How to create position in the Supply Chain: about power and dependence. By prof. Dr. Arjan van Weele

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1 How to create position in the Supply Chain: about power and dependence By prof. Dr. Arjan van Weele

2 Power and dependence: some examples ABN Amro zette leveranciers klem (1) 22 januari 2010, 6:14 uur FD.nl ABN Amro heeft medio 2008 zijn toeleveranciers onder druk gezet om met terugwerkende kracht een forse korting te verlenen op reeds geleverde diensten. De afdeling inkoop van de bank, destijds nog maar net in handen van Fortis en Royal Bank of Scotland (RBS), vroeg terugbetaling tot 10% van de in 2007 overgemaakte gelden in ruil voor contractbehoud. Dit stellen verscheidene facilitaire dienstverleners die destijds contracten bij de bank vervulden. Dergelijke harde onderhandelingspraktijken zijn volgens marktkenners niet eerder voorgekomen in Nederland. Politiek en bedrijfsleven reageren afkeurend. Diverse betrokken bedrijven zeggen het optreden van de bank te hebben ervaren als 'chantage'. 'Ze vroegen hoeveel geld we overhadden om ons contract te behouden', zegt directeur Madeleine Bunders van schoonmaakbedrijf ISS. ISS, dat al enkele jaren bij de Nederlandse vestigingen van de bank schoonmaakt, heeft toen geld teruggestort. 'We hebben betaald en maken nog steeds voor de bank schoon', aldus Bunders. Het bedrag wil zij niet noemen. 'Elk bedrijf had de keuze om wel of niet te betalen. Leuk is anders, maar zo kunnen zaken gaan in het harde bedrijfsleven.' Andere dienstverleners weigerden te betalen. 'Ik ben in april 2008 telefonisch uitgenodigd op het hoofdkantoor in Amsterdam. Daar is mij door drie managers van Fortis, RBS en ABN gevraagd om 10% van de gemaakte omzet uit 2007 te betalen', aldus een directeur van een schoonmaakbedrijf die anoniem wenst te blijven. Hij zegt dat toen hij vroeg wat zijn bedrijf ervoor terug zou krijgen, het antwoord was: 'helemaal niets'. Inbinden zou betekenen dat hij niet op een zwarte lijst kwam en dat zijn bedrijf een betere kans maakte op toekomstige opdrachten. 'Ik heb geweigerd. Tien procent afstaan van reeds gemaakte omzetten. Dat nooit.' / name of department PAGE 2

3 Power and dependence: some examples ABN Amro zette leveranciers klem (2) 22 januari 2010, 6:14 uur FD.nl Tijdens de hele operatie is volgens ingewijden voor in totaal euro 30 mln opgehaald door de bank, die eind 2007 voor euro 72 mrd in handen kwam van het bankentrio dat naast Fortis en RBS ook uit het Spaanse Santander bestond. De onderhandelingen, waarvoor alle grotere facilitaire dienstverleners van ABN Amro werden uitgenodigd, duurden van april tot het einde van de zomer van Verschillende grote schoonmaakbedrijven die weigerden te betalen, vrezen in de toekomst voor oneerlijke concurrentie bij een aanstaande uitbesteding van ABN Amro. 'Omdat de overname van ABN een tijdrovend verhaal is geworden hangt er al een paar jaar een grote schoonmaaktender boven de markt', aldus een van hen. 'Wij weten dat ISS in 2008 heeft betaald. Die willen daar bij een grote aanbesteding van ABN natuurlijk iets voor terugkrijgen.' De bezuiniging stond onder leiding van de inkoopafdeling van RBS. 'De inkopers van ABN zijn op een target gesteld en moesten voortdurend naar Schotland bellen om te vertellen hoeveel geld er was binnengehaald', zegt een directeur van een van de betrokken bedrijven. Scherpe onderhandelingen In een gezamenlijke reactie zeggen ABN Amro en RBS dat er inderdaad 'scherpe onderhandelingen hebben plaatsgevonden'. 'Wij streven altijd naar een optimale prijs-kwaliteitverhouding en daar horen scherpe onderhandelingen bij. De partijen zijn echter altijd vrij geweest om deel te nemen aan de onderhandelingen, of niet.' / name of department PAGE 3

