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Collaborative Relationships






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Collaborative v Competitive Relationships. Competitive approach squeezes the profit margins of the supplier, and by doing so the buying organisation obtains some of the value that the supplier would otherwise keep for himselfDeveloping collaborative relationships takes time and effort
Collaborative Relationships

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1. Collaborative Relationships Benefits of doing business together arise from ideas of sharing as well as exchanging Buying organisation seeks to develop a long-term relationship with supplier Both organisations share common interests, both benefit from adding value in the supply chain Supplier participates with buyer looking for improvements and innovations Both parties jointly set targets for improvements in cost and quality Meet regularly to discuss progress Proactive relationship looking for improvements NOT a long-term COSY customer-supplier relationship Collaborative relationshipsCollaborative relationships

2. Collaborative v Competitive Relationships Competitive approach squeezes the profit margins of the supplier, and by doing so the buying organisation obtains some of the value that the supplier would otherwise keep for himself Developing collaborative relationships takes time and effort ? unrealistic to try creating more of these relationships than a buyer can effectively manage Where a failure in supply would not be damaging it is not worth the time and effort to create a collaborative relationship Collaborative v competitive relationshipsCollaborative v competitive relationships

3. Cosy Relationship v Supply Partnership Supply partnerships are not a ?cosy relationship? between customer and supplier. Whereas a partnership brings improvements to the supply chain, a cosy relationship does not Cosy relationship v supply partnershipCosy relationship v supply partnership

4. The relationship spectrum Figure 1.1?The relationship spectrum Figure 1.1?The relationship spectrum

5. Transactional Relationships When is a transactional relationship appropriate? Situations where the trouble and expense of developing a long-term collaborative relationship are not justified Nature of product being purchased (little or no strategic importance) Many suppliers exist Items purchased rarely Forced upon the buyer (product purchased is of high strategic importance to the buyer but of little importance to the supplier, who in these instances is usually larger than the buying organisation) Transactional relationshipsTransactional relationships

6. Partnership Sourcing Partnership sourcingPartnership sourcing

7. Lean Supply ?The main goal of being ?lean? is to obtain the same output from half the resources used by older methods ? half the number of workers, half the number of design engineers, and half the level of inventory? Saunders Daniel Jones identified five principles that characterised lean production organisations: Tasks and responsibilities are transferred to those who are actually adding value on the production line Discovering defects and problems immediately, and eliminating their causes, is an important objective of control systems Comprehensive information system enables everyone to respond quickly Organisation must be based on empowered work teams This in turn encourages a strong sense of reciprocal obligation between staff and employing firm Lean supplyLean supply

8. Lean Supply Based on the concept of eliminating waste Waste is any activity that uses resources but adds no value Associated with the principles of (JIT) Just in Time manufacturing, also known as ?lean operations? JIT was developed by Taichi Ohno in 1940s in Toyota Ohno identified ?seven wastes?: Over-production Waste caused by transportation Waiting Motion Over-processing Waste caused by Inventory Defects/corrections Lean supplyLean supply

9. Factors relevant to the risk of supply Table 2.1?Factors relevant to the risk of supplyTable 2.1?Factors relevant to the risk of supply

10. Kraljic?s grid Figure 2.2?Kraljic?s gridFigure 2.2?Kraljic?s grid

11. The PMMS supplier preferencing model Figure 2.2?The PMMS supplier preferencing model Figure 2.2?The PMMS supplier preferencing model

12. Evaluation of Suppliers Suppliers already known to organisation from previous dealings can be evaluated on the basis of their track record. This type of evaluation is known as ?vendor rating? When the supplier is not known to the organisation there is a need to judge his capabilities in a different way and on the basis of different information such as: Financial stability Commercial capabilities Management skills History Who they trade with Evaluation of suppliersEvaluation of suppliers

13. Relationship Lifecycle Relationship lifecycleRelationship lifecycle

14. To achieve competitive prices companies must focus on costs. Purchasing?s contribution to reducing costs is throughout the supply chain, whilst maintaining quality Traditional model builds the cost of a product by analysing its components step by step. Profit margin is then added Target costing starts at the other end. Manufacturer estimates the selling price (what the market would be willing to pay) then works backwards to calculate the production cost that must be achieved in order to provide reasonable profit Reducing costReducing cost

15. Features of Lean Supply Specify what creates value as seen from the customer?s perspective Identify all steps across the value stream Perform those actions that create that value flow Only make what is pulled by the customer just in time Strive for perfection by continually removing successive layers of waste Features of lean supplyFeatures of lean supply

