Managing Relationships With Suppliers: The Case of a Local Subsidiary of a Global Company of Components for the Automotive Industry

Managing Relationships With Suppliers: The Case of a Local Subsidiary of a Global Company of Components for the Automotive Industry

Ana Filipa Rebelo (University of Aveiro, Portugal), Helena Nobre (University of Aveiro, Portugal) and Nina Szczygiel (University of Aveiro, Portugal)
Copyright: © 2019 |Pages: 20
DOI: 10.4018/978-1-5225-8157-4.ch003

Abstract

In recent years, growing market competition has made companies increasingly dependent on their suppliers, which requires effective management of their supply chains. To establish and maintain relationships with the best suppliers, companies apply strategic supplier selection, evaluation, and development criteria. The literature review showed the importance of supply chains and the use of strategic criteria in managing relationships with suppliers. Based on the model proposed by Oflac, the authors studied a local subsidiary of a global company of components for the automotive industry. Through this case study, it was possible to understand how a firm establishes strategies and performs in the practice its supply relationship management activities. Results suggest that the existence of strong and continuous relationships creates advantages for companies, allowing them to remain competitive in the markets. The strategies of selection, evaluation, and development of suppliers enable companies to filter the best partners and develop their capabilities to achieve greater profits.
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Introduction

With the rise of globalization, markets have become more complex and competitive. Accelerated competition has resulted in new products and services. Customers are nowadays more informed and demanding, requiring companies to constantly innovate in order to create and sustain the competitive advantage (Carvalho et al., 2012). Supply chains have a critical role in the way companies are organized and establish relationships (Choy & Hartley, 1996). Companies no longer compete between themselves; they compete between their supply chains (Lambert & Cooper, 2000). Companies nowadays do their purchases globally. This allows them to extend their suppliers and customers’ networks, facilitates the access to new markets and technology, leading to better products and better quality, and allows them lowering prices and reducing delivery times (Hines, 2004). In today’s world, relationships play a key role in supply chain management. For supply chains to stay competitive and work efficiently, it is essential to select the best partners and manage relationships effectively (Liker & Choi, 2004).

Companies focus more on their products and on what they are good at, leaving a substantial part of their value chains to their suppliers (Liker & Choi, 2004). This increases the importance of the suppliers in the company’s success. This tendency seems to reduce the supplier base, driving companies establish long-term relationships with the best partners (Lambert, Cooper, & Pagh, 1998). Suppliers have therefore a great impact on companies, so it is very important for companies to create effective strategies to select and manage their suppliers. According to Kannan and Tan (2002), accurate management is based on three dimensions – suppliers’ selection, suppliers’ evaluation and suppliers’ development. Each company ought to apply these strategies according to its goals and needs.

According to Betchel and Jayram (1997), the future of supply chains is based on the establishment of partnerships, strategic alliances and cooperative relationships. Supply chains are connected to relational factors rather than transactional factors, and relationships are very important for the proper functioning of supply chains. Lamberts, Cooper, and Pagh (1998) refer to relationships as a crucial element of a supply chain. However, cooperation and coordination between all the intervenients of the supply chain are essential for the success of the relationship. Mentzer et al. (2001) argue that in order to create competitive advantage and become more efficient supply chains need to work together, share information, risks and profits, and focus on the client.

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