The relationship between a seller and a buyer is fundamental to commerce and trade. It's a dynamic interaction based on mutual benefit, trust, and communication.

1. Buyer-Supplier
Relationship
Presented by: Dr. Parul
sharma, MSOB, LPU

2. Introduction
Purchase supplier relationship –Purchase supplier satisfaction matrix
Factors and types of transactions
Nature of relationships
Compare and Contrast partnership and collaboration
Supplier overview and rating
Strategic Alliance
Top industry examples
Role of IT

3. Key questions for supply manager
Should we
Change our stance on multiple sourcing ?
Move to long term contracts ?
Do more reverse marketing ?
How can we
Improve our relations with suppliers ?
Involve other functions more effectively in supplier relations ?
Initiate partnerships or alliance with our key suppliers ?

4. Can we work without a seller and a buyer
relationship in a market?
•YES
•NO

5. Total Customer Satisfaction
Suppliers
Quality Cost Other
Quantity
Delivery

6. Recent trends
• Buy instead of make
• Outsource instead of continuously make
• Improve quality
• Lower inventories
• Integrate supplier and purchase systems

7. Supplier Link Internal Link
(Hospital)
Customer Link
The strong link determines the strength of the whole
chain, it is important that the strength of each link
in any chain link be equal and congruent.

8. Purchaser-Supplier Relation:
• Nature of relationship-Major influencer- ultimate value and
customer satisfaction
Supplier Goodwill
• Superior sources of supply- important asset
• Sound marketing policy- Develop goodwill
• Goodwill- Brands, advertising and regular calls by sales
person- Relationship Marketing

9. CUSTOMER SATISFACTION DEPENDS ON
•VALUE
•PRICE
•QUALITY
•ALL

10. Congruence in supply chain can be achieved by:
Purchasers maintain friendly relationship with suppliers
Regularly measures satisfaction level of its key suppliers
Best purchasers practice- knowing suppliers' business more
than supplier's own employees
The ability to develop effective working relationships with
suppliers will be dependent on supply's ability to develop
effective working relationships internally.

11. The Purchaser- Supplier Satisfaction Matrix

12. The Purchaser- Supplier Satisfaction Matrix
1. High Purchaser Satisfaction, High Supplier Satisfaction (Win-Win):
Example: Hospital A has a long-term contract with a medical device supplier for the
procurement of surgical instruments. The supplier consistently delivers high-quality
products on time, provides excellent customer service, and offers competitive
pricing. In return, Hospital A provides regular feedback, collaborates on product
improvement initiatives, and maintains a stable demand forecast. Both parties are
satisfied with the relationship, as it enhances patient care, reduces costs, and
fosters mutual trust and respect.
2. High Purchaser Satisfaction, Low Supplier Satisfaction (Exploitation):
Example: Hospital B leverages its dominant market position to negotiate favorable
terms with pharmaceutical companies for the procurement of essential drugs. While
Hospital B benefits from lower prices and exclusive contracts, the pharmaceutical
suppliers feel pressured to comply with unreasonable demands and face tight profit
margins. The suppliers may experience dissatisfaction due to the unequal power
dynamic and lack of consideration for their interests, leading to strained

13. Cont…
3. Low Purchaser Satisfaction, High Supplier Satisfaction (Over-dependence):
Example: Hospital C relies heavily on a single supplier for the procurement of medical
equipment used in critical care units. The supplier consistently delivers high-quality
products and provides excellent technical support, leading to high levels of
satisfaction among hospital staff and patients. However, Hospital C feels over-
dependent on the supplier and lacks alternative options for sourcing similar equipment.
Any disruption in the supply chain or deterioration in the relationship could jeopardize
patient care and operational efficiency.
4. Low Purchaser Satisfaction, Low Supplier Satisfaction (Transactional):
Example: Hospital D engages in competitive bidding processes to select suppliers for
medical supplies such as gloves, gauze, and syringes. Suppliers submit bids based solely
on price, leading to frequent changes in suppliers and little opportunity for
relationship-building. Hospital D prioritizes cost savings over supplier relationships,
resulting in transactional interactions characterized by minimal communication,
distrust, and a focus on short-term gains. Both parties may feel dissatisfied with the
relationship, as it undermines collaboration, innovation, and quality improvement

14. Conclusion from the matrix
Diagonal- fairness or stability line
(0,0) position is completely undesirable from either standpoint.
(5,5) position is minimum acceptable goal for both sides.
(10,10) position is rarely found. It requires a degree of mutual
trust and sharing and respect that is difficult to achieve in our
society of “buyer beware”.

