Question

How can the influences of governance and internal technical skills affect supplier performance? Where have you seen evidence of this happening outside of your organization? Think about recent news stories and global events.

Answer 1

First, Technical skills:

I define technical skill as the extent to which a buyer understands the production processes and affiliated technologies related to a good or service. Technical skill is a heterogeneous firm capability, developed over time, composed of interrelated routines, and able to be leveraged for competitive advantage.

Influences of technical skill on supplier performance:-

Firms commonly produce a subset of the goods and services that make up their end products internally, while purchasing other services and physical components from external suppliers. So the Supplier performance affects buyer outcomes on several dimensions. The prices suppliers charge influence buyer profitability.

Cooperative relationships with suppliers affect short-term performance by smoothing deliveries and reducing tactical coordination costs, while also influencing longer-term performance by helping firms develop new capabilities.

Firms can gain technical expertise directly through production of the component or indirectly through producing related products and conducting relevant research activities.

A buyer’s technical expertise will contribute to supplier performance because buyers will be able to identify competent suppliers, provide greater assistance to suppliers, and attract better suppliers. First, firms that understand core elements of the development and production process will be better able to identify strong suppliers.

Second, Governance,

A firm’s governance activities also may influence supplier performance

Influences of governance on supplier performance:-

I define relational governance mechanisms for supplier management as the processes a firm uses to manage its connections with suppliers, such as processes for maintaining goodwill, sharing information, and evaluating suppliers.

Example

Dell, Nike, Boeing, Embraer, and Toyota produce few of their components internally, for instance, relying heavily on relationships with suppliers to help them achieve industry leadership in price, quality, and responsiveness to changing demands.