1:42 PM
The extent to which suppliers and contractors are managed depends on the type of relationship. Purchaser-supplier relationships exist on a continuum, called the purchasing power line. At one end, the purchaser possesses all the power and can decide what the relationship will be. In these circumstances, it is not unusual for the purchaser to single mindedly pursue its own advantage irrespective of the supplier. At the other end of the spectrum, the supplier has all the power and may single mindedly pursue its own advantage.
Note that at either extreme, the organisation with the power does not have to impose its power to the other party's disadvantage but it may do so if it wants.
Power in a relationship is determined by a variety of factors including
" "Porter's five forces",
" the way in which a supplier sees the relationship between its current business with a customer and the prospect of future business with that customer
" the purchasing organisation's assessment of risk and relative spend for any particular purchase.
Careful analysis of these factors is important because it helps the procurement professional to understand the extent to which the relationship can be managed as well as whether it is worthwhile trying to manage the relationship at all. From this understanding, it is possible to determine the form and extent of any relationship management.
Careful analysis of these factors is important because it helps the procurement professional to understand the extent to which the relationship can be managed as well as whether it is worthwhile trying to manage the relationship at all. From this understanding, it is possible to determine the form and extent of any relationship management.