Buyer- Supplier Relationships

J ohn Blevins
430 West Fifth Street
Perrysburg, OH 43551-1507
(419)874-1289


J ohn Blevins is currently a senior at Bowling Green State
University, Bowling Green, OH, majoring in Supply Chain
Management and Management I nformation Systems.


Toledo Chapter
API CS I D#1556491
Full-Time Undergraduate
Drew Bechstein Adam
Snyder
J ames Sunderhaus


Amanda Szabo
2


Buyer-Supplier Relationships. The three types of buyer-supplier relationships are discussed;
transactional, collaborative, and alliance. Following are three examples of companies and
how they use these relationships for leverage with suppliers based upon different positions
and sizes. The three companies are GE Transportaton, JS Lighting, a small enterprise, and
Bowling Green State University.
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TABLE OF CONTENTS




Introduction pg. 4

Transactional Relationships pg. 4-5

Collaborative Relationships pg. 6-9

Alliance Relationships pg. 9-10

Porters Five Forces Model pg. 11-13

Research Topic pg. 13-14

Buyer/Supplier Relationship from Small Business Standpoint pg. 14-15

Buyer/Supplier Relationship from State Institution Standpoint pg. 16-17

Buyer/Supplier Relationship from Global Corporation Standpoint pg. 17-20

Conclusion/Analysis pg. 20-22

Works Cited pg. 23

Appendix
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Taking the easy path through life is not always the best way to go. Sure it may not be
difficult and there are no real obstacles involved if you take the easy path, but why not try
something different, interesting and more intriguing? There are also benefits involved and
often better results if you take the road that is less traveled and try something different. That
is what we decided to do in this research project.
We decided to research buyer and supplier relationships on three important and unique
companies. There wouldnt be as much learned if we only focused on one company and took
the easy way out. Instead we decided to look into a privately owned and small company, JS
Lighting Solutions, Bowling Green State University, which is a large public institution, and
last but not least, General Electric Transportation, a well-known and global dominant
business. We researched the three main types of relationships and analyzed the typical
situations in which each type of relationship is appropriate. This information was then used
as the basis of our company research. We were very interested to see how each of the three
companies deal with the buyer and supplier process and what is fundamental for them to
survive in todays fast paced environment.
Transactional Relationships

Transactional relationships are the most common and the most basic type of
buyer/supplier relationship. This relationship is referred to as an arms-length relationship
where neither party is concerned about the other parties well being. There is very little trust
involved in this relationship and it could be a one time transaction between the buyer and
supplier. There are rarely any big savings made in this kind of relationship and it usually takes
very little time and effort by either party to go through with an agreement. When relationships
5


like this are involved it is usually an item that is not detrimental to the company, and it is not
as critical if they run out of the item or the shipment is late.
One of the advantages to having a transactional relationship is the lower skill levels of
procurement personnel that are required. There is also less purchasing time and effort put into
determining a price for the item that they are trying to purchase. This means that price is not
really a big concern because it is usually negotiated to be somewhere around the market price
standard.
One disadvantage to having a transactional relationship is that there is a lack of
communication between the buyer and supplier. Buyers must also spend large sums of money
in expediting and in monitoring the quality of the incoming items. This kind of relationship
seems to be inflexible and tends to result in more delivery problems than the other two
relationships. Also, since there is really not much to gain from a relationship like this, the
quality of the product purchased is probably not going to be as good as expected and it is hard
to improve quality in this type of a relationship. In a typical transactional relationship the
supplier is not motivated to put any time and effort in to helping the buyer develop the
product.
Suppliers in a transactional relationship tend to have more leverage than do the buyers
of the product because the buyers have to take what they receive and pay for the product when
it is expedited. Suppliers also feel they should be able to send you a product that meets your
minimum requirements because there is no time and effort put in by either side to develop the
product further. The buyer is out of luck in terms of the quality of the product they receive
because the supplier has the leverage in this situation to send out what meets their minimum
requirements.
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Figure 1

Strategic/Differentiation
No Yes

S
p
e
n
d


High

Possible
Collaborative

Collaborative/Strategic
Alliance

Low

Transactional

Possible Collaborative



Collaborative Relationships:

A collaborative relationship is one of mutual benefit to both parties. There is a varying
level of trust, but some is required. Companies will work together for increased savings and
future innovations. Often with this type of relationship buyers have early supplier
involvement (ESI) (Burt et al. 83). Most companies have some form of collaborative
relationships, whether they are aware of this or not. Advanced forms of collaborative
relationships are a strategic alliance or a joint
venture.

