Module: Introduction to Business Strategy and Supply Chain Management
Title: To what extent do you agree with the argument that close, collaborative and non-adversarial relationships between buyers and suppliers are ”best practice” in supply management?
This essay has for aim to improve that the close, collaborative, non-adversarial relationships between buyers and suppliers are not at a hundred per cent, but in most of the case the best practice, when it comes for big high-tech globally significant project in IT, military, aerospace, automotive and nanotechnology industries. However, to adopt the right type of supplier relationships avoiding large-scale mistakes the buyers’ managers should look over all circumstances and have clear idea what type of interaction and division of surplus value are best suitable for them, because these two factors are the key elements of buyer-supplier relationship theory.
“The ability to match the environment, business strategy and business structure is at the hear of all issues and concepts of organaizational design”(Hines, P. et al., 2000, p.135).The first two factors are well involved in the model of six generic supplier relationship management types existing in business market. Have been characterised by two main dimensions: the nature of interaction between the two parties and the way in which the surplus value is shared. It is important these two elements to be accepted as interrelated not as opposite,which is an usual misunderstanding.Actually the real differentiation between the styles comes from the level of domination of the one element over the others in particular situation.Central to all relationships is the exchange process,where each participant gives something in return of a greater value. Building effective, long lasting relationships demands careful attention to details so all generic types should be closely examined and compared.(Watson,2003; Hutt, M. and Speh, T.,2001)
As regards to the first key dimension-the way of working, its two possible options of styles are arms-length and collaborative. Arms-length way of working appeared when the two sides have a limited contact, beyond the exchange of basic information needed for a transaction to take place.( Watson, G. and Lonsdale, C.A, 2003)Collaborative relationships are observed when the correspondence involve social and operational linkages, high level of information exchange and additional profit is created in expectation of long-run benefits. “According to James Anderson and James Narus ,collaborative exchange involve: a process where a customer and supplier firm form strong and extensive social, economic, service and technical ties over time, with the intent of lowering total costs and/or increasing value, therby achieving mutual benefits.”( Hutt, M. and Speh, T. ,2001,p.89)
Cannon and Perrault identified four aspects of buyer-supplier interaction: product/process information exchange, operational linkages,legal bonds, co-operative norms and relationship-specific adaptations in their work paper from 1999. Product/process information exchange can include open transfer of proprietary techinal,forecasting information and cost data. Participants are willing to share these information in order to improve speed and quality of production.Operational linkages are systems,procedures and routines of the firms linked to facilitate the flow of goods, services, payment or information operations.these linkages are the steping stone of every kind of fill up order of out of stock items or the just-in-time delivery.Cooperative norms reflect the expectation that each partner should to cover according to the agreed set of standards of behaviour and ways of managing with problems or opportunities.Last but not least, relations-specific adaptation refer to non-transferable investment in modification of products or processes, training in definate systems in order...