4 Power and dependence: some examples Ook ING dwingt korting af 15 februari 2010 Het Financieele Dagblad ING Bank heeft in de zomer van 2009 leveranciers onder druk gezet om met terugwerkende kracht korting op producten en diensten te geven. De bedrijven die aan de bank leverden, moesten een deel van hun omzet weer terugstorten naar ING. Weigerden ze dat, dan dreigde de bank de leveranciers geen opdrachten meer te gunnen. Dit blijkt uit een overeenkomst tussen ING Bank en haar toeleveranciers, die in handen is van deze krant. De afdeling inkoop van de bank vroeg een groep leveranciers in augustus vorig jaar om vanaf 1 juli 2009 met terugwerkende kracht 12% van hun omzet terug te storten. In totaal gaat het om enkele miljoenen euro's aan kortingen. Vorige maand ontstond er ophef bij politici en bedrijfsleven nadat deze krant bericht had over de wijze waarop ABN Amro facilitaire dienstverleners onder druk had gezet om eerder gemaakte omzetten terug te betalen. 'Ik voelde me zwaar gechanteerd, maar de bank is een belangrijke klant voor mij, dus ik heb onder protest ingestemd', zegt een ondernemer over de handelwijze van ING. In een reactie zegt de bank dat er inderdaad 'scherp en pittig is onderhandeld met betrekking tot het kortingsverzoek, de ingangsdatum en het percentage'. 'We kunnen ons voorstellen dat dit sommige leveranciers in het verkeerde keelgat is geschoten. De leveranciers hadden wel de keuze om nee te zeggen', laat een woordvoerder weten. De bedrijven moesten een oude factuur sturen naar de gebruikelijke afdeling en vervolgens op een rekening van de inkoopafdeling 12% van die oude factuur terugstorten. 'Op deze manier kon de afdeling inkoop precies laten zien hoeveel geld zij bezuinigt. De bank zegt waarden als integriteit en transparantie hoog in het vaandel te hebben, maar als je dit ziet is dat een gotspe', zegt een ondernemer. De bijeenkomsten van leveranciers en de inkoopafdeling van ING verliepen volgens een vast stramien. 'Ik pakte mijn pen en papier, maar dat was niet de bedoeling. Ik voelde me daar erg vervelend bij. Zoiets had ik nog nooit meegemaakt', zegt een ondernemer. Nog tijdens de bijeenkomst moesten ondernemers beslissen of ze zouden ingaan op het dwingende verzoek van de bank. Wanneer een directeur tegenstribbelde, werd hem gezegd dat als hij niet wilde betalen, de kans groot was dat hij nooit meer voor ING hoefde te werken. 'Ik had zoiets nog nooit meegemaakt en wilde mijn juridisch adviseur ernaar laten kijken', zegt een leverancier. 'Dat mocht niet. Het was nu of nooit. Uiteindelijk stemde hij in. 'ING is geen kleine jongen dus ik heb de overeenkomst ondertekend. Ik vond het een schandalige manier van zakendoen.''de bank zegt integriteit hoog in het vaandel te hebben; dat is een gotspe' / name of department PAGE 4

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6 Discussie Wat vindt u van de handelswijze van deze bedrijven jegens hun leveranciers? Is dit juridisch houdbaar? Is deze handelswijze zakelijk gezien houdbaar? / name of department PAGE 6

7 Discussie / name of department PAGE 7

8 Dealing with monopolist suppliers

9 4 The future is now!

10 Dealing with monopolist suppliers Heineken and its systems packaging supplier Mead*) Heineken was forced by Ahold, a major Dutch retailer, to reduce its lead time for beer and beverages from 3 days to 8 hours In response to these excessive customer demands Heineken started a corporate supply chain initiative with its key suppliers Cross functional Commodity Teams were set up to manage key corporate spend categories and key suppliers Key suppliers were invited to present ideas for improvement ( what can we do to enable you to ) Most suppliers responded and came up with valuable suggestions except Mead, its supplier for systems packaging *) since 2015: WestRock

11 Dealing with monopolist suppliers 11

12 Dealing with monopolist suppliers After 2 months Mead responded: they proposed to arrange for a meeting among the CEO s of both parties to discuss the future of the relationship Heineken s Category Team Systems Packaging was surprised What would you do? 12

13 Dealing with monopolist suppliers Lessons from Heineken case Suppliers do not automatically think in the interest of their clients Understanding supply market dynamics crucial when making moves towards supply chain management Intregrating suppliers in your business processes requires strong business position Question: How to deal with a monopolist supplier?