Requirements for a collaborative
relationship are dependent on the product and its
use for the buyer. A minimal level of trust must be possible before considering a
collaborative relationship. Products that are purchased via collaborative relationships should
be strategic to the buying firm regardless of cost. Also there should be some differentiation in
the market place and the supplier should be one of, if not the top producer of the product. If
the product is not strategic then a collaborative relationship might be more effort than the
benefits are worth. Unless spend is considerable on the product then a transactional
relationship is best. If spend is considerable a buyer should determine whether it is more
beneficial to have a collaborative relationship or to purchase based upon a low price. If the
product is fit for competitive bidding this would be a less costly option. If not then a
collaborative relationship might be the answer. Figure 1 explains this pictorially and provides
an idea of when collaborative relationships are possible and when they shouldnt be pursued.
Collaborative relationships must be supported from the entire organization. A buyer
must have the authority to negotiate with a supplier and come to an agreement that carries
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mutual trust and benefit. This is not possible if executives push only for cost savings or if the
labor force is unwilling to give up some responsibility to the supplier.
Benefits to collaborative relationships are: lower overall costs, higher quality
products, less time to market due to open communication and improved technology and
innovation. Supply disruptions are also less likely as the relationship is similar to friendship
and suppliers and buyers look out for one another rather than opportunities to take advantage
of one another.
Drawbacks are the amount of time and effort involved. Buyers time must be spent
nurturing the relationship opposed to other value adding activities. There must also be time
spent to begin the relationship and earn the trust of the supplier. Also there are higher
switching costs if problems were to arise with the supplier. Lastly there is a sharing of
proprietary information, strategy, planning, and goals, [and] most firms do not feel
comfortable exposing such elements to other firms, fearing a loss of control. (Benton 2).
Collaborative relationships might not be desirable when a company has a certain
amount of leverage over its suppliers, or if the suppliers have all the power then the buyer
might not be willing to enter into a relationship. If the buyer is in a disproportionate position
of power they might force suppliers to succumb to their will or be able to switch suppliers
easily regardless of technology and strategic purchasing. Also they might not be willing to
commit to resources to lower costs with a supplier but expect the supplier to go about the
process on their own. The opposite would be true if the supplier held all the leverage. They
would be unwilling to commit resources to a customer that they did not see a particularly
large value. Costs might be more prohibitive than the possibility of losing the business. The
best scenario to explain this is when demand exceeds supply. However large concentrations
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of power are not entirely discouraging to collaborative relationships. According to Benton
conscious, considerate use of power can allow power holders to promote integration of the
supply chain and influence better performance from other members of the chain (4). The
better the entire chain performs the more money for all of the parties involved in both sales
and profits. Cox et al. propose that there are 6 types of relationships based upon power,
supplier, buyer, interdependence, and relationship terms, arms length and collaborative.
Arms length would be considered transactional in this case and collaborative can consist of
both collaborative and alliance relationships. There are two types of relationship in which the
buyer has the power; adversarial arms length and adversarial collaborative. The arms length
relationship is one in which the buyer exerts control over the supplier and dictates the
situation of the purchase. The adversarial collaborative relationship allows for mutual benefit
and reduced costs, but the buyer takes a larger portion of the surplus value. The two types of
relationships in which the supplier has the power are the exact same with the roles reversed.
Were mostly interested in the two relationships in the middle. Non-adversarial arms length
is a transactional relationship where were executing a one time buy or repeated buys of little
consequence with no differentiation. The last type of relationship is non-adversarial
collaborative and is similar to the collaborative relationships discussed above with both
companies benefiting and trusting one another. This is the only possible alliance relationship
out of Cox et al.s categories (138).






