AFRICA NAZARENE UNIVERSITY

SCHOOL OF BUSINESS

UNIT:SUPPLIER RELATIONSHIP MANAGEMENT

CODE:PSM 314

LECTURER:MR SAMSON NDONYE

GROUP 3:KIRTELA JOHN SETU 18S01APS039

:NDERU STEPHEN 18S01APS036

EMMACULATE SILANTOI 19M01APS056

TASK:(a)Discuss the impact of buyer supplier relationship on an

organization performance. Choose five case studies

(b)Give benefits of global supplier relationship as well as

challenges ,comparing it to organization performance

DUE:27TH FEB,2020
Contents
INTRODUCTION...................................................................................................................................2
DEL- MONTE CASE STUDY....................................................................................................................3
MANUFACTURING FIRMS IN KENYA CASE STUDY................................................................................3
BAMBURI CEMENT LIMITED MOMBASA-CASE STUDY.........................................................................4
EAST AFRICA BREWARIES LIMITED......................................................................................................5
PHARMACEUTICAL MANUFACTURING FIRM.......................................................................................5
Collaborative relationships are best suited where customer......................................................................6
factors that enables a collaborative environment includes.........................................................................6
Organizational Performance................................................................................................................7
impacts of buyer supplier relationship include............................................................................................8
BENEFITS OF GBOBAL GLOBAL BUYER SUPPLIER RELATIONSHIP.........................................................8
Reduced costs......................................................................................................................................8
Increased efficiency.............................................................................................................................8
Minimises price volatility.....................................................................................................................8
Consolidation of the supply chain........................................................................................................8
Outsourcing certain activities..............................................................................................................9
Continual improvement of operations................................................................................................9
CHALLENGES OF GLOBAL SUPPLIER RELATIONSHIP.............................................................................9
CONCLUSION.....................................................................................................................................12
REFERENCES......................................................................................................................................13
INTRODUCTION

Types of buyer-supplier relationships range from arm‟s length transactional relationships

where two parties engage in a transaction isolated in time, to collaborative relationships which
span over extended periods reaching beyond any one specific transaction. Uncertainty in supply
and demand and more dependency on external resources justify the appropriateness of the
formation of a close long-term cooperative relationship in inter-firm relationships. Individual
firms cannot control the issue of uncertainty and technological changes (Adhaya, 2013).

There is pressure to increase

 quality,
 reduce inventory,
 develop just-in-time systems
 decrease time to market (Kamau, 2013). By encouraging collective strategies to
reinforce collaborative coordination and by recognizing resource dependency, firms
engage in a joint and collaborative endeavor to reduce impacts of technological change
and uncertainty
DEL- MONTE CASE STUDY

Del-monte is a juice producing company by the use of pineapples. It relates with their buyers
from production to consumption.Previous research has established that tight integration and
collaboration between departments and organizations can lead to increased performance
(Forrester, 1961; Pagell, 2004),. Thus there is a need to manage these complex supply chains
globally in order to increase performance of manufacturing firms. This has led to;

 Information sharing,
 joint decision making,
 incentive alignment and resource sharing has been largely overlooked by previous
research especially in Del-monte.
 Also a study by Karangi (2013) “effects of outsourcing on organizational performance in
Del Monte Kenya Ltd” in his findings Del Monte Kenya Ltd outsources its non-core
functions like warehousing, transportation, information technology and distribution from
suppliers but, the company has not been fully committed to the establishment of long
term relationships with its suppliers.

MANUFACTURING FIRMS IN KENYA CASE STUDY

This study was carried out to establish the effect of buyer – supplier relationships on
organizational performance among large manufacturing firms in Kenya. The study had
three objectives, to determine the extent to which large manufacturing firms in Kenya
have adopted the concept of buyer-supplier relationships, to determine the challenges
facing buyer-supplier relationships and to determine the effect of buyer –supplier
relationships on organizational performance.

BAMBURI CEMENT LIMITED MOMBASA-CASE STUDY

Bamburi Cement Limited is a subsidiary of Lafarge. It was started in 1951 with its first plant
located in Mombasa beginning production in 1954. It is the largest cement manufacturer in
Kenya, enjoying local dominance both in terms of production and market share (Kenya cement
industry, 2012). It has three active subsidiaries: Hima Cement Limited, Bamburi Special
Products Limited and Lafarge Eco Systems Limited. In addition it has the world famous quarry
rehabilitation, Haller Park. Bamburi Cement Limited has a number of high quality products on
the market, including Power Plus, Bamburi nguvu cement. Bamburi cement limited has to
develop and embrace new technologies and strategies and maintain good supplier relationship
management . In summary ,Continuous maintenance of a good relationship with your suppliers
will protect an organization from;

 the problems of quality

 increase efficiency
 reduce lead time
 value creation
 competitive advantage, hence will lead to improvement of performance and increase of
profit.

This applies to all organizations, whether commercial or public.

