Chapter 4
A Portfolio of
Relationships
4-1
Key Concepts
•
A Transformation in Relationships
•
Types of Buyer-Supplier Relationships
»
Transactional Relationships
»
Collaborative and Alliance Relationships
»
Collaborative Relationships
»
Supply Alliances
•
The Supplier's Perspective
•
Developing and Managing Collaborative
and Alliance Relationships
4-2
Key Concepts
•
Situations Wherein Alliances may not be
Appropriate
•
The Role of Power
•
A Portfolio Approach

well understood
»
Legal problems and concerns inevitably arose
•
While the term “partnership” is still
relatively common, we avoid use of the
term preferring the terms “collaborative
relationship” and “strategic alliance.”
4-5
Three Types of Buyer Supplier Relationships
•
Transactional
•
Collaborative
•
Alliance
4-6
Continuum of Buyer-Seller Relationships
Figure 4-1
Figure 4-1
Communication
Competitive Adv.
Connectedness
Continuous Impr.
Contributions to NPD
Difficulty of Exit
Duration
Expediting
Focus
Level of Integration

Possible Unlikely
No Yes
Tactical Strategic synergy
Activity/Attribute Transactional Collaborative Alliance
Figure 5-1 Continued
Figure 5-1 Continued
4-8
Transactional Relationships Characteristics
•
An absence of concern
•
One of a series of independent deals
•
Costs, data and forecasts are not shared
•
Price is the focus of the relationship
•
A minimum of purchasing time and energy
is required to establish prices
•
Transactional purchases lend themselves
to e-procurement
4-9
Advantages of Transactional Relationships
•
Relatively less purchasing time and effort
are required to establish price
•
Lower skill levels of procurement
personnel are required

tend to result in lower total costs and
improve performance of the supply chain
4-12
Three Success Factors
•
Researchers Stanley and Pearson found
that the three most important factors in a
successful buyer-supplier relationship
are:
»
(1) two-way communication,
»
(2) the supplier's responsiveness to supply
management's needs, and
»
(3) clear product specifications
4-13
Collaborative Relationships
•
Typically used for the procurement of non-
commodity items and services
•
A collaborative relationship frequently is
an appropriate first step on the road to a
strategic alliance
4-14
Collaborative Relationships
•
Collaborative relationships tend to
foster….

Benefits of Supply Alliances
•
Lower total costs.
•
Reduced time to market
•
Improved quality
•
Improved technology flow from suppliers
•
Improved continuity of supply
4-17
Alliance Attributes
•
Continuous improvement
•
Interdependence and commitment.
•
Atmosphere of cooperation
•
Informal interpersonal connections
•
Internal infrastructures to enhance
learning
•
Openness in all areas of the relationship
•
A living system
4-18
Alliance Attributes Continued

4-20
Strategic Elements of a Relationship
•
Is one supplier head and shoulders above the
rest in terms of the value it provides; including
price, innovation, ability to adapt to changing
situations, capacity to work with your team, task
joint risks, etc?
•
Are some suppliers “strategic” to your business?
•
Would your company benefit greatly if the
supplier were more “integrally connected” with
your company?
•
Do your customers require high degrees of
flexibility and speed of responsiveness?
4-21
The Supplier’s Perspective
•
Supplier’s want good customers
•
Several issues affect their assessment,
among them are:
»
Cash Flow
»
Openness and Approachability
»
Availability

•
Are both supplier and buyer aligned in what their
ultimate customer considers to be valuable?
•
If there is substantial risk for the supplier to
develop new technologies, products, processes,
or service support?
•
Are both supplier and buyer aligned in their
respective visions?
•
Are there sufficient operational points of
interaction?
4-24
Situations Wherein Alliances may not be
Appropriate
•
Stability
»
Price Volatility
»
Demand Volatility
»
High Switching Likelihood with High Switching Costs
•
Capability
»
No Partnership/Alliance-Capable Supplier for the Item
»
No Partnership/Alliance-Capable Supplier in the