Vendor-Buyer Partnership
New opportunities and ever-increasing competition in the
global market necessitated a strong and flexible supply
chain. The strength of supply chain would materialise from
the relationships that are developed between the vendor
and the buyer. The flexibility would be a result of transparency
of communication, speed of reaction and focus on major capabilities.
The vendor-buyer partnership involves collaborating efforts
in planning, forecasting, consolidating demand and sharing
information within the manufacturing company and with the
vendor. The relationship between the vendor and the buyer
should be capable of being modified in terms of cost and
other factors. Relationship-based purchasing requires new
skills, decision-making approaches and performance measures.
A variety of vendor-buyer relationships developed recently
in the supply chain industry.
Initially, purchasing involved inquiry-quotation transaction
between the vendor and the buyer. This was later developed
into a system where three vendors set their quotations and
the buyer selected the lowest bid. After analysing the problems
faced in this system, the buyer decided to start discussing
the delivery price in terms of total cost, including scrap
and production yield long-term warranty cost, shipping terms,
payment terms, rework and other costs associated with low
quality.
The most frequently asked question is whether the buyer
is also providing services to the vendor? Apart from the
vendor providing material and services to the buyer, they
also receive monies and services from the buyer. The aim
of today’s buyers is to plan a strategy where both the vendor
and the buyer are satisfied completely. In most of the vendor-buyer
relationships there was dissatisfaction in meeting each
other’s expectations. To prevent such incidents they made
agreements on what to expect from each other. These agreements
could be either transaction based or organisation-to-organisation
based.
Strengthening supply chains by building fairness is a two-way
process between the vendor and the buyer, where they develop
a close relationship to work as partners. It can enhance
competitive position by reducing costs, boosting quality
and improving customer service. When the vendor-buyer relationship
is built on guidelines of fairness, they agree on common
goals and build commitment, trust and mutual support necessary
for their achievement.
