As a procurement manager of a car manufacturing company, you are expected to enter into a contractual agreement with three different suppliers. Mamix limited propose to supply you with critical components which are essential in the production. Austin Brothers deal with less critical products such as tyres and Pick n Pay and Pentel are both suppliers of less critical items such as fast-moving consumer goods such as coffee/milk, etc. and office furniture.In this assignment, we will in details discuss the different types of supplier relationships and how they may affect the outcome of purchases within the production process, as well as how a buyer must approach each of the types of relationships.
Discuss which of the three supplier relationships (transactional, collaborative or alliance) is suitable for each case. In your discussion, you are expected to give sufficient reasons t justify your choice (25)Mamix Limited (critical components supplier)
As a company, we have agreed that the appropriate relationship with Mamix limited will be a relationship of Alliance.
An alliance is a relationship among people, groups or states joined together for mutual benefits or to achieve some common purpose whether or not an explicit agreement has been worked amongst them. Member of an alliance is called allice, they are formed in many settings including military alliances, political alliances, and business alliances. An alliance is formed for a systematic approach to enhance communication the two firms.Alliance buyer and supplier relationship are suitable for Mamix limited, as they specialize in those critical parts that supply our organization with.
the parts involve engine, gear, battery, brake pads, fuel pumps, exhaust, and muffler. alliance.
Alliance gives us the benefits of working efficiently and effectively through strong communication, which will help us decrease the time spent on designing and producing, as we involve our supplier early, with this strategy we are able to enhance our products and develop new models, in order for us to expand our markets and meet the needs and expectations of different customer segments and we automatically gain a completive advantage and maximize our bottom line.Alliance buyer and supplier relationship are long term based, that means our contractual agreements should clearly stipulate the responsibilities, expectations, penalties, and incentives, in order to maintain the same level of quality and eradicate the level of errors, that can be encounter in the future. The benefits from having an open and trustful relationship with Mamix Limited has led us to have successful new products with lower total costs and improving quality and other strategic goals are our main focus in the production process and service delivery. Mamix Limited company supplies us with components that are vital for our production process and goes hand in hand with how we operate our business.
The company has agreed that the Transactional buyer and supplier relationship will not suitable for Mamix limited as it could be a once off transaction or a short term one, and we need a long-term relationship with Mamix to keep our organization running, transaction relationship is all about buying what we need for only that time after that exchange the relationship ends there. Unlike collaborative relationships, an alliance is built to have a trust where both firms can be on the same level a Austin and Brothers (Less critical supplier)As a company, we have agreed that the appropriate relationship with Austin Brothers will be a collaborative relationship.Collaborative buyer and supplier relationship are agreements and action made by involved parties to share resources to reach the mutual goals, they rely on each other with finances and knowledge and people, the essence of collaborative partnership is for both parties to mutually benefit from working together, these instances where collaborative partnership develop each other in different fields to supplement their expertise.
Collaborative buyer and supplier relationship are suitable for Austin and Brothers as they supply us with the less critical products parts which are needed in the production process, we must have trust with our suppliers before they can supply us with products and the suppliers has to be the top producers of that product(quality). the products are vital to our company that means we don’t mind spending more and our buyers must have the authority to negotiate with the Austin and Brothers and come to an agreement that carries mutual trust and benefits. The relationship between our organization and Austin Brothers is a friendship one, we must spend time nurturing the relationship and sharing strategy, planning and goals also letting our suppliers know exactly how we want our products and requirements and specification communication has to be open with our suppliers so that they can be effective in the delivery of our products.
It was agreed that a Transactional buyer and supplier relationship is not suitable as we must have a long term relationship with our suppliers as transactional is short term based(once off transactions).we need an open relationship with strong negotiation skills because the type of product Austin and Brothers offer us are important to the production and that needs us to draw up a contractual agreement, that will give us assurance and still allow our supplier to be flexible enough in order to keep our customers happy and satisfied ,the transactional relationship won’t allow our organization to diversify and change our products according to the taste and preferences of our clients, but with collaborate we work together to share goals and ideas in order to maintain a higher level of client satisfaction and maintain good quality. An Alliance supplier relationship will also not work with Austin and Brothers as the relationship is one of both companies having input into the design and a closer working relationship.
