The role of risk management in buyer-supplier relationships with a preferred customer status for total quality management

Abstract

PurposeThis paper provides a comprehensive risk management framework for buyer-supplier relationships where the buyer has the status of a preferred customer with the supplier.Design/methodology/approachEmpirical evidence is offered with a case study on a large multinational organization in the Fast Moving Consumer Goods (FMCG) industry, with some real-life perspectives on the main risks, mitigation strategies, and issues faced when applying the risk management framework.FindingsThe results show that several risks may affect buyer-supplier relationships: not only traditional supply risks but also risks linked to specific initiatives and/or relationships, as well as risks specific to buyer-supplier relationships with a preferred customer status. Customer attractiveness and supplier satisfaction are found as core drivers for the mitigation strategies, which are built to protect the relationship with the supplier, rather than the buying firm alone, knowing that being a preferred customer with preferential resources allocation may increase a firm’s competitive advantage.Originality/valueThe research brings important contributions to the academic literature and interesting insights to strategic purchasing practitioners, by enhancing the existing knowledge on supply risk management in buyer-supplier relationships with a preferred customer status, as well as providing strategic purchasing practitioners a comprehensive view of the risks, which may affect the relationships with a preferred customer status, as well as possible ways to mitigate them.

Managing TQM's soft side: an explorative study of social care multiservice organizations

“…Supplier management: Relationships with suppliers have been discussed in the soft TQM literature, which has often questioned the necessity of implementing a specific system to control processes and relational exchanges to ensure the success of a project (Pellegrino et al, 2020;Sriyakul et al, 2019). Eventually, if it is impossible to adopt these protocols within social care organizations, specific human resources could be allocated to perform such tasks.…”

The Influence of Total Quality Management (TQM) on Quality Cost Efficiency and Managerial Performance and the Implications for Company Performance

“…Throughout the operation, there is a continuous effort focused on quality areas (Pellegrino, Costantino, & Tauro, 2020). The concept of quality-oriented towards customer satisfaction in an integrated manner and reasonable quality costs should be established as one of the primary objectives.…”

Increasing preferential treatment through supplier satisfaction: the impact of social exchange theory, resource dependency theory and culture

“…Their hypothesis confirms that customer attraction and supplier satisfaction are two different concepts which can influence the behaviour of suppliers in different ways. Pellegrino et al (2020) provided in their research a framework regarding risk management for buyer-supplier relationships where the buying firm has the preferred Chapter 1: Thesis background and research structure customer status with the supplier. Contributing to the study of Pulles et al (2016a), their research showed that customer attractiveness and supplier satisfaction are different concepts and "should be treated as distinctive variables with diverse roles in relationships with a preferred customer" (Pellegrino et al, 2020, p. 975).…”

“…A preferred customer receives special treatment from its supplier, such as a collaborative development or allocation of its best personnel, thereby gaining competitive advantages over its competitor (Pulles et al, 2016a). Preferential resource allocation implies a stronger buyer-supplier relationship (Glas, 2018;Pellegrino et al, 2020). Consequently, satisfaction has been argued to be necessary to achieve preferential resource allocation by a supplier (Schiele et al, 2012).…”

“…Quinn and Rohrbaugh (1981) (2016). One of the main reasons is the shift from short-term relationships with many suppliers to long-term relationships with few suppliers Pellegrino et al, 2020). However, the buying firm will only have a long-term relationship with its strategic suppliers.…”