Strategic Procurement Management

1. (a) Now the companies do partnership as a strategic move to increase the revenues from the sales of the company and so that their profit could be maximised at the highest possible levels. The main motive and aim of the companies forming an alliance and doing partnerships is that both the companies could achieve their required targets and goals set up by them. In the context of Whirlpool and Inland steel, both these companies had their pre desired goals set but they could only be achieved if they had help and cooperation of each other in terms of profits, revenues maximisation, more market share in the market, more customers buying their produced products etc. Both these companies made use of coherent cooperation in marketing, effective and efficient implementation and functioning of the business strategies and plans in order to reach the target goals (Dianora and Ingrida, 2009). While if we look partnerships between companies is a function or derivative of a specific political, economic, social as well as historical context as we can see many similar and common trends and patterns to it.

Now the main agenda and purpose which we see for the companies enter into forming an effective partnership between each other is to exchange each other’s resources, factors of production, skills available so that these resources can be utilized in an efficient manner in some area or a project undertaken by the companies (Ronald, 2000). Now the partnership in which the companies have entered may be either completely endogenous in the nature or it may be completely exogenous. By this we mean that if the partnership formed is entirely exogenous then the main agenda for it is to gain extra resources for the projects undertaken by the company. On the contrary if it is an entirely and purely an endogenous partnership then, the company’s main focus and motive is to maximise the efficient utilisation of the resources. In addition to this some partnerships can also be a combination of the two as well. The basis of the partnerships is laid on the foundation of trust and equivalent cooperation from both the ends. If the partnerships last for a longer time then there comes an expectation and aspiration of ‘quid pro quo’ (William, Carolyn and Stephen, 1992). Now both the requirements of the companies were met so they entered into a relevant and fruitful partnership.

Now there are many pros and cons when companies enter into partnership. The advantages include (Eden, Tanya and Fred, 2009):

1. Gaining more resources and factors for projects as a result of partnerships.

2. Developing high technical advancements and standards.

3. It leads to risk minimisation and reduction as the risk has been divided in between companies as a result of partnership

4. More development in formation of new, better and advanced products and goods. It also leads to developing more technologies needed.

5. Expansion of both the companies as a result and consequence of partnership between the two.

6. Cost diversification and sharing the cost between the companies.

7. Since companies merge and there is a bond of trust between them it results in achieving the required targets and it thereby gives them a more competitive upper hand among other rival companies. (Emanuela and David, 2005)

The disadvantages that are involved in the partnership between two companies are:

  • Partners in the partnership are personally liable for the obligations in the partnership. In this case Whirlpool and Inland Steel are obligatory parties.
  • Another problem in the partnership is the uncertainty in the rules and regulations of partnership. (John, 2002)
  • There can also be conflicts and tensions in the partnership.
  • Since both the parties in this case have to agree this can lead to slow decision taking and its implementation.

Now in the current case, the partnership between Whirlpool and Inland steel seems to be a fruitful and a relevant partnership which is benefitting both these companies in a favourable manner. It can be understood by the Kraljic and Bensaou models. As we know that, in Kraljic model there is a strategic choosing of the best supplier for the partnership to be done with the company (Dong and Paul, 2009). So in order to sustain and make space in the market for itself, Whirlpool had realized that it needs to decrease it suppliers and find a supplier of steel with whom the company can form a long term partnership. Also in order for this to be successful they also realized that the partner with whom they are forming an alliance values the partnership equally. Now Whirlpool tries to optimize its cost of purchasing from the supplier and will also try to reduce the risks involved in the proper supply as well in the partnership formed. This can be understood with a help of a diagram of Kraljic matrix:

Low risk High Risk

Now as we can see in the diagram that the financial risk gets reduced in a partnership from left to right if the company is choosing the best supplier in the market. Similarly the Supply risk also decreases from going downwards to upwards.

Furthermore we can also prove that this partnership is relevant by Bensaou model (Kamil, Nazli and Ayca, 2017). Bensaou model comprises of 4 relationships: strategic partnership, captive buyer and supplier and market exchange. The partnership between Whirlpool an Inland Steel gives identification to all four of these in a proper and systematic manner.