14 Dealing with monopolist suppliers High Power Dependence Matrix Heineken dominant Balanced relationship Dependence Mead Heineken? Mead dominant Low Low MESS Dependence Heineken Mead High

15 Programma Doel van vanmiddag: De rol en betekenis van inkoop en leveranciers Hoe je naar leveranciers vanuit zakelijk perspectief kunt kijken Hoe positie te creëren in de relatie met leveranciers Macht, afhankelijkheid en vertrouwen / name of department PAGE 15

16 Leveranciersmanagement als concurrentiefactor

17 Leveranciersmanagement als concurrentiefactor Uitdaging voor veel ondernemingen: hoe onze EXTENDED ENTERPRISE te managen? Verkoop omzet: 100% Winstmarge 1,5 % Toegevoegde waarde: 20 % Vraag: Wat zouden ondernemers moeten/ kunnen doen? Inkoopwaarde: 78,5 % Externe kosten hebben grote invloed op het rendement van ondernemingen

18 Leveranciersmanagement als concurrentiefactor Uitdaging voor veel ondernemingen: hoe onze EXTENDED ENTERPRISE te managen? Verkoop omzet: 100% Winstmarge 1,5 % Toegevoegde waarde: 20 % Vraag: Wat zouden ondernemers moeten/ kunnen doen? Inkoopwaarde: 78,5 % Leveranciers bepalen 78,5% van kosten, innovatievermogen, CO2 emissie en klantwaarde

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20 De rol en betekenis van inkoop en leveranciers

21 De rol en betekenis van inkoop en leveranciers

22 De rol en betekenis van inkoop en leveranciers

23 Veranderingen in het inkooplandschap Kernvraag Wat zijn naar uw mening de belangrijkste consequenties voor bedrijven hoe als bedrijf in dit soort omstandigheden te overleven?

24 De rol en betekenis van inkoop en leveranciers Darwin It is not the strongest or the most intelligent of the species to survive, it is the one most adaptive to change or most able to adapt to change, that survive.

25 Over de waarde van relaties / name of department PAGE 25

26 Over de waarde van relaties Globalisering en (internationale) concurrentie dwingen bedrijven tot specialisatie Steeds vaker worden niet-kern competenties afgestoten Met als gevolg dat bedrijven steeds afhankelijker worden van hun leveranciers Deze afhankelijkheid is wederzijds: leveranciers spannen zich voornamelijk in voor klanten die ze aantrekkelijk vinden En dus is het van belang te weten hoe aantrekkelijk opdrachtgevers zijn voor leveranciers

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28 Over de waarde van relaties Ford ea. (2003) hebben het over drie mythen in management: The Myth of Action: The buyer acts and the supplier reacts Suppliers are selected by supply staff Each supplier is individually insignificant Marketing actions from a supplier and the purchasing actions from a buyer can be analysed separately from each other

29 Over de waarde van relaties Ford ea. (2003) hebben het over drie mythen in management: The Myth of Independence: A company is able to act independently. It can carry out its own analysis of the environment in which it operates develop and implement its own strategy based on its own resources, taking into account its own competences and shortcomings

30 Over de waarde van relaties Ford ea. (2003) hebben het over drie mythen in management: The Myth of Completeness: A well formulated strategy helps to marshall and allocate an organisation s resources into a unique and viable posture based on its relative internal competences and shortcomings, anticipated changes in the environment and contingent moves by intelligent opponents (Quinn (1996))

31 Over de waarde van relaties The Case against these Myths The management process in any company is interactive, evolutionary and responsive The essence of strategising is in coping with and taking advantage of relationships with surrounding companies in their entirety Companies are becoming less complete a company s network position changes and develops through interaction with other companies in different positions in the network relationships are assets in strategy development

