Both short term and long term buyer and seller relationships have advantages and disadvantages. Short term relations can be useful when a degree of flexibility is required. For example, short term agreements give the buyer the option to switch suppliers for their next purchase.
They can also be beneficial in markets where the prices of materials are volatile and long term commitments are not appropriate. The high level of competition to win short term contracts can also provide opportunities for price discounting and special deals to be done.
However, short term arrangements also have their disadvantages. They generally provide little scope for payment and order flexibility. For example, a new supplier on a short term agreement will want a definite order and prompt payment. There is no trust built up over time between parties, so the opportunity to share market information is also reduced.
There are many advantages that come as a result of building strong buyer and seller relations over a period of time. There is a greater commitment from both groups which means that you will be better able to rely on them when it comes to orders and payments. There may also be more scope for discounts after the relationship is established and there may be more flexibility in the timing of payments. Trust between the buyer and seller is developed over time and this may allow for the sharing of information, forecasts, knowledge and customers between the buyer and seller.
However, long term buyer and seller relationships generally involve a high level of commitment and work to maintain. Entering into long term contracts may be involved so it is important to have accurate forecasts about the future performance and needs of both businesses. Generally, most organisations will have a balance of both long term and short term relationships with their buyers and sellers. This balance can provide some of the benefits of both, while also reducing the amount of associated risks potential problems
No comments:
Post a Comment