Suppliers arms-length relationships with

Most companies rely on budgets built on traditional accounting practice to measure their performance. Earlier in this chapter, in the description of market mediation cost, we pointed out the pitfalls. A preference for arms length relationships also stands in the way of multicompany efforts. Few in traditional departments such as procurement are prepared, by education, training, or inclination, to work strategically with suppliers. In fact, most performance measures discourage such activity. 

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). 

Forging supply chain partnerships Relationships with suppliers and customers are arms length at best, antagonistic at worst. Collaboration up and down the supply chain is limited to transaction data. Efforts are limited to supplier initiatives focused on cost reduction, not revenue increases. Partners collaborate but roles are static. Partners pursue sphere strategies. Trading partners in the supply chain expand their value contributions. 

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. 

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... 

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)... 

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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