Professional Documents
Culture Documents
Prof. J.K.Nayak
+ Increased involvement, better information + Streamlined procedures + Reduced lead times + Better personal relations - Dependence, high switching costs - Loss of competitive edge / market feeling
Indirect costs
Price
Portfolio strategies
High leverage items Substitutes available Market research Competive bidding Financial Importance Labour-intensive Reduce product variety Systems contracting Low routine items Low strategic items Difficult to change Create mutual commitment Partnership
Monopolistic market Find alternatives Secure supply/volume assurance bottleneck items High
SupplyRisk
Partnership development
Not surprisingly that real partnerships are still very scarce...
Hendrick and Ellram (1993) demonstrated that thebalance of power is only true in 1% of the buyersupplier relationships. A, DTI study(Dept. Of trade and industry) in the UK showed that there is still very little mutual trust between suppliers and automotive manufacturers.
The question is how to develop a partnership relation with your most important suppliers.
2 Partnership development
High
Integrate
Intensity of the relation
Low
Partnership development
Acknowledge suppliers as a real source of competitive advantage and as an extension of the firm.
This often requires changes in: - mind shift (not-invented here syndrome) - working culture: teamwork, jobrotation, processfocus, ... - purchasing management style - communication towards suppliers
Increased partnering; filter out the truly best-inclass suppliers and streamline processes and improve the relationship with these suppliers.
Definition of technology choices, design review, method of cost analysis, workingrules, projectplan, etc. Co-operation and continuous improvement Concrete and measureable targets Systematically measure, evaluate and discuss supplier and customer performance (vendor rating & supplier satisfaction) Increase process alignment and integration
Actively involve suppliers (early or timely) in new product development processes in order to fully leverage their technological knowledge and experience
Clear communication Close link between R&D, Purchasing and Development Relational and communicative skills purchasers Value chain mapping Extended enterprise Residential engineering / co-location
Integration: tuning future product and investment plans, management information systems, accounting systems, etc.. Co-operation becomes doing business together.
Both parties invest seriously in future plans Continuous control and monitoring Risks and rewards are shared (not always 50/50) Maximum interdependency Enterpreneurial management style Technology sharing Ethical issues
Complexity
Relations between organisations are in fact bundles of micro-relations
on different organisational levels (corporation, division, unit, plant) on different hierarchical levels in different functional areas
Investments
An investment is made on one occasion and is expected to provide return over several periods, while a cost is associated with an activity the return on which is expected to come during the same period
examples: additional capacity, special machines, special routines, specific knowledge,..
Adaptations
Different types:
technical knowledge-based administrative economic legal
Usefulness of relations
Cooperation High 'Nice' 'Developmental'
Conclusions
(Supplier) relations are not always good and nice: relations can be difficult to manage relations can be problematic relations can be a burden relations are not isolated (chains, networks ..) relations are a fact of life
Recommended literature
Anderson, J. C., H. Hkansson and J. Johanson (1994), 'Dyadic Business Relationships Within a Business Network Context', Journal of Marketing, Vol. 58, October, pp. 1-15. Dyer, J.H. and W.G. Ouchi (1993), Japanese-Style partnerships: Giving Companies a Competitive Edge, Sloan Management Review, Fall, pp. 51-63. Ellram, L.M. (1991), 'A Managerial Guideline for the development and implementation of purchasing partnerships', International Journal of Purchasing and Materials Management, Vol. 27, No. 2, pp. 2-8. Helper, S.R. (1991), How much has really changed between US automakers and their suppliers?, Sloan Management Review, Summer, pp. 15-28. Hines, P. (1994), Creating World-Class Suppliers: Unlocking Mutual Competitive Advantage, London: Financial Times / Pitman Publishing. Lamming, R. (1993), Beyond partnership, strategies for innovation and lean supply, London: Prentice Hall. Leenders, M.R. and D.L. Blenkhorn (1988), Reverse Marketing: The New Buyer-Supplier Relationship, New York: Free Press. Lewis, J. D. (1995), The Connected Corporation: How Leading Companies Win Through Customer-Supplier Alliances, New York: Free Press.