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33 Over de waarde van relaties The four hypotheses of this study were validated: Cooperative-trusting OEM-supplier relations significantly reduce overhead and material costs as measured by the Cost Of Goods Sold(COGS). Cooperative-trusting OEM-supplier relations concurrently increase the level of innovation and reduce OEM investments into research and development Cooperative-trusting OEM-supplier relationships foster quality for individual components and overall end-product fit. Cooperative-trusting OEM-supplier relations enhance material management practices, reducing total inventory levels and increasing inventory turns. (Bron: Milas (2006))

34 Over de waarde van relaties Centraal in het idee van verbeteren van relaties met leveranciers staat het begrip Customer of Choice A customer of choice is a company that consistently receives competitive preference for scarce resources across a critical mass of suppliers Your needs are consistently fulfilled by a supplier before your competitors needs Relates to supplier provided materials, services and ideas that are necessarily limited in availability Beyond the small handful of strategic relationships to include suppliers that support the entire range of business needs (Bron: Strategic Procurement Council (2008))

35 Over de waarde van relaties Discussie Wanneer bent u als opdrachtgever of klant echt aantrekkelijk voor een leverancier? Noem 5 aspecten.

36 Over de waarde van relaties Suppliers reveal surprising truths about how they manage their customer base Relationship myths Reality 1. If a supplier considers me Most Key Accounts are denied a key account I automatically get better performance and resources preferential treatment 2. There is little I can do to Willingness to truly collaborate become a customer of choice; It s based on company characteristics with supplier secures customer of choice status 3. Procurement s need to Procurement can exercise multiple generate cost savings precludes preferred access to supplier resources (Bron: Strategic Procurement Council (2008)) Levers that are greatly valued by suppliers

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38 Module Purchasing Portfolio Management

39 Portfolio management Power and influence strategies Hypothesis Suppliers only are willing to think and act in the interest of their customers when they are forced to do so Discussion: What power and influence strategies can we observe that suppliers apply in order to get a preferential position vis-a-vis their customers? What power and influence strategies can we observe that buyers apply in order to get a preferential position vis-a-vis their suppliers?

40 Portfolio management

41 Portfolio management ABC analysis A-items: 20% of items- 80% of spend B-items: 30% of items- 15% of spend C-items: 50% of items-5% of spend ABC analysis does not recognize the purchased items s risk and strategic value

42 Portfolio Management Why? Not all suppliers are of equal importance Usually a small number of suppliers gets most of the attention; often these are the most problematic not the most important ones How? Companies leave one common strategy to deal with suppliers Differentiation based upon financial and supply strategic criteria Result? Balance between effort and energy you put into a supplier relationship and what you want to get out of it

43 Portfolio Management Purchasing portfolio analysis Buyer perspective High Leverage products Competitive bidding Strategic products Performance based collaboration Impact on Financial result Low Routine products E-Procurement solutions and e- Catalogues Low Supply risk Bottleneck products Secure supply and search for alternatives High

44 Purchasing product portfolio High Important, buyer dominated Purchasing s impact on financial results Not important, Buyer dominated Important, supplier dominated Low Low Not important, supplier dominated Supply risk High PAGE 44

45 Portfolio Management EXAMPLE / name of department PAGE 45

46 Portfolio Management Reasons for using portfolio management 1. Developing differentiated supplier strategies 2. Gaining insight into problems and possibilities 3. Realizing cost savings Results of portfolio management show that companies using portfolio management have: A better understanding of possibilities and problems related to purchased goods To a greater extent differentiated purchasing and supplier strategies

47 Portfolio Management Main reasons for not practicing purchasing portfolio management? Takes too much time No knowledge about purchasing portfolio within organization Purchasing manager does not want to Results are not useful Takes into account too few factors Too simple for complex decisions

48 Portfolio Management Portfoliomanagement Factors influencing the utilization of the purchasing portfolio Company size Purchasing share Purchasing position Utilization of purchasing portfolio Purchasing professionalism Purchasing orientation

