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SCRC Article Library: Background: Developing Collaborative Supplier Partnerships

Background: Developing Collaborative Supplier Partnerships

Published on: Jan, 24, 2011

by: Brian Fillard, MBA ‘03 Scott Frahm, MBA ‘03 Amy Mercer, MBA ‘03 Kendyle Scott, MBA ‘03

Background

Collaborative partnerships between companies and their suppliers are a recent development in the business world. Throughout a great portion of the twentieth century the relationship between company and supplier could be characterized as adversarial. At the beginning of the twentieth century, standardization of parts was the norm for most organizations. This sparked the requirement that suppliers produce large volumes of product and offer the lowest price possible. In turn, this created intense rivalry between competing firms, which was actually encouraged by the organization demanding the product. At the time, many large organizations were vertically integrated to ensure a steady, uninterrupted supply stream (6).

In post-World War II Japan the development of cogent techniques that would set the standards for many U.S. firms by the end of the twentieth century emerges. Given the fact that Japan is such a densely populated nation and does not have a seemingly endless supply of resources like the U.S., they have to utilize all of their resources to the fullest. Because of this situation, the Japanese had to cooperate extensively with each other in order to succeed, leading Japanese businesses to form an integrated network known as the keiretsu. This type of integrated network was characterized by informal but strict cooperation among members (6).

Given the success that Japanese companies were able to achieve with this tight-knit network, it is no wonder that U.S. firms’ interests were piqued. However, it has taken time for this philosophy to take hold in many organizations. This can probably be attributed to the vertical integration that characterized most company’s practices during the first half of the 20th century (7).

The evolution of supplier collaboration over the last 100 years parallels the progress of business models. At the beginning of the century sound business practice could be characterized by a single-focused enterprise with mass-produced products. By the end of the century the trend was that firms had begun to move to multiple enterprise/mass customized producers (see matrix below) (8).

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