Alliance Relationships
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The third type of buyer-supplier relationship is the alliance relationship. An alliance is
formed for a systematic approach to enhance communication between the two firms. Unlike
collaborative relationships, an alliance is built to have a trust where both firms can be on the
same level and help each other out when there is a time of need or uncertainty. If there is no
motive to have trust or manage it then the alliance will most likely fail, and that is something
that just cannot happen. Having an alliance can be very beneficial as there is asset
specialization and human specialization as well. With human specialization, certain people in
companies have experience working together and they have information that allows them to
communicate with others effectively. Because of this, companies are less likely to have
breakdowns between them that will result in errors (Burt 84). With this enhanced
communication comes the benefit of faster delivery times, lower costs and higher quality.
It is quite easy to understand why companies like to engage in an alliance between
their firms. There are typically lower total costs because of the reductions of direct and
indirect costs from labor, machinery, materials and overhead. There is also the benefit of
reducing the time to design and develop products and services, which leads to larger profit
margin. Improved quality and technology from suppliers can be obtained from the openness
and trust that is built from alliance partners (Burt 85). The benefits from the open and trustful
relationship then lead to successful new products with a lower total cost because improving
quality and other strategic goals are the focus, instead of errors. A study was done that was
based on 69 firms currently involved in a buyer/supplier partnership. This study found that
55% of the firms wanted to engage with a partner because it was necessary to have a good
understanding relationship for successful supply chains. This also proves that a paired
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partnership of buyer with supplier is essential to be on the same level and reap the benefits

(Gentry).

The least common and most advanced form of an alliance is a joint venture. A joint
venture is where the two companies actually merge some of their resources to form one entity.
This entity is then owned by the two companies and acts as if it were its own company with
guidance from the parents. The joint venture provides for complete transparency of all
relevant costs and strategies, and for this reason the joint venture is very uncommon and
atypical. Often it is used to limit risk by one of the parent companies when entering a new
market or attempting a totally new strategy that could drastically damage the firm. Many
countries that are developing encourage or require the use of joint ventures. One such
instance is China before joining the World Trade Organization. In order for a business to
open in Chinas market, the government required a joint venture, or that the company
produced only products sold in the country itself. This can actually lead to lower cost
improvements and innovation in some cases, as the parent companies might not divulge all of
their secrets to the joint company.
Trust and long-term vision are essential to the success of a multiform relationship, just
as it is to buyer/supplier partnerships. If a conflict arises between firms it should be addressed
and resolved openly so there wont be any long term problems. It is good to search for the
cause of the problem and not blame it on the other firm because that obviously will not help
out the situation. If one of the sides in the partnership wants to renegotiate an issue then it is
done in such a way so that the result is a win-win situation for all. By negotiating issues this
way, it also goes to show that one side is not out to reap all of the benefits of the alliance
relationship.
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Porters Five Forces Model

Although Porters five forces model was designed to analyze the supply market, we
are going to use it to evaluate leverage in the buyer/supplier relationship. The five areas that
are assessed in this model are: supply market rivalry, buyers, substitutes, second tier suppliers
and new entrants. Most of the topics discussed in this section will not affect small businesses;
rather the medium sized and larger companies working with suppliers in larger contracts.
Supply Market Rivalry is one of the most important factors in determining leverage in
a relationship. If there are a lot of suppliers competing for the same business that are fairly
equal then obviously the buying company has leverage over the suppliers. They have many
suppliers to choose from that can supply products without much differentiation. However, the
opposite is also true; if there is not much supplier rivalry then buyers are stuck with only a
few options and could possibly have to pay higher prices for products. One thing that could
even out the leverage for the suppliers is the switching costs that the buyers must incur in
order to change suppliers.
The strength of second tier suppliers reduces the leverage that buyers of companies
have when it comes to negotiating with suppliers. If a suppliers supplier has control over
them then they cant guarantee much of anything to a potential or current customer. Prices,
delivery dates and possibly quality of products that are produced for buyers are influenced
greatly by the actions of second tier suppliers. Second tier suppliers have most of the leverage
when there are only a few large companies that control the market for a certain product. A
buyer must be careful when entering into a situation like this and may want to contact the
second tier suppliers before entering into any contracts.
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High barriers to entry into a market reduce the amount of leverage a buyer has in a
relationship. If it is hard for companies to enter a market, the companies already in the market
have established economies of scale and a loyal customer base. Some things that create high
barriers are brand loyalty, high fixed costs and high initial investments. A company in a
market like this has obviously done well for itself and probably will not need business, so
they can not be expected to bend over backwards to gain a new customer. At the other end of
the spectrum, if there are low barriers to entry the leverage shifts to the side of the buyer. The
easier it is to enter a market the more suppliers there will be in the market adding to supply
market rivalry and the leverage of buyers.
Availability of substitutes is another factor that adds to the leverage of buyers in the
supply market. If a buyer can choose from a variety of products that will fulfill the same
requirements this will strengthen their position immensely because there are that many more
supplier opportunities that open up to them. The only thing that might limit the amount of
leverage on the buyers behalf is switching costs involved in using substitute products.
Suppliers must be careful of their prices in this case. Chances are a product like this that can
be substituted easily isnt going to be an essential part of the operation. If this is the situation
then a buyer is most likely to go with the lowest price because they wont be as concerned
with quality.
The last part of the model has to do with the strength of the buyer. There are quite a
few things that can influence the leverage of a supplier which I have mentioned above. Also
influencing the strength of buyers is large purchase volumes or the purchase of products that
are undifferentiated or involve low switching costs. If a buyer has the money and resources to
do backward integration a supplier is an inferior position. Another issue that increases a
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buyers negotiating power is if the company has small profit margins they can use this to get a
better price from their suppliers.
As you can see there are many things that a buyer and supplier must evaluate when
they are entering a relationship. They need to know who has the control and determine
whether or not it is a relationship that they are going to be able to handle based on their
evaluation. Obviously the more leverage someone has the better off they are going to be
when it comes to working with other companies. Something to be careful of is taking
advantage of the leverage in a buyer/supplier relationship. If you always have to have things
done your way, no negotiating, then you will get a bad reputation in the industry and you
might have a hard time finding suppliers, negating any leverage you had.
Research Topic

