Purchaser/provider relationship

A critical but often overlooked aspect of the technical service function is the value of relationships that develop between more senior members of the technical service staff and their coUeagues at customer sites. Professional relationships provide value both to suppHer and customer by virtue of the tmst and respect generated in a successhil technical service interaction, analogous to the types of mutuaUy valuable relationships that can develop between suppHer sales personnel and a customer s purchasing personnel. A more efficient process of gathering and dispersing new and usehil technical information can result from these relationships, because the persons involved work in different environments and are exposed in the course of their work to different external sources of information. 

Purchaser-supplied product is a product or service (such as transportation) owned and provided by the purchaser to the supplier for use in meeting contractual requirements. The quality or ESH/PSM issues around these relationships include ensuring that the product or service received meets the appropriate standards and requirements, that the product is returned in the appropriate condition and that supporting documentation is available as needed. 

Table 11.3 presents summary descriptive statistics for those relationships for which financial data were available. Descriptive statistics are provided for sales revenue, operating profit, operating margin, concentration of purchases with the top two vendors, share of purchases with the largest alternative vendor, and overall satisfaction with the largest alternative vendor. Again, to protect confidentiality, contribution margin is not disclosed. 

Pharmacies often choose one pharmaceutical wholesaler and esfablish a prime vendor relationship. The prime vendor relationship is an agreement that stipulates that the pharmacy will purchase a set amount of drugs from the wholesaler. In return for guaranteed purchases, wholesalers provide a discormf to fhe pharmacy. As parf of the agreement, wholesalers may provide further discounts based on purchase volume. Some pharmacies might also retain a secondary wholesaler to use as an alternative source of pharmaceuticals. However, purchases from fhe secondary wholesaler are usually kept to a minimum so as not to jeopardize quantity discounts from the primary wholesaler. 

Global sourcing. Multinational companies (and many local ones) source raw materials and manufactured goods from suppliers located around the world. For economic or cultural reasons, not all of these suppliers use products or processes that are sustainable - a situation that can compromise the ethics of purchasers and can reduce the vendor s ability to provide a consistent supply of high-quality products. Because it considers a supplier s sustainability when it begins developing business partnerships, 3M is more likely to build relationships with responsible and reliable vendors. 

In the one-stop vendor type of purchasing, the safety and loss prevention professionals can establish close working relationships with one or a small number of vendors to provide virtually all their services. The vendors become familiar with the safety and loss prevention professionals operations, employees, management, purchasing system, and other aspects, and this ensures smooth acquisition of needed items. The negative aspect of this approach is that on a single-item purchase, the price may be higher than if bid competitively. 

Complicated and changeable relationships exist between resin supplier, compounder, processor, and end user. But operations of all sizes benefit from using materials at effective economies of scale, which depend on market volume, plant size, processing rates, and many other factors. For example, high-volume operations for diverse markets may tend to purchase standard additive formulations that cover a wide range of properties. Companies in smaller volume or specialized markets may rely more on compounders to provide custom formulations or masterbatches. And, in the interest of increased processing flexibility, all processors may seek options for adding additives to resin in-line or nearer the process that forms the final product [1-4],... 

Harrison (2003) states that there are two extremely different approaches for managing the relationship with suppliers On line procurement (also called eProcurement ) and Strategic Alliances. He claims that the decision on which approach to take should be based on the characteristics of the purchased component and of the marketplace. A summary of the risks and benefits of each of these two approaches is provided in Tables 4.6 and 4.7. 

A second relationship-building component is personal visits. The purchaser s supplier development team visits at least one supplier a month. They also have supplier representatives come to visit their plant to discuss process improvement corrective actions. This reduces the burden of travel for either group, but allows both groups to remain in close personal contact. This personal contact focuses on the supplier s actual process steps, and it provides the necessary history for open discussions about mutual problems and goals. 

It is not unusual for the actual shipment date to be a few days different from the original promised shipment date due to uncertainty in supply chain processes. However, this unreliability might not be acceptable to relationship-based customers. Therefore, Dell offers a special service through Dell Premier accounts at premier.dell.com for business and public sector customers. The service not only provides reports and tools to assist purchasing, asset management, and product support, but also allows customers to hook up their ERP/EDI systems with Dell s to perform real-time computer systems procurement. Through Premier accounts, Dell commits to more responsive and reliable order promising and fulfillment solutions for its relationship-based customers with support from advanced IT systems (see Kraemer and Dedrick 2001). 

---