Supplier Management Benefits
Supplier involvement is a significant part in the whole process of product development. It has been highlighted a number of times that having trusted supplier relationship management in product development can lead to competitive advantage in trying to meet the fast moving pace of the market players, businesses are now in sheer pressure to develop products that are produced fast (in less time), of high quality and less costly. In order to deliver products at their best quality, companies are indulging more and more in outsourcing because competence lies outside their company’s boundary. A numbers of authors are of the view that earlier involvement of the supplier will only add to the fast delivery and good quality and at the same time lowering cost. On the contrary, many argue that supplier involvement also erect challenges for the companies. Literature has highlighted that the one of the factors leading to successful supplier and business relationship is the systematic way of how these businesses deal with their suppliers based on an individual project and the way they make use of innovative technology.
This research focuses on the topic of contract management, in order to have an understanding of the significance of the supplier management relationships that exists. The first section of this proposal will elaborate on the topic of contract management, specifically from the perspective of supplier relationship. Another important strand of this topic is highlighting the benefits and challenges that are associated with contract management and to examine if relationship management will lead to company’s competitive advantage. The second section identifies the gatekeepers and methodological techniques that will be used by the researcher, in order to understand the role of trust in relationship management.
1 Literature Review
1.1 Supplier Involvement and Competitive Advantage
The term contract management can be understood as the process of managing contract with all the intermediaries, such as the vendors and the suppliers that are involved in the supply chain (Du and Lin, 2008, Kwok et al., 2007, Rendon, 2008, Scott, 2007) Many has also viewed it as the integration of capabilities (Lang and Williams, 2003, Liu and Cong, 2010, Scott, 2007, Sun et al., 2011, Xu et al., 2009), where a number of suppliers share their core competence that adds value to the end product. The term supplier involvement can be explained as the resources that are provided by the suppliers in the shape of ideas or materials and the implicit responsibilities that they assume which contribute towards the end product (Barata and Camarinha-Matos, 2002, Carey and Dor, 2008, Clark, 1989, Du and Lin, 2008). Firstly, delivery of better quality product at a lower cost (a short term benefit) and on the other hand involving suppliers in the product development process would mean developing an element of trust and honesty for effective and efficient future projects (Sobrero and Eric, 2001). Another benefit of dealing with the same supplier is learning about the way they operate because with time both the supplier and the company know the exact requirements businesses have. It has been asserted that long term relationship development between the supplier and companies is that with times suppliers can give suggestions that are better for the company and hence leading to an improved better quality product. (Sun et al., 2011)It is also possible in many cases that the suppliers helps the companies to allow them to differentiate their products in market and better product differentiations always lead to competitive advantage (Dyer and Ouchi, 1993).
Another important factor leading to competitive advantage for the firm is when they capitalize on the innovative technology that the supplier offers (Bonaccorsi and Andrea, 1994) Literature has stressed the need for aligning strategic technologies with the people who are working with then as suppliers. Therefore, it has been argued that in order to identify and tap into new markets in future, the companies are required to compare the future needs with respect to technologies and products and hence by exploiting the available opportunities in the market the companies can gain competitive advantage (Handfield et al., 1999). Another way in which the supplier relationship management can lead to the competitive advantage of the company is that the transfer of solutions to the business that has been devised over a period of time can be used by the business as their long term benefit (Sobrero and Eric, 2001) The literature has highlighted existence of two types of groups in the market regarding supplier relations management. One of the views argue that having good supplier relations management leads to companies success and such a group success factors are trust, honesty, commitment of managements, sharing relevant information, giving rewards and risk sharing (Bruce et al., 1995). However, on the contrary, the other group sheds light on purchasing department trying to manage any supplier involvement. This refers to having a structure of a procurement department and the relationships of buyers in development teams (Atuahene-Gima, 1995). However, it has been argued that the former structure is considered as more favorable for organizations success.
1.2 Collaborating Relations
The business try to develop longer relations with the suppliers and this is because both the parties involve to adding further value to the end product. Long-term relations are the one where all the parties involve in seeking for further improvements to be brought in the end product. This is done by sharing any skill knowledge and at the same time sharing the cost leads to a better quality cheaper product. Long-term relationships involve clear communication, having mutual trust for every intermediary that is involved (Steenbeek et al., 2012, Van der Meer, 2008, Van Milligen, 2012). Another factor that is critical to the success of supplier relationships is sharing all resources in order to solve problems.
1.3Challenges in Supplier Management
Although the literature has highlighted supplier relationship as a favorable act, however it is critical to the success of a business to keep in mind all the challenges they are faced with. A number of challenges that company can be faced with are as follows:
1.3.1 Overreliance on Suppliers
In the last few decades companies have shifted more from in-house development to something called outsourcing (Steenbeek et al., 2012, Van der Meer, 2008, Van Milligen, 2012). This increased trend of outsourcing is based on capitalizing other supplier’s resources for making their end product (Steenbeek et al., 2012, Van der Meer, 2008, Van Milligen, 2012). In doing so, the risk that prevails is sheer reliance on vendors have lead to the problems of supply risks. However, most of the companies have no mechanisms of managing these supply risks.