Transactional, collaborative, and alliance relationships are established between many
different types of businesses. Although each type of relationship is based on typical
characteristics, in the business world every relationship is different in its own way. Two
factors that influence the type of relationship and the characteristics associated with it are the
size of the business and the type of the business. These two factors have a large impact on the
leverage that the business has established with their suppliers and the way that they relate to
their suppliers.
Bowling Green State University, JS Lighting Solutions, and General Electric
Transportation are three different types of businesses that all handle their supplier
relationships in a unique way. BGSU is a large state institution, while JS Lighting Solutions
is a small local business, and GE Transportation is a large global corporation. Because of the
volume of sales that these businesses are able to provide their suppliers, they each have
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different types of supplier relationships, diverse strategies of purchasing/sourcing items,
variations in the leverage they hold, and different methods of achieving success.
Buyer/Supplier Relationship from Small Business Standpoint

For the purpose of this section of the paper we interviewed Jan Snyder of JS Lighting
Solutions. This company is very new, with only in operation for about a year and a half, and
still quite small. With its sales volume being in the $200,000 range, it gives us a view of the
buyer/supplier relationship from standpoint of a small private business.
Being such a small company, JS Lighting Solutions is working with suppliers who are
usually significantly larger than themselves. They dont have much of a chance to enter into
any relationships that would be greatly beneficial to themselves and their suppliers so they
dont have any leverage to work with. As of now pretty much all of the purchases made by
the company are based on a transactional relationship with suppliers. In the future, when the
business grows JS Lighting Solutions will look towards finding suppliers to develop and work
with to get the best prices and products possible.
There is one company that JS works closely with and that is a minority supplier. This
is beneficial to JS because it opens up channels to new customers because many companies
are always looking for minority suppliers to do business with. The other company benefits
because they are based in Detroit, MI so they are getting sales outside of their normal clientele
that they usually would not get. Both companies are happy in the end because they are
getting sales that they wouldnt necessarily get on their own and each of them takes a
percentage of the profit. Any leverage that JS has is because of this relationship and is the
sole fact that JS is working in conjunction with a minority supplier.
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Almost everyday JS is in contact with suppliers is some form or another, fax, phone,
acquiring pricing or issuing POs. Being a smaller company they have smaller orders and do
not keep much on stock, so they have to be in touch with suppliers to get what they need in a
timely manner. There are a few problems that they run into because of the fact that they are
small and dont order in large quantities. First of all when working with larger suppliers most
of them have set minimum orders and are not willing to work with companies to fulfill their
needs. Another problem is that some companies charge freight to the purchaser unless a
certain quantity is ordered. JS must figure out what is better for them, buying more and
storing it or just buying less and paying the freight charges. A third problem is trying to
negotiate prices with suppliers. The bigger the suppliers are the less likely they are to
negotiate their prices with a small company making small orders. These problems are things
that not much can be done to correct besides growing the business. Until JSs orders are of
significant value and suppliers want to compete for the business, JS will struggle with having
any leverage with suppliers. For now JS believes the best thing they can do is to build
personal relationship with the salesmen of their suppliers and hope that will help when it
comes to being treated equally by suppliers.
As far as favoring certain suppliers, JS says they definitely do based on two main
criteria. First of all price, if they find a supplier that has consistently low prices they will stick
with them without sending out a bunch of RFQs. The other aspect they feel is important is
delivery performance, as I mentioned earlier being a small company with not much inventory
it is critical that they receive orders in a timely manner. If they receive products on time and
there are not many problems with the order then that supplier looks good for future orders in
the eyes of JS.
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Buyer/Supplier Relationship from State Institution Standpoint

