Buyers and sellers in mature industrial markets can turn single transactions into long-term beneficial relationships by a deeper understanding of the complex connection between the two.
A “must-do” for the sellers, in particular, is to understand patterns of investment and reward, and effectively manage the process that defines the dynamics of buyer-seller evolution.
The buyer is the person or organization that purchases products from suppliers. A buyer could be a manufacturer purchasing raw materials or a customer buying a finished product from a retailer. The relationship between the buyer and seller can be either short-term (one-off or low commitment purchases) or long-term, involving regular purchases based on established agreements.
Two types of buyer-seller relationships
Both short-term and long-term buyer and seller relationships have advantages and disadvantages.
- Short-term relations
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.
- prices of materials are volatile
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.
- Little scope
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,
- the opportunity to share market information is also reduced.
- Long-term relations
8 Advantages of long-term relations
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
- there may be more flexibility in the timing of payments.
- Trust between the buyer and seller is developed over time
- Allow for the sharing of information, forecasts, knowledge, and customers between the buyer and seller.
- Supply chain partnerships can be formed between organizations to provide a
- Level of stability and encourage long-term commitment from different parties towards achieving results.
- 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.
Supply chain partnerships
Three critical aspects of supply chain partnerships are:
recognizing opportunities that would benefit from a partnership, selecting the right partners, and meeting your requirements as a partner.
Generally, most organizations 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.
Buyer and Sales Representative Interaction:
The most important part of the buyer-seller relationship is the interaction between a representative of the buying organization (buyer) and a representative of the selling organization (sales representative or sales representative).
There are many other persons from both the organizations involved in the relationship, but the basic building block of the relationship is based on buyer and sales representative interactions. When the buyer and the sales representative meet, the nature of their interactions depends upon their roles, behavior, and perceptions.