Purchasing and supply relationships

A number of alternative supply chain structures have emerged, based upon networks and the degree of inter-firm collaboration. A well-known view is that of Sako (1992), who distinguishes a spectrum of possible supply relationships, ranging from  

The two organisations will still be subject to independent governance, but will have in common a similar set of governance procedures and mechanisms specific to 

Such common governance is more in keeping with the obligational view. The implications for competitive strategy of this growth of collaborative supply chains are considerable - in particular the need to develop those skills that enable a company to re-engineer established buyer-supplier relationships and to manage them successfully on a day-to-day basis. 

But a one-sided view of the relationship may be the norm elsewhere, and have quite different implications for the firms involved. For example, Rubery et al. (2004) studied the way that a customer firm may extend its tentacles inside the [supplier firm] to reshape the internal human resource practices. The customer firm may exert pressure on a supplier s HR practices in areas such as hours worked (to fit with their own), performance assessment and associated bonus payments. 

The overall aim of this chapter is to review different types of supply relationship, the impact on the firms involved, and the situations where a given type of relationship is most relevant to a supply chain s competitive position. 

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This is becoming especially relevant today. Some manufacturing firms, for example in the electronics and automotive industries, add only 10-20 per cent of total added value internally. The rest is created in the supply base - by commodity suppliers, by co-designers and co-manufacturers, by main suppliers, and by their supply partners. Chapter 8 offers approaches to integration and collaboration in the supply chain, and Chapter 9 offers insights into purchasing and supply relationships. 

There have been two different but equally successful precedents for implementing quality assurance in Europe. In the UK and France, large gas and water utilities were able to create corporate standards to apply through purchase and supply contracts within a customer/contractor relationship with pipe suppliers. In Germany, the proliferation of local authority owned gas and water utilities meant they were too small to impose corporate standards. Instead, the contractual relationship with the larger pipe supply companies was maintained by standards set by third parties such as the German DVGW, supported by independent test houses. 

Fynes, B., De Burca, S. and Marshall, D. 2004. Environmental uncertainty, supply chain relationship quality and performance. Journal of Purchasing and Supply Management, 10, 179-190. 

Su, Q., Song, Y.-T., Li, Z. and Dang, J.-X. 2008b. The impact of supply chain relationship quality on cooperative strategy. Journal of Purchasing and Supply Management, 14, 263-272. 

Smart, A. and Harrison, A. (2003) On-line reverse auctions and their role in huyer-suppUer relationships. Journal of Purchasing and Supply Management, Vol. 9, pp. 257-68. 

Nesheim, T. (2001). Extemalization of the core Antecedents of collaborative relationships with supphers. European Journal of Purchasing and Supply Management, 7(4), 217-225. Newman, R. G. (1988). Single source qualification. Journal of Purchasing and Materials Management, 24(2), 10-16. 

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. 

Information technology can be used to help improve the processes involved in supply chain management. There are many different types of software packages available and the best one for a specific application needs to be evaluated for each company. There is no one-size-fits-all approach that will work well. When purchasing and implementing a software package, the support of top management is a must. The resources for successful implementation must be allocated. Software can enhance the efficiency of processes but the personal relationships need to be mairrtained. 

The key elements that form the virtual network in terms of supply chain management are suppliers, who actually perform, provide/sell, and deliver the product/ service in demand intermediaries, who own the supplier/customer relationship and knowledge and customers, who directly purchase and acquire the product/service. Their roles tend to change as a supplier or an intermediary in a given business relationship may play the role of a customer in another one. Not all suppliers and business partners are alike. Some suppliers provide materials that are used in production, while others provide indirect goods (Manthou et al. 2004). 

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