Process for Implemenation of Supplier Development Strategy Essay


Supply chain management adopts a systematic and integrative approach to manage the operation and relationship amongst different parties in supply chain one of the major issues is supplier development studies have investigated how quality management can be employer in supply chain management to influence performance in the whole supply network. (Mishra Rik, Patel G-Supplier Development Strategies, Data employment Analysis Business Intelligence Journal, January 2010 vol 3 No.1)

There are 8 stages of implementation of supplier development

2.1 Identify critical commodities for development

Managers must analyse their situation to determine whether 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 “unified front” and ensure that all buyer functions.

2.4 Meet with supplier’s top management team

The buyer’s cross functional commodity team must approach the supplier’s top management group and establish three keys to supplier improvement, strategic alignment, supplier measurement and professionalism.

5 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 .In 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 merthies 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. ( Accessed 15/09/2011)

Different types Supply Chain relationships

| |Transactional |Collaborative |Alliance | | |Relationships |relationships |relationships | |Communication |High potential for problems |Systematic approach to | | | |enhance communication | |Competitive |Low |High | |advantage |Independence | | |Connectedness |Little |Interdependence | |Continuous
|Few | | |improvement | |A focus on | |Contributions to | | | |new product |Low |Many/early supplier | |development |Short |involvement | | |Reactive |Difficult/high impact | |Difficulty of exit |Price |Long | |Duration |

Little or none |Proactive | |Expediting |Low |Total cost | |Focus | |High or total | |Level of integration |Many |High | |Level of trust |No | | |Number of |Incoming inspection | | |suppliers |Inward looking |One or few | |Open books | |Yes | |Quality | |Design quality into system | |Relations | |Concern with each other’s | | |Few/low skill level |well-being | |Resources |Minimal |Professional | |Service |No |Greatly improved | |Shared
forecasts |Possible |Yes | |Supply disruptions |No |Unlikely | |Technology inflows |Tactical |Yes | |Type of interaction | |Strategic synergy |

(Handfield RB; Monczka RM; Giunipero LC; Patterson JL. Sourcing and supply chain management; 2004 pg 123)

Portfolio Analysis

4.1 Captive buyer

Captive buyer relationship the supplier dominates the buyer and the buyer depends on the supplier. In these particular captive buyer relationships this dependence of the buyer is due to the unique intellectual property of the supplier. 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 perspective. 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.
( ;Accessed 15/09/2011)

2 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 buyer. 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 these mutual goals the buyer does depend on the supplier to some extent, thus 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 Explanatory variables were market share, lack of substitutes, legal property rights, non-retrievable investments and the size of the supplier. These factors resulted in a captive buyer situation. Again the presence of legal property rights, this time of the buyer, causes the supplier to have limited or no substitutes. Furthermore the relationship involved significant non-retrievable investments for the supplier, making it even more difficult to switch to another buyer. Finally, the high market share of the buyer compared to the small size of the supplier was a significant factor. The net result of these explanatory variables is a captive supplier relationship. (; Accessed 15/09/2011)

3 Interdependent Supply Chain members

Some kind of starting point is needed for identification of supply
chains. For instance, an end product of some kind may be used for identification and analysis of the activity structure organised ‘behind’ it. This is in line with the transvection concept coined by Alderson (1965, p. 92) who defines transvections as comprising ‘…all prior action necessary to produce this final result, going all the way back to conglomerate resources’. This, however, entails a first important connection among chains as they typically merge in different stages within an activity structure where different parts of the end product are assembled, welded etc, tying different chains together successively (Dubois, 1998). Consequently, several different products (and thus also several chains, if defined by products) are involved in every ‘supply chain’ resulting in some kind of end-product. Taking transvections, or end-product related structures, as a starting point we will further analyse the ways in which the activities and resources within ‘supply chains’ are connected by analysing how they are subject to the three forms of interdependence. ( ;accessed 15/09/2011)

5. Buyer /supplier relationship

(Handfield RB; Monczka RM; Giunipero LC; Patterson JL. Sourcing and supply chain management; 2004)


Category Level



The concept of power should be at the centre of any study of buyer-supplier relationships. 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 .It 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.




3. Mishra Rik, Patel G-Supplier Development Strategies, Data employment Analysis Business Intelligence Journal, January 2010 vol 3 No.1

4. Handfield RB; Monczka RM; Giunipero LC; Patterson JL. Sourcing and supply chain management; 2004

|1.Leaverage: |2.Strategic : | |Captive Supplier |Mutual dependence | |The buyer has power |Trust is necessary | |Trust may be lacking | | |3.Routine: |4. Bottleneck | |Mutual Independent |Captive buyer | |Trust not necessary |The Supplier has power | | |Trust may be lacking |

LowHighBusiness Risk

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