Buyer-Supplier Relationships

The connections between the supplier and buyer form the so-called relationship. More broadly, this should be defined as business collaboration, which comes down chiefly to pmchase and sales transactions. The relationship comprises widely understood dependencies between the resources, actions and entities of the participants. We call it the content of a relationship (Figure 1.2). The supplier-buyer relationship may be analysed in the context of three aspects connections, the impact of relationship on the collaborators results, and the impact made by the supplier-buyer relationship on the network and vice-versa (Fonfara 2009, p. 28). Each change on the supplier s side or in the network may have a positive or negative impact on the buyer or the supplier-buyer relationship. The resources and measures undertaken by individual companies are related to one another due to the input and output of processes carried out by the supplier or customer, and as such, determine the effectiveness and efficiency of product and information flows. 

Figure 1.2 Content of the supplier-buyer relationship Source Own study based on Fonfara (1999, p. 51).

The selection of a supplier is just the start of the supplier-buyer relationship. Supplier relationship management (SRM) also includes the segmentation of suppliers, performance assessment, improvement of the relationship and collaboration to create new value (Procurement Strategy Council 2007, pp. 6-7). 

The supplier-buyer relationship is certainly a multi-aspect topic. Unquestionably, it is the foundation of supply chain integration. Building the supplier-buyer relationship provides an opportunity for better performance in collaborating companies. Therefore, the concentration of supply chain links on the development of suppliers and buyers resources and measures should be counted among their top priorities. 

Fig. 5.9 Exemplary supplier-buyer relationship for different modules of Tec 1...

In this example, the supplier-buyer relationship is analyzed according to the different modules of the exemplary product Tec 1 applied in the Kraljic matrix for the private customer segment. The supplier-buyer relationship is a relevant measure to analyze the power distribution between buyer and supplier. In Fig. 5.9 one can see the different components of Tec 1 in the matrix. The noncritical items such as the screen and the keyboard indicate that here there is not a strong dependence on the supplier and a low risk for the profit impact as well as the supply risk. The screen and keyboard do not contribute to the differentiation process of the product and therefore do not have strategic importance. 

Supplier relationship management follows the outline of the supplier-buyer relationship as identified in CMS. Here it is important to identify the most important suppliers versus those that are less important. In CM3, the suppliers are identified as leverage, strategic, noncritical or bottleneck suppliers. 

Method for supplier buyer relationships and supporting activities... 

The above calculation is performed for both affected partners of the supplier-buyer relationship and the values added calculated for the individual supply chain players are then totalled to determine the overall value added produced by the SCI (cf. Eq. 4-17). 

Subsequently, the developed quantification approach is to be tested out by performing the calculations for a case study of relatively low complexity by way of example. The study examines a supplier-buyer relationship in an supply chain section of the food industry. The names of the two supply chain players involved are given as Ci and C2 to ensure data confidentiality and to satisfy the non-disclosure agreements. For the same reason, the balance sheet and P L items are shown in modified form, keeping the ratio between the data identical so as not to undermine the meaningfulness of the findings. The relative effects of the analysed SCI remain unaffected. 

Finally, the presented quantification approach did not take into account the possible distribution of the value added produced by the implementation of the investigated SCI across the affected supply chain players. This aspect depends strongly on the individual character of the supply chain and the players involved and is characterised by the power distribution and trust between the companies (Bemdt, 2003 66), At this point, the inductive nature of the quantification approach comes to the fore once more. One must bear in mind that the calculations are made in the context of a dyadic scenario of a supplier-buyer relationship, where a relatively high degree of transparency exists only with respect to the cost and revenue structure linked directly to the other player. The cost savings or revenue increases, benefiting one player as a... 

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