Eskom Procurement Book 2015

SUPPLIER RELATIONSHIP MANAGEMENT

collaborative supplier when the relationship becomes unsustainable, e.g., when conflict arises between the parties. Another challenge involves the exchange of sensitive information between the buyer and the supplier, which is risky since such information can be used against either company in the future [10]. Acollaborative relationship is usually the first step toward establishing an alliance relationship. Normally, when there is a need to establish an alliance but there is a shortage of adequately qualified human resources, it is considered best to adopt a collaborative stance. However, collaborative relationships might not be appropriate when a company has a certain amount of power over its suppliers, or if the suppliers have all the power over the buyer. Under such circumstances, a transactional arrangement may be more desirable [8]. An alliance is a confederation or agreement between two or more parties made to advance common goals and secure common trust. An alliance relationship is the highest level in the relationship between buyers and suppliers. The basic characteristic of an alliance relationship is trust. In fact, it is often suggested that most supply alliances fail because the partners fail to establish and maintain the required levels of trust. In an alliance relationship, the partners are free to share risks and rewards openly. The partners align their goals and ethical issues are discussed and shared without fear of being exploited by the other party. Inter-organisational learning is pronounced, as personnel from both parties visit each other to learn how each operates. High levels of transparency exist as partners are willing to share information on future plans, technology and other supply chain related issues. Supply alliances offer a range of benefits, some of which include lower total costs, improved quality, reduced time to market, improved technology flow from suppliers and improved continuity of supply [11]. However, because they are resource intensive, they are reserved only for the most critical relationships. If a single supplier stands out from all other suppliers in terms of the value it provides, a supply alliance with that supplier may be desirable. In addition, it is important to establish supply alliances with those suppliers that have a major influence on the organisation’s competitive advantage in the market. If a company can benefit greatly by combining its operations with that of a certain supplier, then an alliance would be appropriate. For instance, Toyota could create an alliance with its supplier of tyres. The two partners could then agree that the tyre manufacturer build a depot within the facility (plant) of the car manufacturer. Such an alliance arrangement has benefits for both parties. 5.5 DEALING WITH DISPUTES IN BUYER-SUPPLIER RELATIONSHIPS Serious disputes sometimes arise between buyers and suppliers. A dispute is any difference in values, beliefs, goals, objectives and interpretations that

5.4.3 SUPPLY ALLIANCES

107 CHAPTER 5