Sourcing & Procurement Management Articles and Reports

There is a saying that claims we teach people how to treat us both in our personal and well as in our professional lives. For that reason, smart professionals know that to achieve and sustain world-class supplier performance, we each must take an active role in asking for what we need and want. In other words, when we get involved in the process by truthfully sharing our needs regarding supplier performance, we open the way towards realizing a more successful business. If on the other hand, you’re not getting what you want and you do nothing to explain your needs, you are actually teaching the supplier that it doesn’t matter. Plain and simple, it’s up to you to take responsibility for excellent supplier performance by asking for what you want.

What kind of relationship with suppliers is best? Here is a summary of recommendation from Professors of University of Pennsylvania and Seoul National University who did a comparitive study of supplier relationships in automobile industry in Japan, Korea and United States.

In United States, arms length relationship is predominant. Automobile industries maintain large supplier base and competition among suppliers. Partnership relations were mere long term arms length contracts. There is not so much trust, information sharing, collaboration and strategic investment as seen in Japan or Korea. Suppliers maintain long list of customers for achieving economies of scale. Due to severe competition, small size of contracts and transaction costs suppliers in US remain smaller than their counterparts in Japan.

Government sanctioned monopoly in United States, the $220 billion energy industry in is undergoing a sea change in the way energy is delivered to business and household customers. Key stages in the energy Supply Chain - energy source – generation – transmission – distribution – house hold / industrial customers - remained vertically integrated. In spite of regulation by government bodies, industry remained uncompetitive and inefficient. Energy deregulation will split one or more stages of the energy Supply Chain among multiple companies. Energy generation companies can sell energy to consumer located anywhere through energy transmission and distribution lines owned and operated by other companies. Increased competition will exert pressure on the energy prices. Energy deregulation experiment started in Pennsylvania in 1998 has been a moderate success with considerable savings to the end consumers. Some 25 states have actively deregulated the market with more states in the process of deregulation. UK has already deregulated its energy market. Current status of each state in US is available here.