Bowling Green State University is a public institution, which must follow state
guidelines regarding their buyer/supplier relationships. Because BGSU is a public institution,
the purchasing function is handled much differently than it would be in private business. A
private business typically has a common family of items that they purchase on a regular basis,
while BGSU purchases a wide variety of items on various schedules. The vast array of items
to be purchased causes the BGSU purchasing staff to use many types of purchasing strategies
and have a broad range of relationship types.
The BGSU purchasing department has a history of conducting competitive purchasing
instead of using more strategic initiatives, yet they are currently beginning to move to more
long term relationships. The type of relationship established with a supplier varies with the
type of item and is very diverse across the board. There are many collaborative relationships,
and also many transactional, but no alliance. The purchasing staff is very unspecialized and
they have a limited knowledge, but they have knowledge on numerous types of items. Some
items require communication with suppliers on nearly a daily basis, while others may only
require communication once every few years.
Many of the problems that BGSU has faced with suppliers deal with delivery. They
have faced issues regarding the quality of a product when it arrives, long lead times, lost
deliveries, etc. These are issues that could be easily solved if BGSU had a collaborative or
alliance relationship with these suppliers, yet it seems as if many of the problems occur where
a transactional relationship is in place. Because of the nature of the relationship, there is not
effort placed into developing long term solutions to these problems. Instead, the supplier is
usually just not given any more business from the University.
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Although BGSU has had its problem suppliers, they have many good suppliers in
which there is a positive relationship. Many of BGSUs main suppliers often make the
purchasing staff feel as if BGSUs business is very important to their company. They often
take problems very seriously and will personally come to make visits and resolve issue. Even
though many companies may attempt to develop strong relationships, the University still
favors suppliers based on service and price. Repeat orders tend to go to the suppliers that have
provided a history of high service and low prices. In many cases BGSU is forced to go with
the lowest priced supplier because of state law, despite service level. The lowest priced
supplier may have weak service levels and no relationship with the University, while another
supplier has a strong relationship, yet state law does not allow this to be considered.
The leverage that BGSU has with its suppliers varies across the board as well. BGSU
has much more leverage when dealing with companies where they represent a large
percentage of those companies sales. BGSU is attempting to find ways to gain leverage with
companies, yet there are many cases where their leverage is minimal. These situations often
exist because of state mandated regulations, such as MBE and EDGE spending requirements.
Because the University is forced to spend a percentage with MBE and EDGE certified
suppliers, they often lose leverage in these situations. When handling suppliers in situations
such as these, where there is a low level of control, the purchasing department must take what
they are offered. These situations also often require a much greater deal of time spent on
follow-up and encouragement.
Buyer/Supplier Relationship from Global Corporation Standpoint

General Electric Transportation is a large global corporation. They are the worlds
leading producer of jet engines, which are used in commercial aircraft, military aircraft, and
18


