Eskom Procurement Book 2015

SUPPLIER RELATIONSHIP MANAGEMENT

To assess these factors, analyse the way in which managers that participate in SRM handle, implement or manage each of the factors, as demonstrated through each factor characteristic. The outcome will be an accurate assessment of the effectiveness of the buyer-supplier relationship. 5.4 TYPES OF BUYER-SUPPLIER RELATIONSHIPS It is important for supply management practitioners to understand the types of relationships that may exist between buyers and suppliers. Over the years, several authors have introduced various classifications of buyer-supplier relationships. Examples of popular classifications include portfolio models, relationship matrices, partnership models, simple tier-structure models and market hierarchical governance approaches [6]. Research conducted by a leading procurement expert revealed that there are approximately 145 different forms of formal and informal relationship links between buyers and suppliers, with each one being a relationship supply chain [7].  A weakness in these classifications is that they focus on the state of buyer- supplier relationships at a specific point in time when, in fact, the relationships develop over a period of time. The most common classification, however, is a three-level conceptualisation that assumes that buyer-supplier relationships develop from an arm’s length (transactional) relationship, through collaborative partnering to the closely knit alliance relationship. Each type of relationship requires different management and leadership and yields different benefits. As one shifts from a transactional relationship towards supply alliances, the linkages become closer, more defined, and the benefits are broader and deeper (beyond just price). Each of these three relationship types will now be discussed. A transactional relationship is the most basic relationship that can exist between a buyer and a seller [8]. Neither party is interested in the well-being of the other (arm’s length relationship); trust and transparency are virtually non-existent and getting the best price is the major focus in the transaction. In this kind of transaction, a win-win situation cannot be achieved. Rather, if the buyer wins, the supplier loses and vice versa. Since it is all about outperforming the other party, the transaction is usually completed within a minimum of purchasing time. A typical example of a transactional relationship is the one found in a supermarket. Here, the customer buys certain commodities, e.g., groceries and Characteristics of factor Commitment Effort: Refers to the inclination of the partners to continue their business relationship. Loyalty: Refers to both repeat interactions and attachment to the trading partner. Length of SR: Primarily refers to the length of a contract agreed. Factor

5.4.1 TRANSACTIONAL RELATIONSHIPS

105 CHAPTER 5