EAST AFRICA BREWARIES LIMITED

East Africa Brewaries Limited is wine and alcohol producing company. It faces major challenge
in its production processes because of the increasing cost of barley and hops. There is a
constant spike in the commodity prices of barley which is sorghum based (Ogunda 2013).
This is reflected in the slow improvement in its profit margins which is seen in the EABL 2014
annual report. Between April and July 2012, the price of barley increased by 26.06% .
This exposes EABL to a significant rise in the price of the inputs used in producing beer. This
therefore encourages emphasis on managing sources of supply. (Euromonitor, 2012) . Goffin,
Marek and Colin (1997) were surprised at the lack of empirical research on supplier
management, despite extensive discussion of the topic in industry. This is a deficiency which
needs to be rectified. Having clear Buyer supplier integration is important in an organization
which has been found to positively affect procurement performance.

EABL should focus more on Procurement performance which is enhanced by involving supplier
right from inception of a product thereby training them on the quality standards required which
involves collaborating with the said customers through information sharing, mutual investments
and shared technology, integrating your systems with those of your suppliers and having a long
term relationship with the suppliers. All these would be a means of managing suppliers and as
result procurement performance enhanced.

PHARMACEUTICAL MANUFACTURING FIRM

This study was carried out to establish the effect of buyer – supplier relationships on
organizational performance among pharmaceutical manufacturing firms in Kenya.
Pharmaceutical industry in Kenya has been expanding overtime driven by the government’s
efforts to promote local and foreign investment in the sector. This has resulted in Kenya being
currently the largest producer of pharmaceutical products in the Common Market for Eastern and
Southern Africa (COMESA) region. The study had three objectives, to determine the extent to
which pharmaceutical manufacturing firms in Kenya have adopted the concept of buyer-supplier
relationships, to determine the effect of these buyer –supplier relationships on organizational and
to determine the challenges facing pharmaceutical manufacturing firms in Kenya as they
implement these buyersupplier relationships.

The pharmaceutical industry in Kenya consists of three segments namely the manufacturers,
distributors and retailers making it a complex supply chain considering its major role in
supporting the country‟s health sector. There is also need to build closer ties between the
manufacturing firms and their suppliers to improve on

 lead time
 product quality
 meet the ever increasing demand of these products (UNIDO 2014).
Collaborative relationships are best suited where customer
 faces high risk;
 the product supplied is technically complex leading to high switching costs
 supply of new product/service and new supplier may be required;
 where supply market for the product is fast changing;
 in terms of technology and legislation or supply market is restricted, i.e. there are few
competent and reliable supplier firms.

factors that enables a collaborative environment includes

1. mutual trust-,Trust is a condition in which each partner is convinced that the other is
fully committed to the common goals
2. both formal and informal communication- Communication is one of the essential
components in the buyer-supplier relationship and may be related to product price,
contractual agreements, technical specifications, organizational strategy and market
related know-how. Communication can only be effective if both parties understand the
requirement of each other and in the same level of thinking & understanding. -
3. strong commitment towards same goals- is the belief that trading partners are willing
to devote energy to sustaining the relationship meaning an enduring desire to maintain a
valued relationship
4. Mutual goal- refer to the degree partners share goals that can only be accomplished
through joint action and the maintenance of the relationship. These mutual goals provide
a strong reason for relationship continuance.
5. cooperation between buyer and supplier- cooperation can be defined as, “similar or
complementary coordinated actions taken by firms in interdependent relationships to
achieve mutual outcomes or singular outcomes with expected reciprocation over time.

Organizational Performance

organizational performance is the ability of an organization to fulfill its mission through

sound management, strong governance and a persistent rededication to achieving
results .When defining organizational performance it

Organizational performance is the final achievement of a firm and contains;

 existence of certain targets to be achieved, has a period of time in achieving the targets
and the realization of efficiency and effectiveness (Griffin, 2010). It can also be viewed
as the ability of an enterprise to achieve such objectives as
 high profit,
 quality product,
 large market share,
 good financial results
 survival at pre-determined time using relevant strategy for action
Organizational performance is used to gauge how an enterprise is doing in terms of level
of profit, market share and product quality in relation to other enterprises in the same
industry. Consequently, it is a reflection of productivity of members of an enterprise
measured in terms of revenue, profit, growth, development and expansion of the
organization.

Contemporary research has examined the linkages between relationships and

performance and emphasized on the need for organizations to move toward closer, more
cooperative relationships. Johnson, Wood, Wardlow and Murphy (2006

impacts of buyer supplier relationship include

 lead time reduction

 improved responsiveness
 customer loyalty
 innovation
 quality products
 reduction in inventory
 improvements in product or process design.
 can result in better market penetration
 access to new technology and knowledge
 higher returns on investment than those competitors who do not have such close
relationships ,

BENEFITS OF GBOBAL GLOBAL BUYER SUPPLIER RELATIONSHIP

Reduced costs
By cooperating in a mutually beneficial relationship with key suppliers, a company can strive for
cost savings over the long term.Good working relationships with suppliers will save on cost

Increased efficiency

As a defined and establish supplier relationship develops, communication improves. Suppliers

gain a more complete understanding of the businesses they serve, and this allows them to meet
their needs more effectively. Delays in the supply chain will decrease, and the flow of operations
will greatly improve.