marine applications. They have very strategic initiatives and work with their suppliers very
differently than a small business or a state institution. When making a purchase for GE there
is always a strong strategic initiative involved. GE is very much concerned with developing
good relationships and having suppliers with thorough understanding of the engines.
Because of the size of GE, most of their suppliers tend to be smaller than they are.
Although many suppliers are smaller, they do business with some large suppliers as well.
Some of their larger suppliers include Hamilton Sundstrand, BAE, and Honeywell. These
suppliers provide GE with very high dollar components; therefore, all procurements that take
place have a strategic plan behind them.
GE has developed a specific procurement policy/procedure that they follow when
conducting all negotiations. Once the negotiation is complete and a supplier is set, GE works
with these suppliers on a regular basis. The suppliers are critical to the success of the engine
and GE can not afford not to stay in close touch with them. Although all the suppliers are
considered to be important, some have more of a collaborative relationship, while others have
an alliance relationship. Within their collaborative relationships, the purchases are more
direct and follow the guidelines of GEs procurement system. The alliance relationships are
prevalent in cases where GE actually shares a product program with the supplier and becomes
partners with them. In these cases the alliance relationships are labeled as revenue share
programs, also known as joint ventures. Within the revenue share programs GE and the
supplier share the costs of the engine. Whether it is a collaborative or an alliance relationship,
GE believes that communication is the key to a successful relationship and both businesses
must be clear in their understanding of the ultimate goal and expectation.
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Even though GE has strong relationships with their suppliers they still experience
problems at times. Sometimes they run in to situations where the supplier is not able to fulfill
their contractual obligation that was negotiated early in the process. This could happen
because the supplier ends up not being able to meet target price, delivery requirements,
quality standards or the necessary level of technology needed. These problems often occur
because the supplier is only looking at the short term benefits, instead of looking at the long
term benefits of the relationship. The supplier may just not understand the long term goal,
they may feel that they can slack because they have no competition, or they may just choose
to disregard the needs of GE because they are not customer focused. When these situations
occur GE has to decide if they want to work with the problem supplier to resolve the issue, or
if they want to find a new supplier. They would like to work to improve the relationship, but
that is only possible when the supplier is willing to work with GE and make necessary
improvements. If a supplier is going to have a successful relationship with GE, they must be
willing to utilize tools like Six Sigma and Lean Manufacturing in order to help them become
more efficient.
Although GE maintains very close relationships with their suppliers, they make sure
that they are strictly business relationships. There is no favoritism that exits when sourcing a
part. When suppliers show GE respect and prove themselves with their performance, they
gain a reputation and may become part of a future supplier strategy. Although this does
occur, these suppliers are seen as having earned their right to be in such a position. When
working with suppliers, GE looks for a relationship built on respect. This respect is gained by
the suppliers recognizing the importance of GEs business and letting GEs representative see
the acknowledged importance. One way that suppliers show this respect is by giving GE the
20


proper attention, showing a strong customer focus, and responding to their contractual
obligations.
Because of the size of GE and the dollar amounts that they purchase they have a large
amount of leverage. Although this leverage exists, GE does not really view themselves as
taking advantage of leverage because of the type of relationships they have established. They
are more interested in working with the suppliers to have a clear vision and understanding of
the business goals, then using leverage to reduce price. In any business volume and
competition are going to influence leverage, but GE believes the key is having a professional
relationship established that is a win/win situation for both parties.
Conclusion/Analysis

JS Lighting Solutions, Bowling Green State University and General Electric
Transportation all have different ways of conducting their supplier relationships. Between the
three companies, instances of transactional, collaborative, and alliance relationship were all
observed. Based on the research done, it became clear to see why these different types of
relationships were efficient in each companys situation. JS, BGSU, and GE all used their
own style of supplier relationships to help them maintain success within their market.
The elements of Porters Five Forces Model that affect leverage were evident in all
three business examined. It became very clear that Porters model really does factor into real
world companies and their buyer/supplier situations. JS and BGSU are in similar situations
and primarily have transactional relationships with their suppliers. After interviewing
representatives from each of these two companies, we could see that the main reason they
were maintaining transactional relationships was due to their size and the types of purchases
they were making. They did not have the need to purchase large volumes, and the items they
21


commonly purchase are products that are undifferentiated or involve low switching costs.
These forces lead to the supplier having more leverage in most cases. Both JS and BGSU
realize their lack of control and are making attempts to gain more leverage, which would
potentially give them better future prices with suppliers. JS is attempting to increase leverage
by working with a minority business supplier, while BGSU in entering into a consortium with
other area schools. By working with a minority supplier JS will receive larger amounts of
business, due to the requirements placed on organizations such as BGSU, to have specific
levels of minority spend. BGSUs attempts to partner with other schools will increase their
purchase volumes and give them more leverage when negotiating prices.
Although GEs situation was much different than that of JS and BGSU, the elements
of Porters model were still apparent. GEs size and large purchase volume capability leads to
a large amount of leverage that they hold with their suppliers. The interesting part is that even
though GE holds a lot of leverage with their suppliers, they really do not focus on leverage
because of the nature of their relationships. The strong collaborative and alliance
relationships that GE maintains, lead to a more open, sharing relationship. Neither side is

then concerned with who has more leverage over the other, but more about how they can help
each other reach their business goals and result in a win/win situation.
Through this research we have learned a lot about how companies deal with their
suppliers. There is not one set way to conduct supplier relationships that will produce
successful results. There are many factors that must play into the situation and be considered
when establishing effective supplier relationships. Different types of businesses must find
their own ways of achieving success based on their size, type of items purchased, market
22


position, etc., and realize that there is always room to improve their relationships. In todays
competitive market having strong, stable supplier relationships are the key to success.
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