If we see in the above diagram, Buyers investment increases from low to high whereas on the contrary to this the supplier’s investment increases from left to right. (Evi, Thomas and Hans, 2011).

Now, in addition to this since Whirlpool was doing single sourcing of the supply of raw material from Inland steel it was much affected by the other supplier’s issues and problems that other firms in the market were facing which lead it to have a much upper hand. As when previously it was producing it had to incur losses when it was taking materials from other sources (Nichola and Roberta, 2010).

b. The KPI (key performance indicator) helps in evaluating the overall performance of the companies in the market. This helps the companies to judge in themselves of what is wrong and what could be improved in their performance and implementation of strategies (Jan- Frederik, 2019). The performance indicator of Inland Steel can be listed as: (Akkermans, Willem and Finn, 2019)

1. Buyer availability i.e. Inland steel knows and has assurance that the steel it is producing will be purchased by Whirlpool.

2. Defect rate in supplying the steel is minimum and at the very least.

3. Increase in the market share in the industry of steel and giving a tough competition to the rivals.

4. Increase in the ROI (Return on Investment)

5. Increase in the revenues from sales of the raw materials provided to Whirlpool for making appliances and goods.

6. Fulfilling the required orders of the raw materials needed on time

7. Easy compliance with the rules and regulations that have been laid down.

8. Easy compliance with the legal and manufacturing rules and regulations that have been laid down. (Jonathan, Mohammed, Denis, Wessam and Brian 2015)

The performance indicator of Whirlpool can be listed as: (Purushottam, Santanu and S.P., 2012)

1. Supplier availability that is Whirlpool is assured that the company will get the required raw materials for producing appliances by Inland Steel on time as being its patent supplier of steel. (Chunguang and Joseph, 2014)

2. Cost of raw materials purchasing from Inland Steel is minimum as comparison to buying raw materials from other sources.

3. Increase in the profit margin of the company as a result of rise in the selling of products by the customers.

4. Rise in the sales revenue by selling the products in the market.

5. Lead time is reduced that is the total time required to fulfil an order gets at the very least.

6. Compliance rate of the suppliers.

7. Following the rules laid down in the partnership deed without any difficulties and problems.

8. Capable to follow the legal, safety and the manufacturing needs and requirements.

9. Rise in the return on investment done by the company in manufacturing commodities and goods.

2. A. Since the business environment is changing every day. Nothing in this universe remains constant and static so even the business functioning is changing in every minute. Even currently if we see the present situation of a crisis of the novel corona virus pandemic which has disturbed the economies globally has affected in much extent the supply chain management in producing goods and commodities. So, in my personal opinion I believe that the companies and firms should take into consideration the dynamic approach to the supply base management. This would help the producers and manufacturers of goods, services and commodities to change and adapt themselves as per the conditions of the business environment. This will also lead them in understanding the trends and patterns in the business over the coming years and will help and enable them to prepare themselves for all the conditions and situations for the future. This will also help them to prepare for any forecasted emergencies that may have a bad impact and influence on the working of their business.

Now since the business environment and surroundings is never constant and is dynamic in its very nature old suppliers leave the market and new suppliers with efficient technology, goods and raw materials enter the market and industry. It helps the buyers to take advantage and benefits that the new suppliers have brought with them into the market. Also in addition to this if the companies stick and are independent to their patent suppliers then if the suppliers have a loss in their business it will also affect and influence the companies in their level of production and output of the target goods and services. So they should be open to the new suppliers in the market. This will eventually help the companies to boost up their profits with new advanced technologies and equipments. As a result their revenues from the sale of goods and services will also increase which will the firms and companies to further expand their business and its activities.

