Eskom Procurement Book 2015

SUPPLIER RELATIONSHIP MANAGEMENT

5.6.2 RISKS AND BARRIERS TO SUPPLIER DEVELOPMENT

There are several risks associated with supplier development initiatives. Supplier development involves sharing proprietary information with suppliers. This is risky, because unscrupulous partners may use this information against each other when their relationship turns sour. To reduce risk, organisations should strive to develop trust with their partners before embarking on supplier development programmes. Another risk pertains to security concerns about large volumes of sensitive information that are exchanged between buyers and suppliers. It is possible for competitors, or others who intend to do harm, to hack into the Internet and Electronic Data Interchange (EDI) shared between companies. It is therefore paramount that such information is properly secured in order to ensure that only the intended recipients receive it. An example of a protective mechanism is data encryption, which is useful in preventing security breaches [18]. Sometimes, an organisation may develop a supplier only to discover that the development has also benefited other organisations, such as the supplier’s customers or the buying organisation’s competitors. As an example, the buying organisation can develop the supplier’s product with the intention of meeting its own competitive advantage needs, only to find that competitors are also benefiting by buying the same product from that supplier. Organisations should be fully aware of these possibilities before implementing the programme. Initiating a supplier development programme is a significant challenge. The following are some of the barriers that one is likely to encounter in establishing a robust supplier development programme [19]: • The existence of competing initiatives within the organisation may place other programmes ahead of supplier development. • Inadequate skill and expertise managing a supplier development programme. • Ineffective monitoring and control systems. • The need to rotate personnel to other duties; leaving supplier development without personnel for follow up. Successful implementation of an effective supplier development initiative is deeply rewarding to the organisation, because it yields a wide spectrum of benefits [6]. The close alignment of buyer and supplier values required during supplier development facilitates the development of trust-based relationships that inspire greater collaboration and opportunities for increased innovation. Supplier development enables suppliers to better understand the buyer’s values, which is important in getting the right product out in time to meet the expectations of customers.

5.6.3 BENEFITS OF SUPPLIER DEVELOPMENT

112 CHAPTER 5