BUS606: Operations and Supply Chain Management

Supplier relationship management is one of the most important aspect of supply chain management. As purported, effective supplier relationship management and improving qualitative and quantitative levels of suppliers could be a competitive advantage of every company. In recent years, Supplier Relationship Management (SRM) has had a trend from traditional relationship to logistic relationship to partnership relationship. Wynstra et al. argued that suppliers are sources of ideas, technologies and savings in time and money. Ellram argues that when dealing with multiple suppliers, it is costly to coordinate the procurement process and to monitor the quality consistency of many different suppliers. Public procurement is one area that lags behind in terms of change especially in least developed nations. Most public sectors in least developed nations use a traditional procurement system which is purely based on adversarial relationships with many suppliers. Bid and Bash approach (Welch, 2003) is used in the tendering process which focuses on the lowest bid and arm's length relationships with many suppliers. The contracts awarded to suppliers have a fixed expiry date, which means that their relationships end on the expiry date of the contract and a new tendering process will be triggered where potential suppliers are prompted to compete between them again.

Erridge and Nondi found that ‘the extreme form of competitive bidding is, on the whole, incompatible with successful achievement of value for money. Erridge and Nondi further argues that extreme forms of competitive bidding are detrimental. These forms involve: rigid application of tendering procedures for low value items regardless of on-costs; too many suppliers; short-term contracts and the absence of cooperation from suppliers. The adversarial approach to supplier relationship management does not engender value for money, the core principle governing public procurement.

The advent of the Public Procurement Act, 2003 addresses so many procurement issues but does not address supplier relationship management issues to achieve a long term benefit for the organization that will bring a win-win approach for the benefit of the organization. It is for this reason that this work is being undertaken to show the additional benefits that supplier relationship management will help improve and add more value to the aims of the Act 663 such as transparency, accountability and the ethical standards to ensure the judicious, economics and efficient use of state resources in public procurement. This will also ensure that public procurement is carried out in a fair, transparent and non-discriminatory manner.

The challenges posed by the use of traditional procurement system in the Public sector procurement calls for a re-evaluation of the approach to come up with the best strategy for managing supplier relationships that beget value for money. Public procurement is an area that is rich for reforms and cost savings opportunities, increase product and service quality. How can supplier relationship be managed in order to bring value for money in Public sector procurement? What benefits can the public sector gain from long term relationships with few suppliers? The study sought to answer the above research questions.

It is against this backdrop that this study was set to identify different supplier relationship strategies which engender value for money in public procurement and the gains and improvement these relationship offer public sector procurement.