49 Portfolio Management Customer portfolio analysis Seller s perspective High Attractiveness account Development segment Pamper customer Provide new ideas and new products Core segment Keep customer at all cost Provide superior service and quality Low Nuisance segment Give little attention to customer If not profitable: say goodbye to customer Low Exploitation segment Charge premium price Beware for losing customer Competitive position relative to other suppliers High

50 Relative cost Relative value Purchasing Portfolio Management Evaluate the impact of the supplier s view within strategy development EXPLOITABLE Adversarial relationship Check power balance Consider other sources CORE Sound position Improve own profit EXPLOITABLE Great caution Raise mutual dependency Seek competition CORE Good match Potential long term relationship NUISANCE Mismatch Accept short term Change supplier DEVELOPMENT Supplier developm. opportunities Encourage participation NUISANCE Very high risk Seek competition Raise attraction DEVELOPMENT Potential match Work closely together to develop business Our Company s attractiveness EXPLOITABLE Moderate risk Monitor price trend Seek alternatives CORE Strong position Maintain relationship Offer other opportunities Supply risk EXPLOITABLE Moderate cost risk Closely monitor price and service Change supplier CORE Good match Intensify relationship Maintain long term relationship NUISANCE Possible mismatch Passive relationship Seek alternative supplier DEVELOPMENT Good supplier interest Offer incentives Raise mutual dependency NUISANCE High service risk Change supplier Offer incentives DEVELOPMENT Potential risk Raise mutual dependency Offer inducements

51 Power in b2b-relationships Module 12215

52 Power in b2b-relationships Managing the balance of power high Financial impact Leverage products Buyer dominated Routine products Strategic products Bottleneck products Supplier dominated low low Supply risk high

53 Power in b2b-relationships high Leverage products Buyer dominated Strategic products Financial impact Routine products Supplier dominated low low Supply risk Bottleneck products high

54 Power in b2b-relationships Sources of power... Dependency No substitutes, very specific product, monopolist, etc. Business volume Transaction volume Share in supplier turnover Knowledge Technology leader (e.g. Bosch) Entrance to specific knowledge and/or networks Access to resources (Financial) resources, markets, institutions, people, etc.

55 Power in b2b-relationships Suppliers may build upon power... Mergers and acquisitions Providing all kinds of value added services: Improved packaging and/or logistics (e.g. vendor managed stock, co-packing, electronic replenishment, delivery guarantees) Providing total solutions to customer (e.g. maintenance, IT) Providing support and advice in product- and process innovation Reciprocity principle Stay out pricing at entrance of newcomers Price agreements and other market deals

56 Power in b2b-relationships Suppliers may build upon power... Developing intensive and personal relationships with: top-management product specialists users backdoor-selling Providing perks and other fringe benefits such as... gifts and other representation items in-house seminars amicable behavior Technical intimidation e.g. IT specialist

57 Power in b2b-relationships Buyers may build upon power... Corporate sourcing strategies purchasing coordination global sourcing benchmarking Cross business, cross functional sourcing teams process approach + account management uniform purchasing procedures fair-play and strict business ethics Multiple sourcing Formalized goals and objectives and supplier agreements

58 Power in b2b-relationships Power is not a constant factor, it changes over time! Mergers and acquisitions may dramatically change supply market patterns Knowledge on how power can be gained and on how it can be used effectively (without resulting in abuse of relationships) seems essential for developing effective supplier and supply chain relationships

59 Purchasing and supplier strategies Power-Dependency Matrix (Cox, 2001) Module 12215

60 Purchasing and supplier strategies Factors influencing the strategic possibilities Interdependencies Dependence customer of supplier Dependence supplier of customer Customization and standardization Trust Competence trust Goodwill trust Affective commitment Calculative commitment

61 Purchasing and supplier strategies Discussie: 1. Wat bepaalt of een opdrachtgever resp. klant macht resp. invloed kan uitoefenen op een leverancier? 2. Wat bepaalt of een leverancier macht resp. invloed kan uitoefenen op een opdrachtgever resp. klant?