B. Now, if Whirlpool adapts to the dynamic approach this will definitely change its equation and relationship with Inland Steel. Since, by adopting the dynamic approach Whirlpool will now be open and broad minded to other potential and capable suppliers in the market. As a result of this their partnership will be directly in the line of fire as Inland Steel will not approve and agree with the perspective and actions taken by Whirlpool in regard with this. Now it may happen as a result and consequence of this it might jeopardize their partnership and Inland Steel will break the partnership that it holds with Whirlpool of being its prime supplier of steel for its products. Other thing which can happen is Inland Steel may agree with the perspective of Whirlpool. As a result and consequence of this Inland Steel may ask them in respect of a solid partnership to make them their prime suppliers and the rest of the suppliers as secondary to them in case Whirlpool needs them in times of emergency or needs more supply of raw materials and resources for the production of appliances and goods. It may also happen that Inland Steel also might do the same in their business for their expansion and growth in the business activities and also adapt the dynamic approach in their business of producing high quality steel. This will help both the companies in their partnership as well as will be beneficial for their respective companies as well.

References for Strategic Procurement Management

Bai, C. and Sarkis, J. (2014). Determining and Applying Sustainable Supplier Key Performance Indicators. Supply Chain Management. 19(3), DOI: 10.1108/SCM-12-2013-0441

Blair, E.S., Marcum, T.M. and Fry, F.F. (2009). The Disproportionate costs of forming LLCs v/s corporations: the impact on small firm liability protection. Journal of Small Business Strategy. Vol. 20, 2.

Costantino, N. and Pellegrino, R. (2010). Choosing Between Single and Multiple Sourcing Based on Supplier Default Risk: A Real Options Approach. Journal of Purchasing and Supply Management. 16(1), pp. 27-40,

Gosling, J., Naim, M., Towill, D., Abouarghoub, W. and Moone, B. (2015). Supplier development initiatives and their impact on the consistency of project performance. Construction Management and Economics. pp. 390-409, https://doi.org/10.1080/01446193.2015.1028956

Gordon, W.I., Anderson, C.M. and Bruning, S.D. (1992). Employee perceptions of corporate partnership: An affective-moral quid pro quo. Employee Responsibilities and Rights Journal, Vol. 5, pp. 75–85

Grave, J. (2019). What KPIs Are Key? Evaluating Performance Metrics for Social Media Influencers. Sage Journals. Vol. 5, Issue 3, https://doi.org/10.1177%2F2056305119865475

Grundey, D. & Daugelaite, I. (2009). Developing business partnership on the basis of internal marketing. Interdisciplinary Approach to Economics and Sociology. Vol. 2, No 1, pp. 118-130.

Hartmann, E., Ritter, T. and Gemuenden, H.G. (2011). Determining the Purchase Situation: Cornerstone of Supplier Relationship Management. 17th Annual IMP Conference at the Norwegian School of Management BI.

Henk, A., Oppen, W.V., Wynstra, F. and Voss, C. (2019). Contracting outsourced services with collaborative key performance indicators. Journal of Operations Management. Vol. 65, Issue. 1, https://doi.org/10.1002/joom.1002

Kozan, M.K., Wasti, S.N. and Kuman, A (2017). Management of buyer–supplier conflict: The case of the Turkish automotive industry. Journal of Business Research. Vol.59, 6, pp. 662-670

Lee, D.M. & Drake, R.P. (2009). A portfolio model for component purchasing strategy and the case study of two South Korean elevator manufacturers. International Journal of Production Research, Vol. 48(22), pp. 6651-6682, DOI: 10.1080/00207540902897780

Matheson, J.H. (2002). Choice of Organizational Form for the Start-Up Business. Minnesota Journal of Business Law & Entrepreneurship. Vol. 1, pp. 7

McQuaid, R.W. (2000). The Theory of Partnerships - Why have Partnerships. Managing public-private partnerships for public services: an international perspective, pp. 9-35.

Meena, P., Sinha, S. and Sarmah, S.P. (2012). Measuring satisfaction in buyer-supplier relationship from suppliers perspective. Int. J. Business Performance and Supply Chain Modelling, Vol. 4, No. 1, DOI: 10.1504/IJBPSCM.2012.044974

Todeva, E. & Knoke, D. (2005). Strategic alliances and models of collaboration. Management Decision. 43(1), DOI: 10.1108/00251740510572533

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