Krause et al. (1998, 43-45) suggest a 10-step process for SD. They state that there is a proactive (strategic) and a reactive approach. Additionally, they state the SD can function as a tool to improve the competitive advantage of a firm. Li et al. (2012, 353) also mention the competitive advantage of SD. However, they do not differentiate between a proactive and reactive approach. Supplier pools are frequently used with SD and management should categorize strategically important products and services. These categorizations are part of a process that takes place before an SD project is selected and this process is often led by pre-determined cross-functional teams (Krause et al. 1998, 48).
With the proactive approach, a firm has more time to consider different aspects and to prepare for decisions. There is a lower level of urgency for supplier improvements and a broader range of improvement topics is available. As a result, there is a higher chance an agreement is reached with the supplier. (Krause et al. 1998, 49-51) Additionally, the proactive approach results in improved supplier commitment and stronger collaboration due to a more equal distribution of investments. Krause et al. (1998, 52) state that supplier’s achievements are more frequently recognized and rewarded with the proactive approach. With the reactive approach, a firm has less time to consider different aspects and less time to prepare for decisions. The SD is in this case has an ad-hoc nature and is only initiated once clear supplier underperformance is recognised. (Krause et al. 1998,
44-45) Due to its “firefighting” nature, the reactive approach increases pressure on the supplier performance and as a result, the chances of success are lower. From a supplier’s point of view, the reactive approach is less often experiences as a collaboration or joint venture, which in turn narrows their views in the hunt for a result. These projects are often carried out by teams that are less diverse compared to the proactive approach. As a result, this narrowed view also leads to missing out on promising possibilities as there are fewer opportunities to investigate them further.
The 10-step approach of Krause et al. (1998) starts with gathering information that is relevant for the SD project. Later steps are focused on turning the SD project into a buyer-supplier relationship. The 10-step approach ends with continuous improvements. These steps have similarities with the framework proposed by Park et al. (2010). Their framework also starts with defining certain parameters, then developing the supplier relationship and lastly the element of continuous improvement. Hughes & Wadd (2012, 26) mention that continuous improvement can be stimulated by giving multiple suppliers the same type of business and rewarding those who perform better with a higher share of the volume.
Khan & Nicholson (2014, 1215-1216) researched SD programs between suppliers from developing countries and buyers from developed countries. They argue that SD consists of three stages, namely the qualification stage, the evaluation stage, and the interactive stage. They mention that during each of these stages the type of buyer-supplier contact and the information/technology sharing is different. During the first stage, criteria are established and suppliers are selected. Certain product technology and information are shared by the buyer with the supplier. There is a one-way information flow with limited explanation. Khan & Nicholson (2014, 1215-1217) argue the existence of a gap regarding the buyer-supplier information sharing during this stage. They state that, at this stage, the supplier is often unable to understand, grasp, and use the provided information due to lacking capabilities. Khan & Nicholson (2014, 1215-1217) conclude that the first stage has a more transactional nature and can therefore not be classified as SD for the supplier.
In Khan & Nicholson (2014, 1217-1218) their research suppliers are asked to provide a prototype with the given information and instructions. Those with the best prototypes advance to the second stage. More managerial information and information/technology about the product/process are shared. In this stage, another prototype is requested and there is an increased level of socialization between the buyer and supplier. Khan &
Nicholson (2014) note that the decision on who progresses to the third and last stage mainly depends on the level of socialization achieved.
Quality training is given during the third stage. There is two-way multi-layered communication, and face-to-face contact is increased. Multi-layered communication, the development of buyer-supplier-supplier relationships, and sharing of strategically sensitive codified information are characteristics of this stage. Trust levels are increased between all stakeholders to enable the sharing of sensitive information. (Khan &
Nicholson 2014, 1218-1219) The findings of Khan & Nicholson (2014) raise an interesting point. What can be perceived as SD from a buyer’s point of view, is not necessarily perceived as such from a supplier’s point of view. Their 3-step approach has similarities with the 10 steps mentioned by Krause et al. (1998). First, there is information gathering, followed up by relationship development. Khan & Nicholson (2014) however, did not mention anything about continuous improvement.
Blonska et al. (2013, 1295) suggest that, at times, supply chain partners are not getting the expected benefits from SD because of supplier’s reluctance to invest. Hence, in these cases, SD efforts result in decreased performance and satisfaction. Krause et al. (2000, 34) mention four strategies that can be used regarding SD. Supplier performance can be improved through 1) supplier assessment, 2) providing suppliers with incentives for improved performance, 3) instigating competition among suppliers, 4) direct involvement of the buying firm’s personnel with suppliers through activities such as training of supplier’s personnel. Depending on the situation and the overall goal of the SD action, a combination of different strategies can be used.
Krause & Ellram (1997, 21-25) mention several critical elements of SD from a buyer firm’s perspective. Two-way communication across different departments between firms can improve quality. Top management should be involved as they have insights into an organisation’s strategic needs and long-term goals, which can be crucial inputs for successful SD. Cross-functional teams should be used as experts from different departments are better capable of handling diverse SD topics.
Krause & Ellram (1997, 21-25) mention price versus total cost of ownership. SD can only be successful if the total cost of ownership is applied. Only considering the price is insufficient if success with SD is to be achieved. The long-term perspective is a requirement for success, which can only be achieved if all involved parties are willing to invest in the project and if there is a true risk for all. Additionally, lack of commitment can be a barrier to establishing a long-term perspective. If a firm generates a large percentage of a supplier’s annual sales it can be used as leverage over the supplier. This can also be used as motivation when dealing with an uncooperative supplier. However, this leverage should not be used purely because it exists. Supplier evaluation is required to identify and measure SD projects. However, supplier evaluation is not in and on itself part of SD. Lastly, supplier recognition can be used for motivating suppliers or to mark a milestone of the SD endeavour.
Krause & Ellram (1997, 21-22) mentions that SD can be applied when a supplier’s performance is not sufficient. They also mention that the nature of SD can either be remedial or strategic, which matches the views Krause et al. (1998). SD can be important for the national, corporate, and purchasing aspects of an organisation Krause & Ellram (1997, 21-22). Dalvi & Kant (2015, 654) state that a firm can only engage in SD once all supplier selection activities have been completed.