16. Features of Agile Supply ?Using market knowledge and a responsive supply network to exploit profitable opportunities in the market place? CIPS Able to see opportunities for product modification Product lifecycles may be short (because organisation?s offerings change frequently in response to market demand) Late customisation Ready to accept stock Stock is seen as a source of value enhancement for the customer and not seen as cost Andrew Cox believes that the lean philosophy is powerful when key criteria are cost and quality, whereas agility is paramount where service and customer value enhancement are key Features of agile supplyFeatures of agile supply

17. Corporate Social Responsibility CSR is being a good corporate citizen. Some matters are covered by legislation: Legislative requirements (Health and Safety at Work Act) Regulatory requirements (Ofcom, Competition Commission) Professional codes of practice (CIPS, CIMA, CIM etc) Many organisations set social responsibility objectives in relation to: Sustainability issues Environmental issues Ethical trading Corporate social responsibilityCorporate social responsibility

18. Corporate Social Responsibility Key Areas for Purchasing Professionals Corporate social responsibility ? key areas for purchasing professionalsCorporate social responsibility ? key areas for purchasing professionals

19. Ethics and Purchasing Why are buyers interested? Both customers and suppliers expect to see ethical behaviour (could lose business if deemed to be unethical) Concern for the environment is just one aspect of ethical business policies Unethical behaviour is not beneficial in the long term Policies and ethical behaviour are considered to be an essential element in strategic management Buyers are more exposed to temptation than other professionals Ethics and purchasing ? why are buyers interested?Ethics and purchasing ? why are buyers interested?

20. The position of stakeholders in the environment Figure 5.1?The position of stakeholders in the environment Figure 5.1?The position of stakeholders in the environment

21. Stakeholders and their expectations Table 5.1?Stakeholders and their expectations Table 5.1?Stakeholders and their expectations

22. Stakeholders and their expectations (continued) Table 5.1?Stakeholders and their expectations (continued) Table 5.1?Stakeholders and their expectations (continued)

23. Satisfying stakeholder groups Figure 5.2?Satisfying stakeholder groups Figure 5.2?Satisfying stakeholder groups

24. Buyer?s techniques for handling stakeholder conflict Buyer?s techniques for handling stakeholder conflictBuyer?s techniques for handling stakeholder conflict

25. Culture Organisation culture is: ?a pattern of beliefs and expectations shared by the organisation?s members, and which produce norms which powerfully shape the behaviour of individuals and groups in the organisation? (Schwartz and Davies) or ? the way we do things around here? CultureCulture

26. Culture CultureCulture

27. Supplier Appraisal Definitions: Appraisal ? the assessment of potential suppliers, prior to contract award Vendor rating ? the assessment of a supplier?s performance in fulfilling a contract after its award Supplier development ? the activities carried out both before and after contract award; aim to assist a supplier in providing a service/product we need Supplier appraisalSupplier appraisal

28. Factors to be appraised in supplier appraisal: Supplier appraisalSupplier appraisal

29. Features that a buyer is unable to influence: Supplier appraisalSupplier appraisal

30. Factors involved in supplier appraisal Table 6.1?Factors involved in supplier appraisal Table 6.1?Factors involved in supplier appraisal

31. Identifying potential suppliers Table 6.1?Factors involved in supplier appraisal Table 6.1?Factors involved in supplier appraisal

32. Site visits / Supplier audit Table 6.1?Factors involved in supplier appraisal Table 6.1?Factors involved in supplier appraisal

33. Supplier selection criteria ? Carter?s 10cs Supplier selection criteria ? Carter?s 10csSupplier selection criteria ? Carter?s 10cs

34. Tiering of suppliers Tiering of suppliersTiering of suppliers

35. Tiering of suppliers Tiering of suppliersTiering of suppliers

36. Why suppliers may not welcome an appraisal Table 6.2?Why suppliers may not welcome an appraisal Table 6.2?Why suppliers may not welcome an appraisal

37. A supplier?s possible reactions to the appraisal process Table 6.3?A supplier?s possible reactions to the appraisal process Table 6.3?A supplier?s possible reactions to the appraisal process

38. Characteristics of services Characteristics of servicesCharacteristics of services

39. Supplier appraisal ? what to investigate Supplier appraisal ? what to investigateSupplier appraisal ? what to investigate

40. Differences between public and private sector purchasing Table 7.1?Differences between public and private sector purchasing Table 7.1?Differences between public and private sector purchasing

