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Purchasing and Supply Chain Management by W.C. Benton Chapter Eleven Purchasing, Supply Partnerships, and Supply Chain Power McGraw-Hill/IrwinCopyright.

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Presentation on theme: "Purchasing and Supply Chain Management by W.C. Benton Chapter Eleven Purchasing, Supply Partnerships, and Supply Chain Power McGraw-Hill/IrwinCopyright."— Presentation transcript:

1 Purchasing and Supply Chain Management by W.C. Benton Chapter Eleven Purchasing, Supply Partnerships, and Supply Chain Power McGraw-Hill/IrwinCopyright © 2010 The McGraw-Hill Companies. All Rights Reserved.

2 Learning Objectives 1.To understand the relationship between purchasing, supply partnerships, and supply chain power. 2.To understand the elements of supply chain partnerships. 3.To understand the continuum of interfirm relationships. 11-2

3 Learning Objectives 4.To understand the potential benefits of supplier partnerships. 5.To understand the nature of supply chain power. 6.To understand the different sources of power. 7.To examine how supply partnerships work in the automotive industry. 11-3

4 Supply Chain Partnerships Critical to the implementation of __________________________________________ _________________________________________. Also termed a strategic alliance, a supply chain partnership is a relationship formed between two independent entities in supply channels to achieve specific objectives and benefits, __________________________________________ _________________________________________. 11-4

5 Supply Chain Partnerships Within the win-win partnership dyad, buyer and supplier share goals as well as inherent risks through joint planning and control, _______________________________________ _______________________________________. Like the overall goal of supply chain management, such coordination allows for improved service, _______________________________________ _______________________________________. Ideally, the end result for both firms should be decreased uncertainty, _______________________________________ _______________________________________. 11-5

6 Importance of Supply Chain Partnership Awareness Like supply chain management, the frequency of partnering is increasing in industry, but implementation still remains a difficult process. And like supply chain management, buyer- supplier partnering extends _______________________________________ _______________________________________ _______________________________________ _______________________________________. 11-6

7 Partnerships: Definition and Overview Though partnering has received abundant recognition over the last few decades from both researchers and practitioners alike, ________________________________________________________. Although many firms engage in partnering activities, the specific interpretation of a strategic alliance or partnership (the terms partnership and alliance will be used interchangeably in this chapter) is at best vague. 11-7

8 Relationship Intensity Partnerships move beyond special influence transactions by involving efforts of both firms to coordinate functional activities. The Figure on the next slide shows how partnerships can be segmented into three tiers based on the intensity and duration of the leadership. Tier I _____________________________________ _________________________________________. Tier II ____________________________________ _________________________________________. Finally, tier III partnerships dilate into significant levels of operational integration. _________________________________________. 11-8

9 Traditional Sourcing The evolution of intrafirm functional integration has occurred for most firms over the last few decades, ______________________________ ______________________________ _____________________________. Supply chain partnerships ______________________________ ______________________________ ______________________________ ______________________________ ______________________________ ________________. 11-9

10 Reduced Supplier Bases Some supply managers argue that implementation of many new manufacturing techniques necessitates ____________________ _______________________________________. The two primary factors of Asian production techniques are reduced supplier ________ and ________________. Other supply managers proclaim that single sourcing is not as widespread in Japan as believed and that many Pacific Rim manufacturers actually exercise a single/dual hybrid approach. 11-10

11 The Size of the Supplier Base Despite the differences in opinions about the size of the supplier base, _________________________________________ _________________________________________. There is an increased tendency toward a smaller supplier base in the United States. With regard to the automobile industry, _________________________________________ _________________________________________. 11-11

12 Expected Reduction of Supplier Base In the 1980s the automobile industry relied upon approximately 10,000 suppliers __________________ _________________________________________ Twenty years later, such purchases rose to $300 billion while the number of tier 1 suppliers fell to just 375. _________________________________________ ________________________________________. The objective of a drastically reduced supplier base precludes an acceptance of supplier partnerships because a firm must accept dependence upon fewer suppliers before they can internalize legitimate forms of supply chain management and supplier partnerships. 11-12

13 Supply Chain Partnerships A Harvard Business School study concluded that a key driver in the decline of U.S. competitiveness _____________________________ _____________________________ ____________________________. It is impossible to operate as a discrete entity, but while virtually no firm engages in completely discrete engagements, conventional Western and American business practices have been more oriented toward discrete than relational. 11-13

14 Supply Chain Partnerships Over recent decades however, __________________ ________________________________________ _______________________________________. Even competitors, and many modern business thinkers will claim that not only is a more open and relational attitude advantageous, _______________________ _______________________________________. Recognizing partnerships between buyer and supplier as a fundamental driver for the success of the Pacific Rim supply chain processes, ________________________________________ _______________________________________. 11-14

15 Benefits of Supplier Partnerships 11-15 While many firms have sought vertical integration through acquisition to harness supplier expertise, some argue that partnerships can provide similar benefits without the necessity of ownership and arduous exit barriers. Buyers can gain from higher quality, and transaction costs may be reduced through economies of scale, decreased administrative and switching efforts, process integration, coordination of processes, and quantity discounts.

