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Slide 7.

Supplier Relationships
Definition of a Relationship

A Connection or Association

Relationship Marketing

Relationship Purchasing
1

2
Long-term
Strategy

Long-term
Strategy

Secures
Mutual
Benefits

3
Not one
Sale at
a Time!

Requires
Focus

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Supplier Relationships

Slide 7.2

Table 7.1 Main differences between transactional and relationship purchasing


Transactional
Focus on short, discrete purchasing

Relationship
Focus on supplier retention

Short-term orientation

Long-term orientation

Arms length

Closeness

Simple buyer/seller relationship

Complex, including internal relationships

Emphasis on price, quality and delivery in the


offered product

Emphasis on improving price, quality, delivery and


other factors such as innovative design as a
collaborative exercise between purchaser and
supplier

No innovation
Moderate supplier contact
Little sharing of information; opaqueness
Reverse auctions may be applicable

High supplier contact, with each contact being


used to gain information and strengthen the
relationship
Significant sharing of information including cost
information, transparency
Reverse auctions generally inapplicable

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Supplier Relationships

Slide 7.3

Relationship Formation
Five Aggregation Levels
1

Actions

Episodes

Sequences

- Individual initiatives
- Groups of interrelated actions
- More extensive entitles of interactions

4 Relationships

- All sequences that comprise in one relationship

5 Partner base

- Relationship portfolio

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Slide 7.4

Supplier Relationships
The Cox Model

Internal
contracts
mergers,
acquisitions
Strategic
alliances

Network
sourcing
Single
sourcing
Preferred
supplier
Adversarial
Arms
length

Partnership
relationship

Core
competencies

A step-ladder of external and internal contractual relationships

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Slide 7.5

Supplier Relationships
Centralised Purchasing

An Illustration of the Interaction Model

Environment
Market structure
Dynamism
Atmosphere
Power/dependence
Cooperation/conflict
Short
term
Organisation
Technology
Structure
Strategy A
Individual aims
Experience

Internationalisation
Position in the manufacturing
channel
Social system
Closeness/distance
Expectations
Trust/opportunism

Product/service
Information
Financial
Social

Exchange
episodes

Interaction process
Long
term

Institutionalisation
Adaptations

Relationships

Organisation
Technology
Structure
Strategy B
Individual aims
Experience

IMP Group, An Interaction Approach in International Marketing and Purchasing of Industrial Goods, Winter 1982, p 10-27

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Slide 7.6

Supplier Relationships
Tangs Classification of Operational Characteristics

Type of contract
Delivery schedule
Length of contract
Senior management involvement
Product service type
Information exchange

Supplier development
programs

Pricing scheme

Number of suppliers

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005

Supplier Relationships

Slide 7.7

Termination Legal Considerations


Financial consequences
Confidentiality agreements
Intellectual property rights

Capital assets
Security issues
Employee rights (TUPE)
Signed record of settlement

Lysons & Farrington, Purchasing and Supply Chain Management, 7th edition, Pearson Education Limited 2005