Eskom Procurement Book 2015

SUPPLIER RELATIONSHIP MANAGEMENT

is unconcerned about the salesperson as long as he or she is quick, correct and polite. Transactional relationships have inherent advantages. First, they can be implemented by personnel who have lower levels of qualification, since the transactions require minimal judgment and managerial skill. Second, transactions conducted through this arrangement commonly require less time and effort, since the parties are mainly concerned with establishing the price [8]. There are several disadvantages associated with transactional arrangements. Since no trust exists, the relationship can have communication difficulties, delivery problems and supply disruptions, a possible compromise in the quality of the goods exchanged and poor service levels from suppliers. These challenges can force the buyer to change suppliers frequently, consequently resulting in switching costs (the costs incurred in switching to a new supplier) [9]. Transactional relationships are neither bad nor inferior. There are areas in which they are appropriate, such as in purchasing non-critical items or items that will not detrimentally affect the company if not immediately available. These typically include stationery, toiletries and refreshments (teas and coffees) for the company. The arrangement is also appropriate where the buyer has more power than the supplier and dictates the conditions of the purchase. Collaboration is the art of working together to achieve a common goal. In collaborative buyer-supplier relationships, as opposed to transactional relationships, there is an awareness of interdependence and the need for co- operation. Therefore, a collaborative relationship is one that provides mutual benefit to the buyer and the supplier. The buying and supplying organisations work together for increased savings and future innovations. Most companies engage in some form of collaborative relationship, even though they may not be aware of it in some cases. Collaborative arrangements offer a number of benefits. The buying organisation enjoys the benefit of Early Supplier Involvement (ESI), which ensures benefits from improvements in quality, cost, time to market and leveraging of supplier technology. The likelihood of disruption is greatly reduced, since collaborative suppliers take care of the needs of their buyers. This further provides protection for buyers during hard times, e.g., when there is a shortage of the supplied goods. Collaborative relationships also provide ample room for supplier development, which consequently allows investments in research and development efforts and enhanced inter-organisational training. Despite their obvious appeal, collaborations have their drawbacks. For instance, in order to develop and maintain collaborative relationships, high levels of human expertise, time and energy are required, whichmakes these types of arrangements demanding. Furthermore, it may be costly to separate the organisation from its

5.4.2 COLLABORATIVE RELATIONSHIPS

106 CHAPTER 5