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Firms can also choose to direct resources into improving supplier relations. This includes expenditures directed towards negotiating single source contracts, providing suppliers with forecast demands and educating suppliers in JIT and TQM techniques. It may also extend to paying supplier incentives for supplying quality products, consulting suppliers when designing new products and paying increased transportation costs for more frequent deliveries.
The benefits of investing in supplier relations include reducing line stoppages due to the unavailability or inadequate quality of purchased products and reducing the defect rate of production.
Current relationships with suppliers are only about half as good as they could be. It requires around $27,000 to maintain supplier relations at this level, otherwise it will decay with time. As shown below, significant investment is required to improve relations beyond about 0.70.
