Activity #8: Collaboration Increases Share of Wallet, in A Tight Economy, New Accounts

Polytechnic University of the Philippines
College of Business Administration

Department of Human Resource Management
A.Y 2020-2021
BAROT, JOHN PAUL CASTILLO January 5, 2021

BSBA-HRM 2-3N LOGISTICS MANAGEMENT
ACTIVITY #8
Answer the following questions: (Reference: Lesson 3)
1. How can suppliers help reduce waste in the customer’s process?
2. What are the benefits and challenges of operating supply chain partnerships?
3. What is the impact of improving new product introductions, promotions, product
ranges and replenishment to supply chains?
4. How can broader-based relationships be formed between trading partners in the
supply chain?
5. What are some barriers to the implementation of strategic partnerships?
Answers:
1. Supplier management is the aspect of supply chain management that
seeks to organize the sourcing of materials and components from a suitable set
of suppliers. The emphasis in this area is on the ‘suitable set of suppliers’.
Generally, companies are seeking to reduce the numbers of suppliers they deal
with by focusing on those with the ‘right’ set of capabilities. The extent to which
companies have undertaken this and have tiered their supply chains is
exceptional.
2. Collaboration Increases Share of Wallet, in a tight economy, new accounts
can be increasingly difficult to secure, even in emerging markets. As a result,
suppliers are increasingly targeting their sales efforts to existing customers and
can only succeed if they add value above and beyond their competitors. The
Longer the Collaboration, the Lower the Costs, One of the greatest benefits from
long-term supply chain collaboration (and one that consistently delights
operationally oriented managers) are the cost savings that result from routinized
procedures over the life of the relationship. When buyers and suppliers begin a
relationship, there interactions often are fraught with inefficiencies and expensive
organizational idiosyncrasies, adding to the cost of doing business in year one.
The Power of Word of Mouth, there are a variety of reasons for this change in
perspective. But many points to the average consumer’s increasing lack of trust
in advertising as well as the incessant “noise” coming from the traditional
promotional outlets. Innovation through Long-Term Collaboration, it is common
knowledge that reduced product life cycles increase the pressure on firms to
develop new products, which often creates considerable stress on the
organization’s R&D function and its budgetary constraints.
3. Where there are a large number of available suppliers and the buyer has
high spending power then the buyer will be able to exercise this power to reduce
prices and to push for preferential treatment. Naturally, care should be taken not
to antagonize suppliers just in case these favorable market conditions change.
This approach is heavily weighted towards the buyer’s viewpoint. It is also a little
unfashionable because it uses the term ‘power’ in supplier relationships, and
assumes that traditional market-based negotiations will be used for some product
groups. However, it applies to many firms today, and reflects the tough approach
taken by purchasing teams of some of their customers. Accepting that these
sorts of conditions are likely to prevail, it is clear that suppliers need to work on
their relative strategic importance to a focal firm in order to strengthen their
position in a supply relationship.
4. Trading partners are given access to a system with shared information.
Often, however, one partner transmits shared information to another. The
information is sent on a ‘for your information’ basis; the recipient uses the data as
it stands, and no feedback is given. Shared information may include product
descriptions and pricing, promotional calendars, inventory levels, shipment
tracking and tracing. This type of arrangement only supports independent
planning by each partner. Uncertainty is reduced by each partner becoming
aware of other partners’ activities. However, trading partners do not have the
opportunity to comment on or change the plan in any way.
5. The barriers to the implementation of strategic partnerships are the
following:
Power - The ability of one member in the supply chain to control another
member at a different level can be detrimental to the overall supply network, and can
provide a source of conflict. Conflict is clearly associated with power, arising when one
organization impedes the achievement of the goals of another
Focus on negative implications of partnerships - Buyers consider the benefits
gained through heightened dependence on a smaller number of suppliers less
favorably, and tend to highlight the risks. Buyers also consistently view the cost-saving
aspects of supply chain management as more important than the revenue-enhancing
benefits.
Opportunism - A key issue that prevents partnerships from enduring appears to
be the gap between the strategic requirements of long-term partnerships and tactical-
level maneuvering – in particular, opportunism. It is a problem to resolve this, given that
the dimensions that characterize close working relationships also provide both
opportunity and increased incentive for opportunistic behavior. This is caused when
partners cannot easily obtain similar benefits outside the relationship and when
specialized investments have been made. Buyers often assume that suppliers will take
advantage if they become too important, and therefore act to prevent this. The
consequences for the partnership relationship come second in their considerations.
Self-interest - Companies face difficulties in establishing and maintaining supply
chain partnerships. Even in the automotive industry, often considered the supply chain
exemplar, companies keen to implement single sourcing still continue to multisource,
particularly for non-critical items and commodity items. They rarely enter into
collaboration even when the customer is dependent on the supplier – that is, when the
product is strategically important and alternatives are limited – and instead set their self-
interest higher than the need to act according to common best interest.
Focus on Price - The focus on price may be due in some part to buyers having
trouble valuing matters such as know-how, technological capability, a particular style of
production or a spirit of innovation, and therefore being unable to price them accurately.
Their concern that suppliers may act opportunistically tends to lead them to avoid
entering into areas where these factors prevail. Significantly, one of the key areas that
feature these traits is that of design and development. It seems that, in this area, buyers
find it extremely difficult to measure designer performance or the amount of productive
time spent during design, and therefore feel the need to guard against high bids from
suppliers.
References:
https://www.scmr.com/article/the_many_benefits_of_supply_chain_collaboration

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Polytechnic University of the Philippines

College of Business Administration

BAROT, JOHN PAUL CASTILLO January 5, 2021

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