Academic journal article Journal of Purchasing & Materials Management

Supplier Development

Academic journal article Journal of Purchasing & Materials Management

Supplier Development

Article excerpt

Supplier Development

One of purchasing's most-critical decision areas is the selection of sources of supply. This selection process may range in complexity from a buyer's five-minute interview with a salesman to a search lasting months or years and involving company personnel in disciplines such as production, sales, and finance. Supplier development, as defined below, falls into a special category within this overall selection process. It need not take a long time, and it often is surprisingly simple. Properly used, it can be an extremely effective purchasing tool.

Normal practice probably would demand a proper definition at this point, followed by an explanation of the author's interest and his method of research. However, since this topic in itself has some connotation of being unorthodox, aggressive, and imaginative, conformity will be disregarded. Let us, therefore, proceed directly to an actual illustration of supplier development at work.

CANADIAN BOWLING CONSULTANTS

Canadian Bowling Consultants (CBCo) had its head office and main plant in Toronto. It sold a complete line of bowling equipment and provided all of the services (financial, engineering, installation and marketing) that a bowling center's owner might need. CBCo enjoyed a Canadian monopoly and had an excellent reputation for quality and service.

The purchase of automatic pinsetters was chosen as a typical example of supplier development in action.

Automatic Pinsetters

Canadian Bowling Consultants sold automatic pinsetters to bowling establishment owners as part of its complete bowling equipment service. Depending on the number of lanes, an installation of automatic pinsetters might cost anywhere from $6,000 to $150,000, at an average cost of $3,000 per lane.

In the spring of 1954, Mr. A. Johnston, purchasing agent for CBCo, became increasingly concerned about the purchasing arrangements for automatic pinsetters. Until 1954, CBCo had bought all of its automatic pinsetters from Walker's, a Canadian subsidiary of an American manufacturing company. Walker's of Canada imported these machines from the parent and in 1954 its sales to CBCo were almost $500,000. Mr. Johnston had tried, without success, on several occasions to persuade Walker's to import the parts and to assemble pinsetters in Canada. Mr. Johnston discussed the matter with CBCo's chief engineer, who had no desire to change suppliers. "Look at the service we get from Walker's," the chief engineer said. "Every time the slightest thing goes wrong at any alley, or any time we have some problem here, all we have to do is call them and they come running." Walker's service had been excellent. Their sales representative always had dealt directly with CBCo's engineers and neither they nor the engineers saw any need to draw purchasing into any negotiations. Frequently Walker's representatives knew about a new installation before Mr. Johnston heard about it.

Despite the cool reception from his chief engineer, Mr. Johnston decided to look further into the matter. He knew that Walker's was the only Canadian source of pinsetters. He also knew that the basic manufacturing skills involved in the production of automatic pinsetters should be available in Canada. A survey of American suppliers showed that only three manufacturers, one of which was the parent of Walker's, were available there. Discussions with the two competitors of Walker's showed that neither was particularly interested in selling to CBCo. One of the reasons for their reluctance was CBCo's request for five-pin setters, on which Walker's had done engineering development and they had not. The other reason was that Mr. Johnston expected a reduction in price on the basis of Canadian assembly. Neither competitor had a Canadian subsidiary.

Mr. Johnston discussed his problem with the president of the American Bowlers League during a chance encounter. …

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