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Paper info: From product to performance: creating business relationships

Title


From product to performance: creating business relationships

Authors


Benjamin Sthl

Place of Publication


The paper was published at the 18th IMP-conference in Perth, Australia in 2002.

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Abstract


This paper elaborates on why and how business relationships develop through an indepthstudy of a world-leading industrial tooling company (ITC). The study of the ITCfocuses on the development of a "preferred supplier" concept, developed in the UKsubsidiary since the mid-1990's. The aim was to capture business volume at customersthrough greatly increased embeddedness from a legal, technical and social point ofview. In brief, the ITC offers greater productivity at the customer plant throughproductivity analysis using its network knowledge of cutting, milling and drillingoperations and the tools involved. This has been codified in a software package. TheICT also offers automated, real-time stock control and consignment stocks.The case study highlights some important implications of business relationships. Itshows that strong ties can be built relatively fast if a working methodology exists and ifbuyers are willing to give suppliers a greater role. The main driver for the relationshipin general, commitment, investments and trust, is the explicit methodology anddocumentation of achievements in terms of productivity gains and cost savings. It is thenetwork knowledge of the ITC that is exchanged, not the tools themselves but rather theoptimization of the activities that they perform. For the ITC, what was previously afragmented but stable market is becoming a winner-takes-all market, at the customerlevel. This indicates that increased levels of supplier-customer embeddedness can leadto fierce competition among suppliers.