Arm s length relationship

The arm s length approach as a result of lack of funding associated with ethical trade, there is only limited use of third-party auditors. However, the partial use of independent auditors does occur mainly within the context of arm s length relationships between retailers, auditors and suppliers. This can be defined as the contractual relations between companies involving competitive bidding and playing-off of suppliers. Weak social ties and detached social relations are characteristic of such relationships (Doel, 1996, 1999). 

The term supply chain implies an increase in external partnerships as companies link their operations. A single enterprise that delivers a product or service will have an upstream supply chain for the raw material it needs and a downstream supply chain to end-users to distribute its product. However, it does not necessarily have to have partnerships with either set of enterprises. Partnerships are above and beyond traditional commercial, arm s-length relationships. Well-executed partnerships offer significant opportunities in most chains to quicken increased returns. Poorly executed efforts, on the other hand, may have the opposite effect. Understanding what kinds of changes are needed begins with understanding the traditional model exemplified by the quotation that opened this chapter. 

The last point is directly applicable to this book. And we would respond with a resounding Yes to that question. Meaningful partnerships require investments in both physical assets and systems. So an agreement on accounting for these is mandatory if partners are to move beyond arm s length relationships. 

We have pointed out that information sharing along the supply chain is difficult for many reasons. Inside the walls of a single company, department boundaries are barriers. S OP is an effort to overcome this barrier. The barriers are no less difficult across companies. Also, the traditional arm s length relationship between buyer and seller makes many reluctant to share information. Technologically, the means to share can also be difficult. The system at the supplier may not talk to the system at the buyer. 

Buyer-supplier reciprocal arm s length relationship Supplier dominant arm s length or collaborative relationship... 

This traditional style of relationship ( bow tie ) is contrasted with a multiple-contact model ( diamond ) alternative in Figure 2.4. In the diamond version, contacts between different functions are positively encouraged, and the arm s length relationship of the bow tie is replaced by active relationship management and supplier development processes. This is exemplified by the remarkable changes in the supplier portfolio at the UK High Street retailer BhS. In the early 1990s BhS had over 1,000 suppliers. Now it has just 50. But the nature of the... 

In earlier chapters, we referred to partners as other firms that happen to share the supply network with a focal firm. And in section 9.2 we started to develop the term partnership to address the evolution of additional features from a basic, arm s length relationship. Here, we use the term strategic partner to refer to a supply partner with whom a focal firm has decided to develop a long-term, collaborative relationship. Collaboration may be the ultimate objective of a number of phases through which a supply relationship may evolve. A transition route from open market negotiation to collaboration is shown in Figure 9.8. 

We both work from different ends of the same field. It is possible for our firms to establish an arm s length relationship, it can be very beneficial to both of us. 

It is essential that an engineer maintain an arm s length relationship with contractors, vendors, etc. having, or potentially having, contractual arrangements with the engineer s employer or client. 

Normally, a firm will have a wide range of relationships spanning the entire spectnrm, the majority of which will not be partnerships but arm s-length associations. Of the relationships that are partnerships, the largest percentage will be type 1, and only a limited nrtmber will be type 111 partnerships. Type III partnerships should be reserved for those suppliers or customers who are critical to an organization s long-term success. The previously described relationship between Coke and McDonald s has been evaluated as a type III partnership. 

The supply chain paradigm demands effective partnering outside the enterprise. In some ways, this is easier than working only internally in some ways it is more difficult. It is easier because these partners are probably suppliers and customers with a stake in your success. Clients also tell us it is sometimes easier because they can side-step conflicting internal priorities and politics. It is often more difficult because relationships with outsiders have traditionally been at arm s length. Whatever the case, there will be an increase in partnering arrangements of all kinds. 

Due to this development in management theory, the appreciation of inter-firm relationships has been supplemented considerably besides the traditional arm s length management of suppliers, newer theories advocate the consideration of suppliers as partners (Dyer et al. 1998). Whereas the former view, which is still valid and frequently applied, is based on premises of minimal dependence and maximal bargaining power (Porter 1980), the latter view can be traced back to the successful buyer-supplier buyer-supplier relationships prevalent in the Japanese car producing sector. We will take up the two different types of relationship, one after the other. 

If the power distribution is reversed, and the supplier has dominance over the buyer(s), then the other circumstances of the previous paragraph are naturally also reversed the supplier can dictate prices and margins, whilst the buyer has to accept the conditions set by the supplier. The relationships can be managed in a more (collaborative) or less (arm s length) closely cooperating mode. 

Finally, the last remaining power constellation, independence, is assigned to a buyer-supplier relationship type. Due to the fact that these transactions are normally undertaken in a short-term context with relatively loose cooperation, an arm s length approach is recommended. Both buyer and supplier (have to)... 

A last open question focuses on the use of a differentiated supplier management. The question arises whether different sourcing strategies can be applied to each individual supplier segment. Furthermore are there different relationship schemes present for the different supplier segments In other words, some suppliers are managed at arm s length" and other suppliers have a close relationship... 

The traditional supplier-customer relationship has been limited to contact primarily between the customer s buyer and the supplier s salesperson. Other functions, such as information systems, are kept very much at arm s length. Indeed, the customer s buyer argues that dealings with the supplier should only go through him or her in that way, they ensure that sensitive communications, such as those affecting price, are limited to a single channel. 

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