62 Purchasing and supplier strategies Attributes of power The numbers of buyers/suppliers: number of The attractiveness of buyer s account to buyers/suppliers in a particular market. supplier: attractiveness of the buyer s business to the supplier. Share of buyer of total market for supplier: purchases of a buyer at one supplier (valued The degree of standardization of supplier in money) divided by the total purchases for offerings: the degree in which the supplier s this particular supplier. assortment stays the same for a particular period of time for a particular buyer. Dependence of supplier on buyer for revenue: the number of alternatives: the degree in which the supplier s revenue depends on one particular buyer; the number of alternative buyers. Supplier switching cost: the cost for the supplier to switch to another buyer Buyers switching cost: the cost for the buyer to switch to another supplier Buyers search cost: the costs a buyer has to make to search for suppliers. Information control/ information asymmetry advantages: Advantages that can be achieved when one party has more information on the other party, which can be of use in the purchasing process.

63 Purchasing and supplier strategies Additional attributes of power Reputation effects: the effects that the reputation of a company have on the possibilities to exert power Network effects: the use of personal contacts to get something done Collusive cartels: companies acting together in secret to an illegal or fraudulent end Governmental regulation (creative and disruptive regulation): In creative regulation the government acts as a creator and guarantor of resource scarcity in buyer-supplier exchange. In disruptive regulation the government constrains or removes an existing power advantage

64 Purchasing and supplier strategies Attributes of buyer power relative to supplier High Low Low Buyer dominance Few buyers/many suppliers Buyer has high % share of total market of supplier Supplier is highly dependent on buyer for revenue with limited alternatives Supplier switching costs are high Buyers switching costs are low Buyers account is attractive to supplier Supplier offerings are commoditized and standardized Buyer search costs are low Supplier has no information asymmetry advantages over buyer Interdependence Many buyers/many suppliers Buyer has relatively low % share of total market for supplier Buyer has relatively low % share of total market for supplier Supplier switching costs are low Buyers switching costs are low Buyers account is not particularly attractive to supplier Supplier offerings are commoditized and standardized Buyer search costs are relatively low Supplier has only limited information asymmetry advantage over buyer Attributes of supplier power relative to buyer Interdependence Few buyers/many suppliers Buyer has high % share of total market for supplier Supplier is highly dependent on buyer for revenue with limited alternatives Supplier switching costs are high Buyer switching costs are high Buyers account is attractive to supplier Supplier offerings are not commoditized and customized Buyer search costs are high Supplier has significant information asymmetry advantages over buyer Supplier dominance Many buyers/few suppliers Buyer has low % share of total market for supplier Supplier is not at all dependent on buyer for revenue and has many alternatives Supplier switching costs are low Buyers switching costs are high Buyers account is not attractive to supplier Supplier offerings are commoditized and standardized Buyer search costs are very high Supplier has high information asymmetry advantage over buyer High

65 Purchasing and supplier strategies

66 Purchasing and supplier strategies Route 1: Supplier Dominance to Buyer Dominance Increase the buyer s share of the market. Increase the number of suppliers in the market. Increase selected suppliers dependency on the buyer. Create commoditization and standardization of the supply. Ensure cost and quality transparency. Route 2: Supplier Dominance to Interdependence Increase buyer s share of the market. Increase number of suppliers. Work closely with preferred supplier(s) for technology/innovation sharing. Lock-in high-quality suppliers. Create jointly owned product/service differentiation. Route 3: Supplier Dominance to Independence Increase number of suppliers. Encourage substitutes. Create commoditization and standardization. Innovate to reduce buyer search costs. Lower barriers to entry for new entrants. Route 4: Interdependence to Buyer Dominance Increase buyer s share of the market. Increase number of suppliers. Increase preferred supplier dependency on buyer. Increase commoditization and standardization of supply. Reduce supplier control of intellectual property rights. Route 5: Independence to Interdependence Increase buyer s share of the market. Select preferred suppliers for close working relationship. Increase supplier dependency on buyer business. Lock-in suppliers with distinctive capabilities vis-àvis their competitors Create jointly owned product/service differentiation Route 6: Independence to Buyer Dominance Increase buyer s share of the market Select suppliers with relatively high dependency on buyer Reduce buyer search costs Seek maximum degree of commoditization and standardization Increase attractiveness of buyer account to supplier

