Supplier Partnership in Purchasing

Supplier Partnership Vs Traditional View of Supplier Management


Supplier partnership is commonly accepted view for last couple of decades. However, for the history sake I think it is worth writing about how traditional or old view was characterized, the key points were:

  • There are many suppliers on the market, who can produce according to a certain specification. Neither seller nor purchaser is unique.
  • To put pressure on the costs in the primary goal and the purchasing process is a guarantee that the market mechanisms should work.
  • In the purchasing process the price is always the decisive factor. A lower price is always preferable.

Supplier Partnership Definition and Characteristics:

 

Cali (1993)1 introduce the concept of supplier partnership as

“A mutual, ongoing relationship between a buying firm and a supplying firm involving a commitment over an extended time period, and entailing a sharing of information as well as sharing of the risks and rewards of the relationship”

Since then many big, small and medium size companies are using this approach, especially in the automotive industry this is the norm. The supplier partnership as an approach adopted by these companies focused on2:

  • Focus on continuous improvement
  • Share information, risks and successes with suppliers to establish a long-term mutual partnership.
  • User quantitative measurement to judge if improvements are performed.
  • Involve the suppliers at an early stage in the design process.
  • Investment in education and technical support for the suppliers are a key to success.
  • Reducing the number of suppliers and trusting a few suppliers is the better basis for quality improvement in supplier partnership.

If you compare that traditional view where producer or the buyer should help the supplier with improvement work and assist in solving quality problems that occur in production or at the end customer used to have low priority. Below table shows different factors and how traditional or old model is compared with supplier partnership model.

Supplier Partnership

A good supplier-manufacturer relationship as mentioned before is in the forefront of good SCM. A few models of this type are now suggested.  T he theme behind these models is the replacement of traditionally adversarial situations that exist today, with integrated partnership relationships.

The partnership model lacked the capability of coping with globalization. In addition agreed commitments often led to high levels of pressure on both sides. There were limits to the amount of cost reduction especially on the supplier’s side

Conclusion:

In summary when companies adopt supplier partnership model and link their processes much closer with suppliers they witness reduction in poor-quality cost, better possibilities of applying the JIT in Purchasing philosophy and the necessity of having committed suppliers.

Recommended Books:

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Reference:

  1. Cali, J.F. (1993). TQM for purchasing management. McGraw-Hill, New York.
  2. Bergman, B. and Kelfsjo, B. (2002). Quality from Customer Needs to Customer Satisfaction. Studentlitteratur

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