41. Differences between public and private sector purchasing (continued) Table 7.1?Differences between public and private sector purchasing (continued) Table 7.1?Differences between public and private sector purchasing (continued)

42. European procurement directives Buyers are obliged to award the contract on the basis of the lowest quoted price, or on the basis of the economically most advantageous tender European procurement directivesEuropean procurement directives

43. European procurement directives Benefits of the EU directives for buyers and suppliers European procurement directives ? Benefits of the EU directives for buyers and suppliersEuropean procurement directives ? Benefits of the EU directives for buyers and suppliers

44. European procurement directives Drawbacks of the EU directives for buyers and suppliers European procurement directives ? Benefits of the EU directives for buyers and suppliersEuropean procurement directives ? Benefits of the EU directives for buyers and suppliers

45. Reciprocal trading Intra-organisational trading Intra-organisational trading refers to commercial relationships between entities which are part of the same organisation. It may be regarded as one variety of reciprocal trading, which means the practice of buying from a supplier simply because that supplier happens to buy from you. Problems with reciprocal buying: Brings into the buying decision factors that have nothing to do with the buyer?s principal duty, which is to secure the best possible value for his organisation Unsuitable purchase decisions are made which could result in a heavy price to pay in terms of product quality and customer satisfaction Possible breach of law (in the UK there are legal regulations which prohibit most attempts to stifle competition) Malcom Saunders suggests that three questions should be asked in analysing an opportunity for reciprocal trade: How necessary is it to have a reciprocal agreement with a customer in order to win the sales contract? What are the benefits to the company of winning the sales contract? What are the costs to the company of using this customer as a supplier, as opposed to exercising a free choice? Reciprocal trading ? intra-organisational tradingReciprocal trading ? intra-organisational trading

46. Changing supply source Changing supply shourceChanging supply shource

47. Strategic relationshipsStrategic relationships

48. Outsourcing OutsourcingOutsourcing

49. Outsourcing matrix Figure 9.1?Outsourcing matrix Figure 9.1?Outsourcing matrix

50. Contracting Out Contracting OutContracting Out

51. Outsourcing OutsourcingOutsourcing

52. Ideologies of conflict Ideologies of conflictIdeologies of conflict

53. Conflict ConflictConflict

54. Robbins?s strategies for resolving conflict Table 10.1?Robbins?s strategies for resolving conflict Table 10.1?Robbins?s strategies for resolving conflict

55. Robbins?s strategies for resolving conflict (continued) Table 10.1?Robbins?s strategies for resolving conflict (continued) Table 10.1?Robbins?s strategies for resolving conflict (continued)

56. Conflict Resolution Cornelius and Faire suggest that there are three basic ways a conflict can be worked out Win-Lose ? one party gets what he wants at the expense of the other party. This may damage working relationship Lose-Lose ? neither party gets what he really wants, compromise. Resentment may build on both sides Win-Win ? both parties get as close as possible to what they really want. Generate more options, problem solving, open communication, enhanced cooperation and preserved working relationships Conflict resolutionConflict resolution

57. Stakeholder communication The more crucial the stakeholder the more important it is to involve him in detailed communication about strategies, policies, plans and procedures. Stakeholder communicationStakeholder communication

58. Market Situations Monopoly is a market where just one supplier exists. Doubtful whether any pure monopoly exists because there is almost always an alternative supplier (water comapnies) Oligopoly is a market dominated by just a few large suppliers (telecommunications industry) Monopsony is a market in which just one buyer exists Market situationsMarket situations

59. Defining the terms Table 11.1?Defining the terms Table 11.1?Defining the terms

60. The e-purchasing cycle Figure 11.1?The e-purchasing cycle Figure 11.1?The e-purchasing cycle

61. Internet and Purchasing Purchasers use internet for the following: Search suppliers? catalogues Electronic ordering Payment by electronic funds transfer/purchasing cards Track shipments and receive delivery information Internet and purchasingInternet and purchasing

62. Purchasing and IT Purchasing and ITPurchasing and IT

63. A list of e-purchasing tools Table 11.3?A list of e-purchasing toolsTable 11.3?A list of e-purchasing tools

64. A list of e-purchasing tools (continued) Table 11.3?A list of e-purchasing tools (continued)Table 11.3?A list of e-purchasing tools (continued)

