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Supply may come in the form of parts or components or in the form of service. Manufacturing companies, for instance, source parts or components from suppliers that will…
This paper starts with an explanation of the common mistakes companies commit in dealing with their suppliers. Several factors that companies should consider before getting a supplier or outsourcing a business process will follow. Different types of supplier relationships are then explored. The paper ends with a discussion of properly managing supplier relationships.
The first mistake that companies commit even before entering into supplier relationships is the lack of organizational/business process analysis. Companies often enter into supplier relationships without first knowing what the company really needs. These “unevaluated processes” blind a company from the areas where it excels and areas where it needs improvement (Aron and Singh 136). A company, then, might mistakenly outsource core processes which are vital to its functioning, or manufacture in-house those components which can be sourced from suppliers at lower costs with same quality, for instance.
Another mistake companies make involves getting into supplier relationships for the wrong reasons. Companies often award a contract to the lowest bidder without looking at the quality of the product and the commitment of the supplier. Some companies rush into outsourcing their services just to cut on expenses without realizing that their service providers doesn’t provide the same quality of service as they do. These mistakes result into greater losses and unrealized business goals.
Venkatesan talks about the fear of some companies on being “hollowed out” once they establish a relationship with a supplier (99). These companies fear that sourcing components from suppliers makes their products lose their unique qualities which make them less competitive. While this fear may have a rational basis, companies tend to forget the purpose of getting a supplier in the first place.
Several factors need to be analyzed first before ...
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