15. Buyer Seller
Relationship
International Sourcing

16. FACTORS FOR SUCCESSFUL
INTERACTION
Factors for
successful
Buyer Seller
interaction
Content of
information
Style of
exchange

17. Cont…
Factors for Successful Buyer-Seller
Interaction
Compatible Incompatible
Content of Information
- Relevant Information ✔
- Transparency ✔
- Alignment of Goals ✔
- Miscommunication ✔
- Hidden Agendas ✔
- Misalignment of Goals ✔
Style of Exchange
- Communication Preferences ✔
- Collaborative Approach ✔
- Cultural Sensitivity ✔
- Communication Barriers ✔
- Conflictual Interaction ✔
- Lack of Flexibility ✔
Content of
Information
Style of Exchange

18. Types of Transactions:
Compatible Style Incompatible Style
Compatible
content
Incompatible
content
Ideal Transaction
Inefficient
Transaction
Inefficient
Transaction
No Transaction
Types of
T
ransactions

19. Type of Transaction Description
Ideal Transaction
Both buyer and seller engage in a mutually beneficial exchange where value is
created for both parties. This transaction is characterized by transparency,
trust, collaboration, and alignment of goals and interests.
Inefficient
Transaction
In this type of transaction, the buyer and seller interact but fail to achieve
optimal outcomes due to inefficiencies or shortcomings in the exchange
process. This could result from poor communication, inadequate information,
unclear expectations, or mismatched priorities.
No Transaction
This occurs when there is no interaction or exchange between the buyer and
seller. It could be due to various reasons such as lack of need or interest,
inability to reach agreement on terms, or competitive factors. In some cases,
the absence of a transaction may be a missed opportunity for both parties to
create value or achieve mutual benefits.

20. Types of Relationships
T
ransactional
Relationships
Value-added
Exchanges
Collaborative/Partnering
Relationships

21.  Transactional Relationship
Focus
primarily focused on the immediate exchange of goods, services, or money,
without necessarily establishing long-term connections between the parties.
One time only exchange and less loyalty to particular supplier
Little interest to extent relationship
Transactional relationship preferred when
Availability of many suppliers
Stable supply market
Purchase decision not complex
Purchase considered less important for achievement of firm’s objectives
Example: Stationery materials

22. Transactional Relationship
Advantages
Relatively less purchasing time and effort required to establish
price
Lower skill level of procurement personnel required
Can react quickly to changing market/economic conditions
Disadvantages
Expediting and monitoring incoming quality
Provision of minimum service by suppliers
Supplier not motivated to invest time and energy for
development of buyer’s products
Less effective performance by suppliers

23.  Value-added Exchange
Focus
Complete understanding of the present and future needs of
customers and meeting the needs better than competitors
Groups made by the selling firm
A: Most profit potential customers
B: Between A and C
C: Least profit potential customers

24.  Collaborative Relationship
Focus
Building a strong social, economic service and technical ties between
customer and supplier firm
Purpose
Increase value, lower total costs and achieve mutual benefits
Joint problem solving and integration of processes of the two
companies
Two important factors: Trust and Commitment

25. Collaborative Relationships
Advantages
Long term contracts
Reduction of risk for suppliers
Reduction of total costs
Improvement of process
Improvement of products
Increased investment in R&D
Better focus on customer need

26. Transactional vs Partnership
Short Term Long Term
 Selection criteria: Lowest price
 Selection criteria: Cost of
ownership
 No. of suppliers: Many  No. of suppliers: One or few
 Purchasing department’s
responsibility
 Cross-functional teams and top
management involvement
 Little sharing of information
 Sharing of short term & long-term
plans, risk & opportunity, data
 No technology inflow  Inflow of technology takes place
 Minimal service provided
 Greatly improved service
 provided
 Little contribution to New
Product Development process
 Highly involved in New Product
Development process
 Less difficult to exit  Difficult to exit