16 Risks of Supplier Partnerships With its many benefits, supply chain partnerships retain several inherent risks that can be potentially damaging to participants. _______________________________________ _______________________________________ _______________________________________. Partnerships may actually open the weaker party up to negative influence potential and research _______________________________________. 11-16

17 Partnership Implementation and Critical Success Factors Before firms can enjoy the benefits of a buyer–supplier partnership, ____________________________________ ______________________________________________. A supplier partnership involves a significant attitudinal as well as structural change from traditional supply arrangements, __________________________________ _______________________________________________ Guides to the implementation process are summarized below 11-17

18 Supplier Partnership Implementation The first step ______________________________ _______________________________________ _______________________________________ _______________________________________. Next, criteria for potential partners are developed, and candidates are assessed. Once a partner is selected, the establishment of the actual relationship provides the next critical step in which the partners __________________________________ _______________________________________. The final step in the partnering process includes the maintenance of the relationship to either enhance its development or bring about its dissolution. 11-18

19 Critical Success Factors Ultimate dissolution of the partnership may be necessary if the firms are unable to successfully work through the critical steps of partnership formation or synergies cannot be recognized. Abandonment of partners ________________________________________ ________________________________________. Ultimately, little is known about disengagement, so dissolution may offer a pessimistic yet rich source of research. A rule of thumb ___________________________ ________________________________________. 11-19

20 Interfirm Power The notion of interfirm power holds its roots in social science (psychology, social psychology, and political science) ____________________ _______________________________________ ________________________. The power component of partnerships will begin with the definition of power. As defined by Maloni and Benton:... the power of a supply chain member [is] the ability to control the decision variables in the supply strategy of another member in a given chain at a different level of the supply chain. It should be different from the influenced members original level of control over their own supply strategy. 11-20

21 Power Influences on Supply Chain Relationships Extremely complex in nature, power serves as a composite relationship-oriented variable, _________________________________________ _________________________________________. The following section will examine the effects of influence strategies on critical relationship factors including dependence, _________________________________________ _________________________________________. Exploration of the effects of power on factors of the supplier–buyer alliance provides the key to understanding the concept of the power-partnership link that is under investigation. 11-21

22 Power and Dependence The notion of power in an interfirm relationship implies target dependence on the source; otherwise the target would not need to subject itself to the unbalanced relationship. ________________________________________ ________________________________________. Does a state of dependence negate the possibility for critical supply chain partnership success factors such as goodwill, trust, and shared goals? ________________________________________ ________________________________________ ________________________________________ ? 11-22

23 Power, Commitment, and Trust Two factors driven by power and critical ________________________________________ ________________________________________ ________________________________________. The relationship between power and commitment is dependent _____________________________. Commitment is nothing more than a form of compliance (instrumental) as well as identification and involvement (normative). 11-23

24 Power, Commitment, and Trust Are true trust and normative commitment possible in an interfirm environment of power asymmetry? Can a target in an unbalanced power relationship experience ____________________ ______________________________________? _______________________________________ ______________________________________? 11-24

25 Power, Cooperation, and Compliance Power essentially attempts to force a target to comply with the sources desires, and, _______________________________________ _______________________________________ _______________________________________ _______________________________________. Compliance is action without inherent desire, and, thus, compliance remains a relatively easy factor to measure since it implies action, not feeling. 11-25

26 Power, Cooperation, and Compliance _______________________________________ _______________________________________ _______________________________________. Can cooperation exist in power of a supply chain partnership relationship? _______________________________________ _______________________________________ ______________________________________? 11-26

27 Power and Conflict Conflict can be defined as tension between two or more social entities... which arises from incompatibility of actual or desired responses. Conflict is present in the supply chain when one supply chain member hinders goal attainment and performance of another. ________________________________________ ________________________________________. 11-27

28 Power and Conflict Does a power imbalance in a supply relationship create __________________________________ ______________________________________? Does use of relational power strategies decrease conflict and promote a supply chain partnership? How does power affect ___________________? 11-28

29 Power and Satisfaction Satisfaction in the supply chain can be defined as the extent of contentment with the relationship. Ultimate supply chain partner satisfaction ________________________________________ ________________________________________ ________________________________________. Drivers of satisfaction within supply chain partnerships include relationship-oriented factors such as planning, _________________________ ________________________________________. 11-29

30 Power and Satisfaction How does power influence satisfaction within the supply chain? Within a power imbalance, can the target firm experience sufficient levels of satisfaction to retain commitment to the supply chain relationship? ________________________________________ ________________________________________ _______________________________________? 11-30

31 Power, Performance, and Profitability A final point on the effects of power concerns _______________________________________ _______________________________________ _______________________________________. Performance may be defined as the ability to execute intentions and goals. Supply chain member performance ______________________________________ ______________________________________ 11-31

32 Power, Performance, and Profitability Countervailing power. How does power influence source performance and profitability in a power asymmetric supply chain relationship? _______________________________________ _______________________________________ ______________________________________? _______________________________________ _______________________________________ ____________________________________? 11-32

33 Automobile Industry Example of Power Asymmetry The automobile industry in the United States represents a breeding ground for power research. The industry consists of five manufacturers that account for 85 percent of market share and these manufacturers source from a supplier base of thousands. Such an oligopolistic buying structure has created a power asymmetric environment. With a few manufacturers comprising a large percentage of the suppliers sales, the supplier must bow to the authority of the buyers or risk financial collapse. 11-33 Supply chain management grants the supply chain a potential source of competitive advantage and will become an increasingly important part of the industry strategy.

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