Supplier development is important and if so which purchased commodities and services require the most attention. A corporate level executive steering committee must assess the relevant strategic importance of all goods and services that the company buys and produce a portfolio of critical commodities 2. 2 Identify critical suppliers for development The managers must assess the performance of suppliers who supply commodities in the “strategic supplier category’.
These commodities considered strategically important, as they might be difficult to substitute or purchase from alternative suppliers. 2. 3 Form a cross-functional team A buyer must first develop internal cross-functional consensus for the initiative before approaching the supplies to ask for improvement such consensus will help to show a 2. 4 “unified front” and ensure that all buyer functions. Meet with supplier’s top management team management group and establish three keys to supplier improvement, strategic alignment, supplier measurement and professionalism.
Identify opportunities and probability for improvement At these meetings with the suppliers executive should identify areas earmarked for improvement. Companies adopting a strategic approach to supply base development can usually agree upon areas or improvement . Len some areas driven by final customer requirements and expectations. 2. 6 Identify key projects After identifying promising opportunities of supplier development managers must evaluate them in terms of feasibility, resource and time requirements and potential return on investments.
The aim is to decide what the goals should be and whether they are achievable. 2. 7 Define details of the agreement After the potential improvement project is identified, the parties need to agree on specific marshiest for monitoring its success. 2. 8 Monitor status and modify strategies Manages must constantly monitor the progress and constantly exchange information to maintain momentum in the project. (http:// www. Ethnographer’s. Com. Junipers/smaller_universe/Mann_smaller/some- suppliers . HTML.
Because of this intellectual property the buyer has limited or no Substitutes to turn to creating a dependence on the supplier. Despite this dependence a high level of trust plays an important role in making this relationship fruitful for both parties. Apparently the dominance of the supplier is limited to the extent that the mutual trust stays intact. But the level of trust also has its limits from the supplier’s respective. The supplier is not willing to trust the buyer with its intellectual property. The obvious reason for this is the risk that the supplier would lose its dominating position. Thus, the supplier has a special interest in maintaining its dominant position.
The survey and interviews indicate that for captive buyer relationships the explanatory variables were the lack of substitutes, legal property rights and size of the supplier. Apparently the legal property rights of the supplier, and the resulting lack of substitutes, causes the buyer to depend on the supplier. These factors, combined with a supplier that is much larger than the buyer, results in a relationship that can be described as a captive buyer situation. Captive Supplier Captive supplier relationship the supplier depends on the buyer and the buyer therefore overpowers the supplier.
This unbalance of power can have one or a combination of factors: the size of the buyer and its market share but also the switching costs for the supplier contribute to the dependence of the supplier on the rye. Despite the fact that the supplier has important intellectual property this is not sufficient to balance the level of power towards the buyer. To make this relationship a fruitful one cooperation and mutual goals are of great importance. Via preventing the buyer from abusing its dominance over the supplier. For this reason, in a captive supplier situation the buyer will also invest (heavily) in the relationship but not to the extent that it loses it’s dominating position. While studying the captive supplier relationships, it became apparent that the
Power affects the expectations of the two parties over what commercial returns should accrue to them from a relationship. It also affects the willingness of the two parties to invest in collaborative activities. As important, it also affects the willingness of the two parties to share the costs of relationship-specific investments . Let also affects the willingness of the two parties to share sensitive information. As a result, an understanding of the power relation which is often stable, with the relative stability should, from the point of view of the purchasing manager, inform both the supplier selection and the relationship management decision as he or she attempts to manage risk proactively.