65. Suppliers and e-procurement Suppliers and e-procurementSuppliers and e-procurement

66. Online Auctions Online auctionsOnline auctions

67. International Supply Contracts International supply contractsInternational supply contracts

68. Linking e-purchasing tools to the relationship spectrum Table 11.4?Linking e-purchasing tools to the relationship spectrum Table 11.4?Linking e-purchasing tools to the relationship spectrum

69. A summary of Incoterms 2000 Table 12.2?A summary of Incoterms 2000 Table 12.2?A summary of Incoterms 2000

70. International Supply Contracts A multinational company is one that operates from bases in several different countries. A global company sells to or buys from countries throughout the world International supply contractsInternational supply contracts

71. Forms of supplier development Table 13.1?Forms of supplier development Table 13.1?Forms of supplier development

72. Forms of supplier development (continued) Table 13.1?Forms of supplier development (continued) Table 13.1?Forms of supplier development (continued)

73. Supplier Development Examples of supplier development: A buyer wants to use purchasing cards, supplier does not have capability. The buyer may purchase electronic terminals for the suppliers concerned A buyer pays for his supplier?s manufacturing processes to be updated, in return for discounted supplies in the future Why develop suppliers? Gain in terms of sharing in the specialist knowledge of the supplier Take advantage of the supplier?s capabilities to support a strategy of outsourcing non-core activities Improve the supply base so as to achieve better quality, delivery and price Supplier developmentSupplier development

74. Relationship Development Advantages: Motivated suppliers can be encouraged to invest in research and development Use of multiple sourcing and competitive bidding. Process is streamlined and waste is avoided Long-term agreement means that the supplier?s production costs will fall as a result of the learning effect. Gives scope for price reductions Relationship developmentRelationship development

75. Costs and benefits of development activities: buyer?s perspective Table 13.2?Costs and benefits of development activities: buyer?s perspective Table 13.2?Costs and benefits of development activities: buyer?s perspective

76. Costs and benefits of development activities: supplier?s perspective Table 13.3?Costs and benefits of development activities: supplier?s perspective Table 13.3?Costs and benefits of development activities: supplier?s perspective

77. The costs related to quality Figure 13.2?The costs related to quality Figure 13.2?The costs related to quality

78. Measuring Performance Supplier?s perspective of relationship with a buyer: - Adherence to contract terms in relation to volume, required lead times, payment etc Operational efficiency in terms of scheduling A fair sharing of risks and rewards Being given an opportunity to perform well, without every minor problem escalated to the level of crises Measuring performanceMeasuring performance

79. A simple purchaser-supplier satisfaction model Figure 14.1?A simple purchaser-supplier satisfaction model Figure 14.1?A simple purchaser-supplier satisfaction model

80. Tools for moving positions Table 14.1?Tools for moving positionsTable 14.1?Tools for moving positions

81. Measuring Performance Measuring performanceMeasuring performance

82. Sponsor A sponsor is chosen from among senior management team. His task is to support the implementation and operation of the measurement system by using his influence as a senior manager to ensure that it is taken seriously by all parties A sponsor?s activities may include: Attend meetings relating to the measurement of performance Track progress of the performance measurement system Use his influence within the organisation to remove barriers Support the buying team in dealing with the supplier if there is failure to meet KPIs Report to senior management SponsorSponsor

83. Account Management An Account Manager ensures that a contract is performed to the required standard, meeting specifications, terms and conditions agreed between the buyer and supplier Aspects of account management: Managing all aspects of the relationship between the supplier and the buyer?s customers Ensuring delivery of the goods and service from the supplier on the agreed terms and to the agreed standard Encouraging the supplier to adhere to agreed standards or KPIs and to seek improvements in performance throughout the duration of the relationship Account managementAccount management

84. Account Management Benefits of account management: Better control by the buyer over the execution of supply contracts Maintain communication, help to achieve better performance by the supplier Improvements in cost and quality, thereby adding value Foresee problems early and deal with them before they become serious Ensure buyer carries out its undertakings properly so difficulties with the supplier are avoided Account management Account management Account management Account managementAccount management Account management Account management Account management

85. Continuous Improvement Total Quality Management (TQM) is an attitude or philosophy. It focuses on small changes that can be recognised and dealt with at local level. An organisation should continually look for ways of achieving further improvement. The search for quality never ends. Kaizen is a Japanese word meaning gradual and orderly, continuous improvement. A kaizen strategy involves everyone in the organisation working together to make improvements without any large capital investment. There are two elements to Kaizen: improvements and change. Continuous improvementContinuous improvement

86. Performance measures for vending services Table 14.1?Performance measures for vending servicesTable 14.1?Performance measures for vending services


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