The transformation from reactive to proactive procurement parallels a transformation in relationships between suppliers and buyers. Suppliers have developed partnerships with customer firms. This partnership has turned into collaborative relationships or strategic alliances. The rising cost of product development, globalization, and shorter product lead times have been cited as important reasons for supplier collaboration. The involvement by partners has a positive impact on strategic purchasing, and strategic purchasing has a positive impact on a firm’s financial performance. Even though there are many benefits from this collaborative or alliance network between suppliers and customers, there are obstacles. Trust plays a critical role in such collaborative or alliance relationships between suppliers and customers. However, such collaborations and alliances enable information flow across the supply chain.
To answer questions such as why a supplier was not treated according to its capabilities or why did engineering think it had capabilities when it did not, the characteristics of the suppler has to be clearly articulated . Developing visions for suppliers can help OEMs to create clear expectations and thus better the core capabilities of the buyer and supplier firms . OEMs also increase supplier involvement in product development and the share of inbound just-in-time (JIT) deliveries. However, while suppliers increase their outsourcing and globalization of production and product development activities, OEMs do not. By outsourcing certain activities to specialized suppliers, companies can focus on those products and activities that they are distinctively good at . This specialization, enabling a reduction of the capital base, implies improved return on invested capital and the possibility to benefit from economies of scale. However, outsourcing means that important activities are placed outside the boundaries of the firm. In addition, coordination of these activities demands vast resources, and many companies therefore strive to reduce their supply bases. A cooperative strategy between OEMs and suppliers is needed to ensure efficient coordination of these activities. Information flow enables such cooperative strategies.
The transformation from reactive to proactive procurement parallels a transformation in relationships between suppliers and buyers. Suppliers have developed partnerships with customer firms. This partnership has turned into collaborative relationships or strategic alliances. The rising cost of product development, globalization, and shorter product lead times have been cited as important reasons for supplier collaboration. The involvement by partners has a positive impact on strategic purchasing, and strategic purchasing has a positive impact on a firm’s financial performance. Even though there are many benefits from this collaborative or alliance network between suppliers and customers, there are obstacles. Trust plays a critical role in such collaborative or alliance relationships between suppliers and customers. However, such collaborations and alliances enable information flow across the supply chain.To answer questions such as why a supplier was not treated according to its capabilities or why did engineering think it had capabilities when it did not, the characteristics of the suppler has to be clearly articulated . Developing visions for suppliers can help OEMs to create clear expectations and thus better the core capabilities of the buyer and supplier firms . OEMs also increase supplier involvement in product development and the share of inbound just-in-time (JIT) deliveries. However, while suppliers increase their outsourcing and globalization of production and product development activities, OEMs do not. By outsourcing certain activities to specialized suppliers, companies can focus on those products and activities that they are distinctively good at . This specialization, enabling a reduction of the capital base, implies improved return on invested capital and the possibility to benefit from economies of scale. However, outsourcing means that important activities are placed outside the boundaries of the firm. In addition, coordination of these activities demands vast resources, and many companies therefore strive to reduce their supply bases. A cooperative strategy between OEMs and suppliers is needed to ensure efficient coordination of these activities. Information flow enables such cooperative strategies.
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