Although much more rare than supplier convergence, supplier deconvergence occurs when a company offering several services or products breaks into a number of smaller companies specializing in a specific service or product (InterTradeIreland 2002). This may occur as part of a restructuring process for companies, or may be a strategic decision to associate different companies with specific services or products.
A common occurrence within associations is that they are extended vertically within the supplier community – for example – by the mid 1990s 79% of Toyota’s tier 1 suppliers had created their own associations extending beyond Toyota’s existing. This approach to expanding associations depend on organizational size, similarity and size of the supply chain.
A key drawback to supplier convergence is that one of the main concepts of it is to force smaller companies into mergers or out of business by replacing or threatening to replace them with one large company offering different products or services. Wal-Mart and Borders, two of the superstores cited above, have received criticism for forcing local, independent stores out of business by offering convenience and prices that smaller retail stores would not be able to match. For many, this is a concerning trend, as it means local retail outlets will continue to be replaced with large, multinational firms.
There are also difficulties associated with supplier associations, these include the customer firm using the association as a method to exert control over its suppliers who may also become too dependent. Supplier associations rely on trust between organizations and where this is not embraced (for example sharing the results of improvement programs, or leaking of information to competition) benefits may be reduced. Targets and momentum is required to make supplier associations a success and where this is absent there is potential for the association to become a “talking shop”. without deriving meaningful improvements.
A drawback to supplier convergence from a business's perspective can occur when a company applies convergence in such a way that makes it inconvenient for customers, and thus backfires on the company. For example, Belgian telecom company Belgacom decided in the late 1990s to combine fixed and mobile phone services into a single subscription. The plan failed, however, when customers wanted to keep these services separate and the company had technical difficulties in producing a single bill for two services (Shankar 2003).
Supplier convergence, when properly executed, can provide benefits to both companies and customers. The 2004 Microsoft paper by Trowbridge et al. singles out mergers and "bundling" as a particularly positive aspect of supplier convergence. By merging, it says, companies can increase their overall efficiency; that is "the cost of performing multiple business functions simultaneously should prove to be more efficient than performing each business function independently, and therefore drive down overall costs" (Trowbridge et al. 2004). This can also prove beneficial to the customers, as they can often receive a number of services and products at a better value from one company than from several smaller ones. The convergence of information suppliers, such as websites, also offers the public the ability to view and receive information from one source.
Some confusion may exist over the difference between supplier performance management (SPM) and SRM. SPM is a subset of SRM. A simple way of expressing the difference between SPM and SRM is that the former is about ensuring the supplier delivers what has been promised in the contract, which suggests a narrow, one-way process. SRM, in contrast, is about collaboratively driving value for both parties, resulting in lower costs, reduced risk, greater efficiency, better quality, and access to innovation. This requires a focus on both negotiating the contract and managing the resulting relationship throughout implementation, as well as systematic joint value-discovery efforts.
Changes in any of these conditions can be defined as parameters for raising an alert. For example, a financially stable supplier may in fact be about to lose it CEO to retirement – which may cause issues within the management team. Early visibility into that change gives the manufacturer time to ensure it doesn’t negatively affect customers.
Based on the criticality of the supplier and the nature of the alert received, the manufacturer can then choose to take necessary action, such as calling or visiting the supplier, increasing monitoring, or moving towards terminating the relationship with the supplier and finding a replacement.
In 2008-2009, manufacturers experienced the startling speed at which suppliers can move from stability to shutting down operations. The devastating impact of a crucial supplier failure has moved risk management from add-on service to mission-critical. With a new focus on risk management, manufacturers have seen value whether the economy is stagnant or thriving.
Supplier may refer to:
A supplier association is a business term which refers to a customer company bringing together a group of its suppliers on a formal and regular basis in order to achieve strategic and operational alignment.
The fishing and agriculture sectors dominate the supplier cooperatives. Among these are fish sales group and seven specialized food manufacturing companies, the largest being TINE and Nortura. In forestry 85% of all forestry produce is produced by the members and owners of the Norwegian Forest Owners Association, that also owns most of Moelven Industrier and parts of Norske Skog.
Supplier evaluation and take-on is a continual process within purchasing departments, and forms part of the pre-qualification step within the purchasing process, although in many organizations it includes the participation and input of other departments and stakeholders. Most experts or firms experienced in collecting supplier evaluation information prefer doing so using five-step processes for determining which to approve. Their processes often take the form of either a questionnaire or interview, sometimes even a site visit, and includes appraisals of various aspects of the supplier's business including capacity, financials, quality assurance, organizational structure and processes and performance. Based on the information obtained via the evaluation, a supplier is scored and either approved or not approved as one from whom to procure materials or services. In many organizations, there is an approved supplier list (ASL) to which a qualified supplier is then added. If rejected the supplier is generally not made available to the assessing company's procurement team. Once approved, a supplier may be reevaluated on a periodic, often annual, basis. The ongoing process is defined as supplier performance management.
Some of the challenges associated with supplier evaluation may be mitigated by the use of appropriate tools. For simple projects a spreadsheet can be used. But as evaluations become more complex or more frequent data management and data integrity issues become significant. Web Electronic RFP / Tendering systems are often used for initial selection projects. Some products provide functionality for combining both initial selection and ongoing evaluation and benchmarking.
Supplier enablement is the process of electronically connecting suppliers (or other trading partners) to a company's supply chain. Supplier enablement is achieved when suppliers of goods and services are connected to a company's back-office systems to exchange critical business documents such as purchase orders, invoices and other information. Suppliers can be connected, or "enabled," using a variety of means including Electronic Data Interchange (EDI), Extensible Markup Language (XML), Web forms, RFID chips, or other e-commerce tools.
Supplier convergence in the retail industry is often described as the creation and growth of, literally, "one-stop shopping" (Slywotzky et al. 1999), epitomized by retail giants such as Wal-Mart, whose outlets offer a wide range of products in an attempt to make competing specialty stores obsolete. Essentially, each section in large department stores, such as hardware, electronics, and clothing, consequently aims to replace competing businesses specializing in just one of those areas.
A residual supplier is a country that supplies the world market only after importers have met their initial needs from preferred suppliers. A residual supplier is not initially competitive because of higher prices or lower quality.
Websites provide another example of supplier convergence, often with regards to services rather than products. Mega-search sites such as Google and Yahoo have expanded from their humble beginnings as search engines to comprehensive information portals offering news, weather forecasts, and financial services. In doing so, they have created websites that replace or combine the services of many other specialized sites.
The boom of technology and the internet in recent years has been a key factor behind the trend of supplier convergence. The bundling of products together is a prime example of how a telecom/entertainment company could exploit the convergence pattern to their advantage. By offering triple play discounts to customers who subscribe to a number of services such as land-line telephone, wireless phone, internet, and digital cable, companies are encouraging customers to receive all these services from a single company rather than several different ones. The expansion of wireless networks is also a factor in supplier convergence, as one national or international wireless phone company could replace many localized ones (InterTradeIsland 2002).