As the name suggests, a supplier relationship is a connection between a vendor or supplier and an organization, business, or entity. It is critical to give importance to this term, especially during these trying times, where the global supply chain is undergoing significant disruption. Maintaining and nurturing such connections is more important than ever before. Let’s find out the different supplier relationships and their importance in the manufacturing industry.
The Importance of Supplier Relationships
Supplier relationships have a profound effect on a product’s development. This is because a supplier relationships mainly deal with working with suppliers to procure raw materials for the product at the right time, for the right price, and at the right volume.
The recent pandemic has had a detrimental impact on supply chain efficiencies across the globe. One of the ways we can mitigate much of this damage is by establishing strong supplier relationships. There are several types of supplier relationships that are more common in modern electronics manufacturing. Let’s explore some of them.
Types of Supplier Relationships
Arms-Length
Arm’s length supplier relationship involves selecting a suitable supplier and ordering parts from them for immediate need. There is no guarantee that the relationship with the supplier remains active for upcoming orders. Here, the business will share the bare minimum information about the product being developed with the supplier.
The benefit of the arms-length supplier relationship is that the business is not obligated to choose a particular supplier. Instead, they can choose from a pool of suppliers ready to meet the requirements. Most commonly, such relationships are carried out through computerized interactions. The downside of such a system is that the same supplier can also provide parts to the competition as there is no exclusivity in such short-term deals.
Subcontractor
A subcontractor relationship involves medium-term contracts where both parties are comfortable sharing business information with each other. Being a subcontractor to a business doesn’t negate the supplier’s freedom to do business with the competition, and they may engage some business with the competition.
Partnership
A partnership between the supplier and a business introduces a high level of trust between two parties. Here, the supplier will be primarily concerned with meeting the requirements for this specific entity and will be only able to do limited business with the competition. Hence, it can pool more resources towards developing parts for the business partner.
Partnerships are found on long-term contracts. The business will also share extensive details about the product being developed with the supplier to get the parts to the exact requirements.
Strategic Alliance
A strategic alliance is formed when the supplier and the business are bound by long-term contracts, and there is full sharing of information and plans between both parties. The advantage of strategic alliances is the increased trust between both parties, and the supplier may reserve their resources specifically for this client. With this arrangement, we can also see a merging of cultures between both parties and more robust communication streams as they work together for one common goal.
Strategic Partnerships in Electronics Manufacturing With JEM Electronics
JEM Electronics enables businesses to navigate the challenging waters of today’s supply chain crisis. We understand how important it is for businesses to create strong and fruitful supplier relationships to meet their production requirements. At JEM Electronics, we undertake strategic partnerships in cable assembly manufacturing for businesses and help them connect with qualified suppliers to streamline production.