27. Purchaser-Supplier Relationship
Management

28. Extensive communication between both parties is needed to
maintain satisfaction and stability
Requires substantial coordination work inside purchasers
organisation
Team approach to long term supplier relations
Members of internal team have to deal directly with the
counterparts on supplier side
Immediate action needs to be taken when either side detects
a problem

29. Awareness of full details of each sides aspiration,
strengths and weakness is necessary
Personnel from both sides need to understand
each other well for mutual benefit
This can come through exposure, discussions,
mutual problem solving etc.
Thus the ability of supply’s personnel to develop
effective working relationship internally will be
key determinant of the organization's ability to
get the most out of its supplier force

30. Supplier Ranking

31.  Unacceptable Suppliers:
Fails to meet operational and strategic needs of the
buying organization
Discontinue with the supplier and substitute better ones
 Acceptable Suppliers:
Meets current operational needs as required by contract
Provides a performance that others can easily match,
hence no basis for competitive edge

32.  Preferred Suppliers:
Purchasers have a process orientation with preferred
suppliers to avoid unnecessary duplication and speed up
transactions
Both parties work towards mutual improvements to eliminate
nonvalue-adding activities
Meets all operational and some of the strategic needs of the
buying organization
Reacts positively to initiatives of the purchaser to improve
the current situation

33.  Exceptional Suppliers:
Anticipates operational and strategic needs of the purchaser and
are capable of meeting and exceeding them
They need to be treasured
They can serve as example of what is possible: an opportunity to
experiment with new and different approaches to supply base
management and as an early indicator of future supply
management direction and goals
It requires substantial amount of work from both sides to obtain big
rewards of mutual breakthrough
Patience and persistence are required to sustain the investment in
relationship building

34. Strategic Alliance

35. Definition
A supply strategy based upon joint opportunities, mutual trust,
respect and open & honest communication between the
supplier and the customer.
This strategy is focused on reducing related supply chain costs
and improves the quality of goods and services.
Majorly technology driven and involves substantial investment
by buyers and sellers to achieve major market breakthroughs

36. Success factors for Strategic Alliance
Focus: A common vision for the relationship, with agreedstrategies and activities
Trust: Open communication and disclosure of business drivers
Performance: Continuous improvement towards agreed targets and KPIs
People: Clearly defined roles and responsibilities
Proactive: Anticipating business needs and providing creative solutions
Profit at Risk: Establishing real metrics to drive behaviour for both parties

37. Mistakes
Low commitment
Poor operational planning and integration
Strategic weakness(diverging strategies/under-developed value
added propositions, unclear strategic return on investment)
Rigidity or poor adaptability
Unrealistic expectations
Overdependence
Hidden agendas leading to distrust
Legal problems(IPR)

38. Supplier Development Program
Supplier development” is defined as an activity that a buyer
undertakes to improve a supplier’s performance and/or capabilities to
meet the buyer’s short-term supply needs
•Identify critical commodities
•Identify critical suppliers
•Form a cross-functional team
•Meet with supplier top management
•Identify Key projects
•Define details of the agreement
•Monitor status and modify strategies

39. Conclusion
Supplier selection process is very complex now as
environmental, social, political and customer satisfactions
factors have also be considered along with traditional factors
like quality, cost, delivery and service
Partnerships ,strategic alliance, reverse marketing are picking
importance
There is a drive to search for new and better ways of managing
the relationships between buyers and sellers

40. No single approach to relationship management is inherently superior.
"Successful supply chain management requires the effective and efficient
management of a portfolio of relationships."
Three environmental factors to consider:
(1) The product exchanged and its technology
(2) The competitive conditions in the upstream market
(3) The capabilities of the suppliers available.
Developing and managing collaborative and alliance relationships requires
skilled professionals who recognize the benefits of collaboration. These
individuals must be able to identify and obtain necessary data and use the data
to exploit and enhance relationships.