Transitioning to Collaborative Buyer-Supplier Relationships in Supply Chain Management - P, Study notes of Management Accounting

Download Transitioning to Collaborative Buyer-Supplier Relationships in Supply Chain Management - P and more Study notes Management Accounting in PDF only on Docsity! CHAPTER 4: A PORTFOLIO OF RELATIONSHIP TRANSFORMATION From reactive and mechanical to proactive procurement and strategic. SUPPLY CHAIN MANAGEMENT -Reactive Reasonably cordial but frequently adversarial Win-Lose outcome -1980’s-1990’s- Partnerships: lack of clarity -From management Many salespeople did not understand implications “partner”- legal -Partnership: common term -Prefer: collaborative relationship and strategic alliance 3 TYPES OF BUYER-SUPPLIER RELATIONSHIPS 1. - Transactional  Most common and basic  Neither good/nor bad  Arms length relationship 2. - Collaborative  Interdependence and necessity of cooperation 3. - Alliance  Institutional trust  Failure to develop and manage is the principal reason supply alliances fail. TRANSACTIONAL CHARACTERISTICS  Absence of concern by both parties about the other party wellbeing. Win-Lose  One of a series of independent deals each on its own merit  Costs, data, forecasts are not shared.  Price-Major focus  Quality of the relationship- little or no concern  Minimum purchasing time and energy is required to establish prices.  Lend- e-procurement and in some cases reverse auctions. ADVANTAGES  Relatively less purchasing time and effort required to establish price.  Lower skill levels-personnel DISADVANTAGES  Communications difficulties greater  Considerable investment in expediting and monitoring.  Timely delivery  Incoming quality  Right quality  Inflexible when flexibility may be required  Changing technology  Market conditions  Quality only as good as required  Suppliers- minimum service required  Less effective performance-less to lose  Subject to more supply disruptions/shortages  Supplier not motivated to invest time and energy  Buyers- TCO seldom know  Frequent changes and hidden switching costs COLLABORATIVE AND ALLIANCE RELATIONSHIPS 76% CEO’S- external collaboration with business partners and customers is key to innovation.  Tend result in lower total costs  R and D- more app Cost reduction- Long term relations VE/VA Long-term performance agreements give suppliers an opportunity to reduce their costs.  Controlled competition  Benchmarking  Advanced supply management pricing practices RESULTS  Lower total costs Buyer-Supplier Relationships  Customer secretive- open and approachable  Buyers honest-ethical  Procurement- responsive  Customers professionals QUESTIONS TO BE ADDRESSED BEFORE PROCEEDING (SEE PAGE 74) ALLIANCES-MAY NOT BE APPROPIATE 1. Stability of prices market and buyer demand  Price volatility – commodities traded on open markets – share risks  Demand volatility – materials or services  High switching likelihood with high switching costs  Changing technology  Critical quality 2. Capability of potential suppliers  No partnership/alliance- capable supplier for the item  Lack of capable supplier  No full service  No partnership/alliance- capable supplier in the geographical area  No full service  Rapid technological change  Disadvantage- lock in one supplier  Remain competitive  Mismatch of rates of technological change  Buying firm changing more rapid than supplier 3. Competition in the supply market  Noncompetitive market  Supplier take advantage of buying firm  Supplier dependency creation  Neglected areas  Mismanage or not mismanaged  Supplier seeking to reduced competition  May save in short run  Eliminate competition and reduce industry capacity 4. Benefits to the buying firm from the relationship  No leverage form partnership  Volume  Inventory  Innovation  Total cost  No hard savings from partnership  Non-quantifiable  Soft savings  Staff reduction  Cost avoidance 5. Internal buy-in to partnership  No internal customer buy in THE ROLE OF POWER “Power is at the heart of all business to business relationships”  Influence  Can be seen as unethical POWER Captive buyer Captive supplier PORTFOLIO APPROACH No approach is superior 1. The product exchanged and its technology 2. The competitive conditions in the upstream market 3. Capabilities of the suppliers available E-COMMERCE – RIGHT RELATIONSHIP 1. Avoid cumbersome process and webbize it 2. Magic pill 3. Supplier equality B2B – Great focus – role market ERA Reengineering entire value chains and networks start- finish Sound business judgment on relationship picked