1.3.2 Mismanagement of contracts
Companies in order to outsource their tasks to another firm are not sure about what is required by the business. This leads to just signing the contract without any clarity on the roles executives have and responsibilities for both the supplier and the business. In such a chaotic situation, where roles are blurred, leads to a poor supplier relationship management and most of the efforts are duplicated. These duplicating efforts all lead to wastage of money and effort.
1.3.3 Supplier not to be Held Accountable for Performance
One of the common problems is that most of the people from the business do not have any knowhow on what the role of supplier is and what is the responsibility of business. In situation where there is no clarity on the actions business can take when anything goes wrong, leaves the business is a challenging situation (Binder and Clegg, 2010, Foerstl et al., 2010, Le Nguyen Doan and Nguyen Phu, 2011).
1.3.4 Suppliers are not Partners
Many of the firms while signing a contract with suppliers do not consider supplier as an outside and allow them access to everything. It is important to keep in mind that suppliers can never be strategic partners and the companies need to keep an eye on the cost baseline (Yung et al., 2009, Zhang and Jiang, 2011).
1.3.5 Confusing aims and objectives
Many firms are unaware of what is required by the business to be rectified. This confusion aggravates when another party of suppliers get in involved. Literature stresses that suppliers give an objective view on the problem but many a times businesses themselves do not know what is required and hence for the suppliers to first understand the problem and then devising solution gets difficult (Oruezabala and Rico, 2012).
1.3.6 Too Many Vendors
In most cases empirical evidence suggests that due to outsourcing too many activities of the business, the companies are not just over relying on the vendors but it’s also leading to a number of complacency issues. Critics have argued that because company has so many suppliers, it gets too tedious and challenging in order to deal with them on daily basis. Therefore, companies indulged in too many suppliers experienced that almost all employees were involved in dealing with suppliers, which resulted in wasted efforts and redundant work (Le Nguyen Doan and Nguyen Phu, 2011, Lu, 2010).
1.4 Rationale of Topic
Extant literature available on this topic focuses more on single product development projects and therefore fails to answer the inter-organizational supplier relationships. This project will attempt to address all the relevant issues that hamper supplier relationship management and the key factors that facilitate long-term relationship of trust and risk sharing, from a perspective of inter-organizational supplier relationship. The rationale for choosing this topic that there is a gap in literature from inter-organizational perspective within the UK.
This research proposes to highlight the topic of contract management and examine the related issues and challenges that are associated to contract management. Additionally, the researcher will explore any benefits the stem as a result of supplier relationship and the role trust plays in allowing firms to gain competitive advantage against rivals. With a hope to examine the way relationship management leads to critical success of the company, the researcher has proposed to explore a UK based super market company. The rationale for choosing a supermarket is significant because the structure of super market is such that many intermediaries are involved and the chance of exploring risks, challenges and benefits of supplier relations, leading to competitive advantage is easier.
The researcher proposes to maintain contact with the senior manager of the super market. This is important because senior manager has all information on the supplier relation. Another gatekeeper for this research will be at least one or two suppliers for the super market.
2.1 Research Aims and Objectives
This research aims at:
To explore the field of contract management from UK environment perspective
To examine the way inter-organizational relationship among suppliers and businesses can be maintained.
To add to the pool of literature on the topic of contract management
2.2 Research Questions
Can supplier relation management lead to business success
What is the role of trust in supplier relationship management
What are the benefits of supplier relation management
What are the challenges that are erected by relying on external suppliers
2.3 Research Techniques
This research proposes the use of mixed methods approach (Creswell, 2006), as a method to explore any benefits and challenges that are involved in the supplier relation in contract management. Mixed methods have been used by many past social science researchers, in order to understand their problem at hand (John, 2008). Questionnaires will be used as instruments to gain knowledge on the topic of relationship management, additionally as part of the qualitative strand this research has proposes the use of in-depth interviews (Sharlene, 2010). In-depth interviews will be carried out in order to know the in-depth knowledge on the issues that the company faces with as a result of supplier relationship. In depth interviews will also allow the researcher to gain information on the benefits that the company and supplier are cherishing in the shape of long term trust. This technique of using mixed methods approach is that results will be triangulated by comparing results of questionnaires and that of interviews.
2.4 Target Audience
The researcher will maintain a contact with the senior managers and actual suppliers of the super market company. This research proposes to distribute at least a total of 100 questionnaires. These questionnaires will be distributed among their suppliers of the super market. 50 questionnaires will be distributed among one supplier and another 50 among the second supplier of the super market company. Additionally, a total of 15 in-depth interviews will be carried out among the senior manager of the super market and the mangers of the suppliers. 5 interviews will be carried out with the senior manager of the super market itself and the other 10 from the senior managers of the suppliers (5 interviews with each supplier).
The basis that the gatekeepers are chosen will be the random sampling technique. In case if the super market has many suppliers, any two suppliers will be chosen randomly. The identity of the super market company that the researcher has chosen cannot be revealed due to privacy issues.
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