Portfolios of Buyer-Supplier Relationships

PORTFOLIOS OF BUYER-SUPPLIER RELATIONSHIPS

Part A. Basic Concepts and Ideas

1. A portfolio of 4 buyer-supplier relationships exist; all require a different level of investment:

a. Market Exchange Profile: Low investment by both parties because neither side has developed specialized assets to work with the other. Each can turn to the marketplace and shift business partners at low cost and minimal damage.

b. Captive Buyer Profile: More buyer investment, and held “hostage” by the supplier’s strong bargaining power, who is free to switch to another customer.

c. Strategic Partnership Profile: High investment by both parties, hence “tying their hands to each other,” resulting in a social climate that is highly trusting and collaborative.

d. Captive Supplier Profile: More supplier investment is required to win and keep the business with the customer. Despite proprietary technology, suppliers have the greater burden and limited bargaining power.

2. No single type of buyer-supplier relationship is inherently superior to the other. Instead, best practices implement a suitably balanced portfolio of relationships that are adapted to specific products and market conditions. Contextual factors include (i) the characteristics of the product exchanged, (ii) the level of competition in the upstream market, and (iii) the capabilities of the suppliers available in the marketplace.

3. Successful supply chain achievement boils down to how well or how poorly each type of buyer-supplier relationship is managed in terms of (i) information sharing mechanisms, (ii) boundary spanners’ task characteristics, and (iii) climate and process characteristics.

Part B. Application of Concepts and Ideas

1 & 3. The mission of the U.S. Navy is to maintain, train and equip combat-ready Naval forces capable of winning wars, deterring aggression and maintaining freedom of the seas. To achieve this goal, all 4 types of buyer-supplier relationships must be leveraged....