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Lecture Purchasing and supply chain management (3/e): Chapter 11 - W. C. Benton

Chapter 11 is entitled “Supply partnerships and supply chain power.” The intense coordination necessary for effective supply chain integration necessitates a reduced supplier base; where manufacturers were once producing products with thousands of suppliers, successful firms are now manufacturing better products with fewer suppliers. | 1 Chapter 11: Supply Partnerships and Supply Chain Power Purchasing and Supply Chain Management, 3rd edition, Copyright 2013, All rights reserved The Win-Win Partnership Dyad Buyer and supplier share goals and risks through: Joint planning and control A supply chain with increased information flow and enhanced loyalty The result for both firms: Decreased uncertainty Greater control of costs Cycle times, inventory Quality, customer satisfaction 2 Partnership Definition: A tailored business relationship for achieving a competitive advantage based on: Mutual trust Openness Shared risk Shared reward Strategic partnerships receive benefits of joint ventures and vertical integration without the ownership commitment 3 Benefits and Risks of Supplier Partnerships Benefits: Higher quality, and transaction costs Increased market stability Setup time reduction, improved process-oriented layout Increased communication and goal congruence Risks: Partner may not meet expectations Loss of partnership | 1 Chapter 11: Supply Partnerships and Supply Chain Power Purchasing and Supply Chain Management, 3rd edition, Copyright 2013, All rights reserved The Win-Win Partnership Dyad Buyer and supplier share goals and risks through: Joint planning and control A supply chain with increased information flow and enhanced loyalty The result for both firms: Decreased uncertainty Greater control of costs Cycle times, inventory Quality, customer satisfaction 2 Partnership Definition: A tailored business relationship for achieving a competitive advantage based on: Mutual trust Openness Shared risk Shared reward Strategic partnerships receive benefits of joint ventures and vertical integration without the ownership commitment 3 Benefits and Risks of Supplier Partnerships Benefits: Higher quality, and transaction costs Increased market stability Setup time reduction, improved process-oriented layout Increased communication and goal congruence Risks: Partner may not meet expectations Loss of partnership control Complacency Over-specialization 4 Large vs. Small Suppler Bases Benefits of a large competitive supplier base: Higher manufacturer bargaining power Lower costs, higher quality, reasonable delivery times, and special exigencies Shelters against supply interruptions Benefits of a smaller supplier base: Less adversarial attitudes Lower switching costs Decreased shipping errors Quantity and relationship-based discounts Decreased cost of quality 5 Power of a Supply Chain Member Definition: The ability of one channel member (the source) to influence the actions and intentions of another supply chain member (the target) Characteristics: A composite relationship–oriented variable Extremely complex in nature Affects both the target and the source Key factor in a supplier–buyer alliance 6 Types of Power Mediated power sources Based on the source’s intention to bring about some action Includes reward, coercive, and legal legitimate power Represents the competitive, negative uses of power