Faced with increasing costs, increasing customer demands and increasing competition, most companies – whether manufacturers or service providers – look to their suppliers to help them overcome these challenges. Traditionally, adversarial tactics to quickly achieve lower purchasing costs and translate the savings into bottom-line gains have been a common approach. Indeed, the ease with which price reduction pressure can be applied to suppliers and the certainty of its results makes this an attractive option.
However, many firms – albeit a minority – are forsaking the adversarial approach. They believe that more benefits result from co-operative, rather than adversarial, supplier relations, and have been developing trusting supplier relations in an effort to achieve a "best-in-class" competitive position. These firms are reluctant to initiate price reduction pressures on their supply base, however slight, because they are concerned that increased pressure will adversely impact their overall supplier relations. Considering the time and effort it takes to achieve trusting co-operative supplier relations, such concern is understandable. At the same time, some of these firms have expressed concern that they might not be getting price reductions equivalent to what these same suppliers are giving competitors that follow an adversarial approach.
Both sets of firms believe they are faced with a dilemma. Firms with trusting supplier relations believe they will lose the benefits of co-operative supplier relations if they arbitrarily demand price reductions from suppliers. While firms taking an adversarial approach believe they will not get the lowest possible prices from their suppliers if they take steps to develop co-operative supplier working relations. The issue for businesses today is how to deal with these apparently contradictory perspectives. In other words, can a firm have co-operative supplier working relations while pressuring the same suppliers for lower prices?
To answer this question, Professors
The implications of these findings have profound impact for managerial actions. They found that with the appropriate degree of attention paid to the actions associated with “Buyer communication and information sharing with suppliers” and “buyer commitment to suppliers” management can neutralize the negative impact of price reduction pressure on the firm's working relations with its pressured suppliers.