67 Conclusions Module 12215

68 Conclusions Review of portfolio management approaches Kraljic does not pay attention to interdependencies between the buyer and the supplier Kraljic does not include the dynamic character of portfolio strategies Kraljic focuses on cost and risk, not on value aspects Kraljic has a dyadic view on relationships and does not take into account networks

69 Conclusions Portfolio s are an effective tool for the design of differentiated supply strategies Given the nature of business every party will try to dominate the other Differences in power position have consequences for the spirit and atmosphere of the relationship Having a power position is not the point the issue is how to use this power how not to abuse it Personal relationships serve the purpose of business (there is not such thing as coincidence!) Portfolio need to be reviewed on a regular basis

70 Conclusions Some recommendations... Business reality is a more important factor for the design of effective supplier relationships than academic insight If customers are not able to manage their relationships with their suppliers, then suppliers will manage their customers This is why leveraged purchasing strategies are necessary Account managers need to focus on improving performance rather than (personal) relationships only!

71 Conclusions The troublesome road towards supply chain integration. Intensity of relationship High Partner Involve Integrate Rationalize Low Acknowledge High Number of suppliers Low

72 Power Definition: A has power over B to the extent that he can get B to do something that B would otherwise not do. Talking about power makes people feel uneasy Power is not necessarily exercised Philips has an extensive supplier assessment Often warning is enough for corrective measurements PAGE 72

73 Dependence Dependence is determined by: The need for a resource and the availability of alternative sources Dependence is the opposite of power Dependence can be mutual buyer-supplier Innovation, Technology Entrepreneurship and Marketing PAGE 73

74 Managing dependence Financial magnitude Resource criticality Availability of alternative source Organizational dependence Switching costs PAGE 74

75 Managing dependence Financial magnitude Resource criticality Availability of alternative source Organizational dependence Switching costs + Innovation, Technology Entrepreneurship and Marketing PAGE 75

76 Managing dependence Financial magnitude Resource criticality Availability of alternative source Organizational dependence Switching costs + Innovation, Technology Entrepreneurship and Marketing PAGE 76

77 Managing dependence Financial magnitude Resource criticality Availability of alternative source Organizational dependence Switching costs + Innovation, Technology Entrepreneurship and Marketing PAGE 77

78 Managing dependence Financial magnitude Resource criticality Availability of alternative source Organizational dependence Switching costs + Innovation, Technology Entrepreneurship and Marketing PAGE 78

79 Managing dependence Strategies to reduce dependence position of A with company B Cultivate other sources than B Decrease the importance of the exchange for B Japanese firms purchase an equity interest in critical suppliers Decrease the importance of the exchange for A Develop standardization programs Limit negative effects of dependence Keep excessive stock Development of norms and values which will restrict the exercise of inter organizational influence / name of department PAGE 79

80 Trust Definition: The willingness of a party to be vulnerable to the actions of another party based on the expectation that the other will perform a particular action important to the trustor, irrespective of the ability to monitor or control that other party Innovation, Technology Entrepreneurship and Marketing PAGE 80

81 Trust Weak correlation between trust and relationship duration, opposite from assumptions (Vanneste ea. 2010) Trust index of financial world Supplier- manufacturer Working relationship index Trust and dependability are not interchangeable because they have not identical meanings PAGE 81

82 Innovation, Technology Entrepreneurship and Marketing PAGE 82

83 Trust Competence trust: the ability of an exchange partner to perform according to agreements Goodwill trust: the belief that the supplier will not misuse his position and actually takes the buyer s interests into consideration. Affective commitment: the extend to which a party likes to maintain a relationship with another party Calculative commitment: the extent to which an exchange partner perceives the need to maintain a relationship Bron: Gelderman (2003) / name of department PAGE 83

84 Managing trust Leadership Business integrity/ organization behavior Principles/ethics Skills and competence/knowledge and management Creativity Trustworthiness competence Trust Supply chain excellence Innovation, Technology Entrepreneurship and Marketing PAGE 84

85 De wereld van vandaag Hier aangekomen zult u denken: En wat betekent dat nu allemaal voor ons wat betekent dat voor mij wat betekent dat voor mijn onderneming? Het antwoord: CHANGE HAPPENS PLATO: πάντα ῥεῖ