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CHAPTER 5
SUPPLIER RELATIONSHIP MANAGEMENT
5.6.2 RISKS AND BARRIERS TO SUPPLIER DEVELOPMENT
There are several risks associated with supplier development initiatives. Supplier
development involves sharing proprietary information with suppliers. This is risky,
because unscrupulous partners may use this information against each other
when their relationship turns sour. To reduce risk, organisations should strive
to develop trust with their partners before embarking on supplier development
programmes.
Another risk pertains to security concerns about large volumes of sensitive
information that are exchanged between buyers and suppliers. It is possible
for competitors, or others who intend to do harm, to hack into the Internet and
Electronic Data Interchange (EDI) shared between companies. It is therefore
paramount that such information is properly secured in order to ensure that only
the intended recipients receive it. An example of a protective mechanism is data
encryption, which is useful in preventing security breaches [18].
Sometimes, an organisation may develop a supplier only to discover that the
development has also benefited other organisations, such as the supplier’s
customers or the buying organisation’s competitors. As an example, the buying
organisation can develop the supplier’s product with the intention of meeting
its own competitive advantage needs, only to find that competitors are also
benefiting by buying the same product from that supplier. Organisations should
be fully aware of these possibilities before implementing the programme.
Initiating a supplier development programme is a significant challenge. The
following are some of the barriers that one is likely to encounter in establishing
a robust supplier development programme [19]:
• The existence of competing initiatives within the organisation may place other
programmes ahead of supplier development.
• Inadequate skill and expertise managing a supplier development programme.
• Ineffective monitoring and control systems.
• The need to rotate personnel to other duties; leaving supplier development
without personnel for follow up.
5.6.3 BENEFITS OF SUPPLIER DEVELOPMENT
Successful implementation of an effective supplier development initiative is
deeply rewarding to the organisation, because it yields a wide spectrum of
benefits [6].
The close alignment of buyer and supplier values required during supplier
development facilitates the development of trust-based relationships that inspire
greater collaboration and opportunities for increased innovation. Supplier
development enables suppliers to better understand the buyer’s values, which
is important in getting the right product out in time to meet the expectations of
customers.