Page 108 - DMGT525_MATERIALS_MANAGEMENT

Unit 7: Selection of Suppliers

However, the present Indian situation is far away from such world class thinking. In the present Notes
socio-economic milieu prevailing in our country where trust and concern are found somewhat
wanting, the Indian companies seem to find more advantages in multiple-source buying. But
still the choice between single source and multiple source buying is quite situational. Vendor
development can be seen as an attempt to get the advantages of both spreading risk, building
competition and at the same time establishing a good rapport. Vendor development involves
helping or building up the vendor by various means such as:
 Lending money for part of his capital equipment working capital requirement, etc.
 Lending technical help by making company engineers and technicians available to the
vendor to help him tide over the initial technical problems.
 Help in R&D, by again lending technical help to not only to establish the company, but
also to help improve its products and services on a continuous basis.

 Guaranteeing him a certain amount of business (This is particularly needed during initial
stages of setting up the vendor)
Such efforts on the part of the buying company will produce a kind of goodwill and rapport
between the two companies. Such a vendor will be willing to listen to the special problems of
the buying company and, therefore will be an asset to the buying company.

Some of the vendor companies may be large and established companies who may not need
financial, technical or R&D assistance. But such companies can still be cultivated in many other
ways by collaborating with them in various projects of interest to them, jointly investing in a
project to produce common raw material required by the supplying and the buying companies,
etc.
Self Assessment

10. One of the reasons for developing new vendors is to build more ……………….. in the
supply market.

11. The supplying company might even do some ……………………. gathering work for the
buying company.
12. The choice between …………….. source and …………… source buying is quite situational.

7.4 Vendors Relationship

Another important objective in purchasing management is that or maintaining good relation,
with vendor. A good vendor is an asset to the company; and, therefore, just at customer goodwill
it is considered as important. A good relationship with the vendor should also be treated
likewise. A vender who supplies the proper quality material in proper amounts in proper time
is not very easy to find. Moreover, there are many situations where materials are required in a
hurry. There are situations where materials are in shortage in the supply market. In all such
situations, good relationships with the vendors pay dividends, this may entail: personal
relationship as well as professional relationship:
(a) By helping the vendor in times of stress and strain with financial aid, technical aid, by
providing management skills if necessary, and
(b) Maintaining a healthy professional relationship by fair negotiations, fair evaluations and
fair compensation.

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