Kapitel 7: Supplier business

Question 1

How can the suppliers business be characteriszed`?

Answer 1

supplier business: a highly complex interaction between the supplier and the customer to ensure the supplier´s offerings meet the customers expectations

–>Individualization of the suppliers offerings lead to a high interdependence between supplier and customer

• Individual customer, Interrelated prooduct purchase

Question 2

Phases of specific management in the supplier business?

Answer 2

1.Initiation of business relationship
2.Retention and development of business relationship
3.Termination of business relationship

Question 3

What are the procurement strategies of customers of suppliers?

(iniation of business relationship?

Answer 3

Single sourcing:
- Procurement of goods/services from one supplier only
- Tendency towards single sourcing increases with two-sided, specific investments in the business relationship

Multiple sourcing:
- Procurement of goods/services from several suppliers
- Better chances of an out-supplier to get an in-supplier-position (entry opportunity limited by time for an out-supplier)

Question 4

What are the two forms and benefits of single sourcing?

Answer 4

1.Model or plant-specifiy:
Benefits:
decreased overall risk as demand is spread to several suppliers

2.Model-or plant spanning:
Benefits:
- improved coordination (few suppliers only)
- Economies of scale in manufacturing

Question 5

What is model-spanning single sourcing?

Answer 5

Model-spanning single sourcing:
- with respect to equipement for electronic foor high class vehicles ->Bosch is the only premium partner
- VW-Group a model-and brand spanning single sourcing takes place: equipment integrate into different models and brands

Question 6

What are the Characteristics of sinlge-sourcing?

Answer 6

• strategic, technologically complex parts
• Complex choice of partner and negotations
• Cooperation during development phase with the suppliier
• Often times connected to a contractually binding agreement throught the whole lifetime of the product

Question 7

What are the points to consider in the supplier evaluation phase?

Answer 7

strategic potentials:
- Potential for innovation
- Potential for flexibility
- Potential for integration

Product-related characteristics.
- Quality,
- Price
- Time
- Place

Question 8

What are the strategic concepts for suppliers in the supplier business?

Answer 8

1.Adjustment strategy:
- Quality management
- Logistics integration
- Pricing policy

2.Emancipation Strategy:
- Innovation
- Multi-level marketing

Question 9

Adjustment strategy: What is meant with the quality management across the value chain?

Answer 9

The supplier performs quality management across the value chain, even within the value chain of the customer
1. Information on manufacuturing quality
2. goes to quality improvmenet and management
3. Quality inspection from manufacturing quality and quality improvement/management
4. Quality control in the assemlbly
5. quality planning and evaluation customer side
6. goes to quality improvement/management (2)
7. 6 goes to quality cost control which then goes again to quality improvement/management

–>all lead to the Information on product quality for the supplier

Question 10

Adjustment strategy: What is logistics integration? (What are the two dimensions? and what are imortant determinants?

Answer 10

Dimensions:
Customer:
1. with stock-keeping
2. without stock-keeping

Supplier:
1.with stock keeping,
2.without stock-keeping

Important determinants of logistics integration:
- Value of products (A items, B items, C items)
- Demand forecasting accuracy (deterministic vs. stochastic demand)
- Power of the supplier/customer

Question 11

Adjustment strategy: What is logistics integration? (What are the 4 szenarios based on the two dimensions?

Answer 11

Supplier and Customer: with stock-keeping:
safety stock held by supplier and customer

Supplier and Customer: without stock-keepping: Two-sided just in time (JIT) delivery

Supplier stock-keeping+ Customer: without stock-keeping: Safety stock held by supplier

Supplier:Without stock-keeping + Customer with stock-keeping: Safety stock held by customer

Question 12

Adjustment strategy: What are the two approaches for pricing policy?

Answer 12

1.Actice price policy: Influencing of price level
- Possibilities of implementation: target-pricing/Target-costing, Supply Chain Pricing

2.Passive price policy: Adaption of cost structure to price level
- Possibilites of implementation: Rationalization of the production, relocation, reduction of verticale range of manufacturing, horizontal cooperation

Question 13

What is the Emancipation strategy: Innovation?
(Goal, and description)

Answer 13

Goal: by developing or redesigning the services offered, the customer gains a competitive advantage in its market

• Supplier creates a counter-balance to the customer´s power position
• Ideally, the supplier is already involved in the product development process of the customer.
• particularly, so-called tool kits can help (summary of the solution oriented competencies of the supplier)

Question 14

What are the two systems of emancipation strategy: Multi-level marketing?

Answer 14

1.Push system: Supplier actively promoting and pushing products down the distribution networks with promotional materials, marketing tools

2.Pull system: focues on creating demand and consumer interest, which naturally pulls distributers into the network, distributors rather respond to existing demand than actively pushing demand

Question 15

What are the requirements for successful multi-level marketing?

Answer 15

Requirements for successful multi-level marketing:
- component has an essential relevance for the quality (image) of the final product
- component is identifiable to (end) customers as a separate part of the product

Question 16

What are the two possibilites of safeguarding a business relationship in supplier business?

Answer 16

Creation of internal stability:
balancing one-sided specific investment, e.g. initating an innovation process at the customer

Contractual regulations:
external safeguarding using long-term supply contracts (often framework contracts);
a typical example is successive delivery contract (e.g. a supply contract of an energy provider)

Question 17

What is to be done to prevent one-sided termination of the supplier-customer relationship?
(Goal, specific requirements, two forms?)

Answer 17

Goal: to establish a stable relationship
Specific requirements:
- real capital (e.g. specific tools)
- Human capital (e.g. specific knowledge of employees)

two-sided –> high internal stability:
–>Interdependence (lock-in effect):
termination of the relationship is painful for both parties

One-sided –>low internal stability:
–>Risk of opportunistic behavior:
the party with a lower level of specifc investments may take advantage of this circumstance

Question 18

What is insourcing?

Answer 18

Insourcing: the supplier´s employees work at the manufacturer´s plant (vertical cooperation between supplier and customer; specific investments)

Question 19

What is IT Network integration?

Answer 19

It Network integration: supplier and customer use the same information technologies (e.g. simultaneous engineering, just-in-time concepts)

Question 20

What is the termination of business relationship equivalent to?

Answer 20

the termination of a business relationship is equivalent to a deinvestment problem; at least parts of the specific investments lose their value

Question 21

Possible reasons for terminating a business relationship?

Answer 21

• Economic crisis/changes in economic conditions
• End of life-cycle of the supplier´s product
• relational conflicts that can´t be solved
• Customer or supplier dissatisfaction
• Increasing attractivity of alternative business opportunitites

–>Business relationship exists as long as the incentive or benefit of that relationship is larger or equal than an alternative option