And when issues in the ordering process do arise, the healthy working relationship between
supplier and client will make such issues easier to resolve.

Minimises price volatility

Adopting the principles of supplier relationship management, companies can often take
advantage of fixed pricing or scaled increases in exchange for lengthier contract terms, minimum
order levels or various other qualifying criteria.

Having a clear and unambiguous cost base allows a business to set its own pricing structures
with some certainty, and that often translates to happier, more loyal customers.

Consolidation of the supply chain.

The consolidation of the supply chain may allow buyers to reduce the number of suppliers they
purchase from - streamlining the purchasing process and making budgeting a far simpler task.

Outsourcing certain activities

A successful supplier relationship management programme will often create a trusting

partnership between a buyer and a supplier. In some cases, this may result in many key activities
being transferred to the supplier on a permanent basis. This may include entrusting a supplier
with the management of inventory levels and some elements of customer service.

Continual improvement of operations

A long-term relationship between supplier and buyer allows for the free-flow of feedback and
ideas. Over time, this will create a more streamlined, effective supply chain that could have a
positive impact on both costs and customer service.

CHALLENGES OF GLOBAL SUPPLIER RELATIONSHIP

Supplier’s Track Record

The first step to take before engaging with any supplier is to go through his past and current
projects and to investigate his knowledge about tax and legal implication of exporting and
importing. Knowing the supplier beforehand helps to create and build healthy relations.

 Understanding The Culture

Belonging to a different culture may give rise to different views and interpretations while having
the same conversation.

Communication gap

Communication is absolutely necessary for many aspects of the business. If a supplier doesn’t
understand the company’s strategic goals that may fulfill the needs and requirements due to poor
results. Maintaining good contact with the suppliers can benefit the organization in a big way.

Non-Transparency of Processes

Many times, the non-transparency of the supplier’s process creates gaps in the company-supplier
relationship. Technology can play a crucial role to fill this gap. Analyze the whole process more
efficient by using an online purchase order and invoice management tool like Invoicera.

Stressed Supplier

Suppliers deal with many organizations at once. Often the order is delivered late by the supplier
because of the unavailability of the product. These type of late deliveries can weaken the
relationship. Forecasting the requirements of the company can help in running the SRM process
smoothly

Damaged Delivery

At times, the delivered product turns out to be damaged or flawed. Aggressive steps at such
times can ruin a relationship. One should notify the supplier respectfully and ask him to replace
it. A healthy balance maintained while taking steps against suppliers who are underperforming.
A healthy balance manages underperforming suppliers.

Supplier training

If the supplier doesn’t understand, what the company wants its customers to experience through
their products, he won’t be able to provide enough supplies. One should make sure that the
supplier knows the company’s motto. They should be given appropriate training to ensure
expectation levels.

Create a comprehensive knowledge base that can train your suppliers on each of your different
processes. If you are a corporate with a huge network of suppliers, you may also consider setting
up a website exclusively for suppliers to learn the processes and coordinate with your internal
teams for supplies. It doesn’t cost a lot to set up such a platform with the help of website builder
tools.

 The Need To Nurture

A healthy relation only nurtures when the two sides stay together for long. Abandoning the
suppliers at the time of success may create stress in a relationship. To avert this, one should
include the supplier at every milestone and success celebration of a company.

Disharmony Amongst Buyer-Supplier Chain

 In a time without recognition and encouragement, the supplier becomes disloyal to an
organization. Changing the supplier is not the solution here as it will consume more time and
money. One can gain the loyalty of a supplier by encouraging him, or perhaps, offering
incentives if possible.

Conflicts Over Contract

Signing a biased contract can be very unpleasant for the supplier. One should make sure that the
contract has benefits for both the sides. A contract must be reviewed very carefully before it gets
finalized. Many organizations are now realizing the importance of Buyer-Supplier Relationship
Management. Efforts have to made on a continuous basis to build harmonious Buyer-supplier
relationships. SRM is a long-term approach to sustained success.

CONCLUSION
following factors affect buyer - supplier relationships; Lack of Co-operation, Lack of
commitment, Poor Performance, Lack of trust and Lack of Communication. This therefore
means that the above factors pose a challenge in buyer - supplier relationships.

REFERENCES
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Eamonn, A., Donna, M., Brian, F., & Daniel L., (2008), Communication Media
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Kamau, N. I. (2013). Buyer – supplier relationship and organizational performance among

large manufacturing firms in Nairobi, Kenya. Unpuplished master’s thesis. Unversity ofNairobI

Krause, D.R., Handfield, R.B. & Tyler, B.B. (2007),“The relationships between supplier
development, commitment, social capital accumulation and performance improvement”, Journal
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Mwanzia, S. M. (2013). Stategy Development at Bamburi Cement Limited, Kenya.

Unpublished MBA Project, University of Nairobi

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