to invest time and money in trainings, give constructive feedbacks and generate common ideas in order to correlate the performances with organizational value drivers. This mutual respect and persuasion leads to sustainable competitive-advantage, since long-term and constant liaison is the key to success.
About Author: Sinbl Hawro Yakoob
Sinbl graduated in Int. Business Studies, specializing in Supply Chain Management (SCM), from the Zuyd University of Applied Sciences in Maastricht, NL. Only recently, Sinble has finalized Master’s in Int. SCM and Logistics at the Plymouth University, GB. Hence, she endeavoured an academic career within multiple countries, in order to learn different facets of Logistics and SCM. While studying International Business, the subjects of Logistics and SCM have enhanced her interests considerably, and therefore she has decided to pursue masters in that field. Having a profound insight in this realm is significantly contributing and instilling to her knowledge, which is certainly pivotal for being able to write articles and transfer this know-how for the interested readers. Thus, combined with Sinbl’s interest in international development, she is positive that she have much to add to this blog and for its followers. Currently, Sinbl is am working at Mercedes Benz Customer Assistant Center Maastricht, NL in the Critical Parts Management Department, in which I am responsible for handling the bottleneck products
List of References
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Easton, S. et al., 2014. Supplier Relationship Management: How to Maximize Vendor Value and Opportunity. s.l.:Apress.
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Available at: http://www.cips.org/en/Supply-Management/Opinion/2015/February/ The-five-secrets-of-supplier-relationship-management/
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About the Author- Dr Muddassir Ahmed
Dr MuddassirAhmed is the Founder & CEO of SCMDOJO. He is a global speaker, vlogger and supply chain industry expert with 17 years of experience in the Manufacturing Industry in the UK, Europe, the Middle East and South East Asia in various Supply Chain leadership roles. Dr. Muddassir has received a PhD in Management Science from Lancaster University Management School. Muddassir is a Six Sigma black belt and founded the leading supply chain platform SCMDOJO to enable supply chain professionals and teams to thrive by providing best-in-class knowledge content, tools and access to experts.