Mr J Davies Essay

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‘Managing suppliers through long term collaborative relationships constitutes best practice’. To what extent do you agree?

Collaboration is ‘’the process by which partners adopt a high level of purposeful cooperation to maintain a trading relationship over time. The relationship is bilateral; both parties have the power to shape its nature and future direction over time.’’ (Monczka, Trent and Handfield). Examples of long term collaboration include Microsoft and Novell. In 2006 the two companies announced ‘’broad business and technical collaborations’’ to provide products that function better when used together. This partnership would be in place until at least 2012.
Research has shown that businesses will benefit from collaboration (Dyer and Singh, 1998). However there are certain criteria that will affect the level of success of collaboration (Singh and Mitchell 1996). In the essay I will look at the positives and negatives of collaboration and look at the factors that contribute to the levels of success companies will gain from a collaborative relationship with their suppliers.

In order to establish if long term collaboration is a positive practices it is necessary to look at the factors that influence a company’s decision to collaborate with its suppliers. Supplier selection is vital when choosing who to collaborate with; ideally the buyer wants to be the dominant player in the relationship but also wants a competent supplier. In order to get one of these options a buyer usually has to sacrifice the other. Acquiring a competent supplier is particularly valuable if the buyer is diversifying into new areas and is relatively inexperience. However, a competent supplier will hold more power as they know they have a superior product to other less competent companies. The diagram below shows that the ideal supplier would be in the gray shaded area. In this area you have a supplier that is fully competent yet the buyer is still dominant and has the power. Suppliers such as this would make the best collaborative partners for the producer.
However one advantage of a long term collaborative relationship is that through investment the buyer may be able to improve the competence of the supplier and push them closer towards the gray area without loosing the power in the relationship. This is known as supplier development; ‘’A bilateral effort by both the buying and supplying organizations to jointly improve the supplier’s performance’’ (Krause and Handfield)
| |Buyer Dominance |
|Buyer-Supplie| |
|r Power | |
| |Buyer - Supplier Equality |
| |Buyer Dependence |
| |

Collaboration does have its negatives and pitfalls; it can be a time consuming and costly to begin a collaborative relationship. Direct costs are likely to include new labour, training and new research and development. Other cost maybe incurred in order to facilitate efficiency between the buyer and supplier. It will be necessary for the buyer to release information about the company; therefore security will be an issue. A company is liable to loose its competitive advantage if important information is leaked to competitors.
Problems will also arise if the two companies have different company cultures. A culture clash may occur if the two companies hold different attitudes on how day to day business should be carried out. There may be information barriers if the two companies use different methods of communication and unifying these methods will again require time and investment.
It is becoming more common to have suppliers in different countries to take advantage of cheaper labour; this may add a language barrier as well as time zone differences which can lead to delays in relaying information and inefficiency. Companies need to find ways around such
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