With increasing marketplace turbulence, firms have shifted procurement from encouraging many suppliers competition to drive down the process to relationships that are long-term with fewer suppliers and deeper relationship investments. This is because suppliers’ relationships is a critical supply chain management component, and it has been identified by the Forum of Global Supply Chain as one of the key processes of a supply chain. As such, leading organizations are employing differentiating methods such as effective management of suppliers and planning with vital suppliers to reduce volatility risks and complexity (Taggar, 2014). Therefore, it is significant to understand the various types of supplier relations and the benefits they attribute to businesses.
In this context, there are three kinds of supplier relationships namely: transactional, collaborative, and alliance relationships (Burt, Petcavage & Pinkerton, 2012). According to Taggar (2014), the transactional relationship between the buyer and supplier is characterized by the application of competitive bidding, purchasing from numerous suppliers, bidding specifications that are fully developed, and contracts which are short-term to attain a low purchase price. Burt, Petcavage, and Pinkerton (2012) add that price is the transactional relationship focus. On the other hand, cooperative (collaborative) buyer and supplier relationship are typically used for non-commodity services and items procurement (Burt, Petcavage & Pinkerton, 2012), and it is characterized by sharing of information, contracts that are long-term, and collaboration for mutual benefit (Taggar, 2014).
Delegate your assignment to our experts and they will do the rest.
The third type, alliance relationship is characterized by the existence of the institutional trust, which majorly differentiates it from collaborative relationships. As such, alliance relationships are characterized by win-win negotiations, executive commitment level, interpersonal connections are informal, openness in all related areas, and a cooperation atmosphere (Burt, Petcavage & Pinkerton, 2012). The benefits of supply alliances include improved quality, improved supply, reduced market time, and enhanced flow of technology from suppliers. Additionally, alliance and collaborative supplier relationships tend to reduce the total costs of supplies and improve supply chain performance (Burt, Petcavage & Pinkerton, 2012).
References
Burt, D. N., Petcavage, S. D., & Pinkerton, R. L. (2012). Proactive purchasing in the supply chain: The key to world-class procurement . McGraw-Hill Professional.
Taggar, R. (2014). Type of Relationship between Buyer and Key-input Supplier: Exploring via CIT Approach. Pacific Business Review International, 6 (12), 37-44.