As a company, we have agreed that the appropriate relationship with Pick n Pay and Pentel will be a transitional buyer relationship.Transitional buyer relationship is suitable for Pick n Pay and Pentel, as food and stationery are not one of our core functional activities, but they are needed to support the smooth running of our day to day running of the business.The relationship of referred to as an arms-length relationship where neither the parties are concerned about the other party’s well-being and it could be a once off transaction between the buyer and the supplier. The supplies have more leverage than buyers of the products as the buyers only purchase what they want, let’s take for instance our organization, we only purchase things we need once in a while with Pentel, it can be twice in a year that we place an order for our stationary’s. The is little time and efforts from both parties to sit down and draw up a contractual agreement.
Our purchasing time is less as we don’t put too much effort on price due fact that we can change suppliers at any given moment (perfect competition-many buyers and sellers) if we are not happy about their set prices. Our company doesn’t require procurement personnel for the transactional relationship.It was agreed that a transactional supplier relationship won’t be work together with Pick n Pay and Pentel for future innovation, as we (buyers) can decide to change suppliers. Our company doesn’t involve the above-mentioned companies in the begging of the product as it only supplies us with supporting elements that help the organization to keep running. We don’t need to consider having any level of trust with these suppliers (Pick n Pay and Pentel).as they don’t offer and strategic products to our organization. The purchasing of the office furniture and coffee will not need support from the entire organization, only one person is responsible for it.
The relationship between the buyer and supplier is a friendly one as it is all about exchanging.It was agreed that an Alliance is not suitable for Pick n Pay and Pentel as the is no trust build and we don’t help each other in serious situations. There is no communication and benefits between us and the above-mentioned parties, the relationship doesn’t focus on achieving continuous improvements on how we handle our transaction (buying methods). the supplier and buyer relationship are not a partnership with Pick n Pay and Pentel doesn’t improve the performance of the supply chain, we don’t need executive-level commitment and shared vision of the futureAlliances relationships are regarded as the ideal type of relationship because of their core benefits. Based on this assertion and the context of the provided case scenario, discuss the following advantages of alliance relationship (20)Reduced time to marketHaving an alliance relationship plays a significant role in a way that the two parties will focus more on their core competencies of the company by reducing time to market.
The core competence of the company is the manufacturing of cars, so getting the products to the market faster will give them a competitive advantage over other companies. The speed at which both parties will conform to, in producing the cars will result in benefits such as capturing of more sakes, providing market flexibility and maintaining a leadership position. Reducing time to market can also be a focal point for improving the overall innovation management process. In reducing time to market, the focus is generally on speeding up the production process. Both parties will be responsible for the production parts in which they are experts and have skills and knowledge. This will then help in speeding up production to deliver on time to end users. For an effective and efficient reduction time to market, the resources must be available to execute the project and wastage of resources should be kept at a minimum to be able to provide customers with the product in time. With a reduction in time to market, partners will have a chance to earn better revenues as the possibility of product penetration in the market is more. Also since there will be minimum utilization of resources, the product manufacturing cost will be reduced, which will help the partners in pricing their products at competitive rates.
Sharing knowledge about production and planning, the market changes and company goals will help in improving the quality performance of the company. Improved quality performance will attract more customers and give the company continuous improvement. Customers are attracted by the consistency of quality satisfaction they derive from utilizing the product. Both parties need to plan and set quality standards jointly and should be willing to discuss their practices an Improved technology flow from suppliers.Entering into an alliance with Mamix limited, Austin and Brother and also pick n pay will include accessing new technologies, R&D resources, and IP rights, diversifying products and services, improving material flows and operations lifecycle times, making more agile and reducing overhead and administrative costs. Openness and company trust enhance an inflow of technology from alliances partners that lead to many success of new products. Technology plays an increasingly critical role success or failure of small and medium enterprises.
Computerized machines will replace manual machines tools that are used to manufacture cars, computers will, therefore, be used to track our inventories or both critical and less critical component parts. Manufacturing and technologies are critical, they no longer the required technologies. Improved technology will become one of the keys to an operation success between the strategic alliances. Improved and internet technologies alone will change the mechanisms of the following spheres, communication, marketing, selling, buying and generating revenue Improved continuity of supply.Alliances customers are the group that will least likely to experiences supply disruption alliances share these attributes
Also, working conditions can decrease profit and improved quality and reliability. Lastly, environmental responsibility improves efficiency and profitability.and production or manufacturing of cars openly. For improved quality, partners need to understand each other’s competencies and share information and technology. Improved quality will result in a competitive advantage of the company and improved return on investment. High-quality products produce a higher profit. Having fewer defects or failures in the manufacturing of cars will lower manufacturing and service costs leading to improvement of quality. Improvements in the performance or other dimensions of quality will lead to increased sales and a larger market share.