Working Relations Research Fundamentals

 

Working Relations Index®

The Working Relations Index® (WRI®) methodology is a quantification of suppliers’ qualitative working experiences with a single company (Buyer) to whom they provide products and/or services. The WRI® result is expressed as a single metric and represents the degree to which collaborative supplier working relations are present (Figures 1 and 2).
PPI’s WRI® model is comprised of five major components with each component containing two or more variables (Figure 1). Each variable is represented by one or more questions in the survey questionnaire. The value of each individual variable is the average response of the suppliers who answered the variable-related question.
The WRI® metric is calculated by combining a weighted average response of each variable of a specific component to obtain the component score. Each of the five component scores are then weighted and combined to provide an overall WRI® metric for each company or other client-defined category within the company, e.g. division, geographic region, manufacturing site, purchase area, etc.

 

The weights applied to the variables and components and the formula to calculate the WRI® metrics are the intellectual property of PPI and is not ever shared with any individuals outside of PPI.

 

The WRI® model was created by Professor John Henke in 2002, ten years after he began conducting in-depth confidential supplier surveys for various North American OEMs, which evolved into the Annual Automotive Industry™ Study. The results of the Annual Studies were captured in a comprehensive PPI supplier working relations database. Using this data, Professor Henke, through rigorous statistical analysis and modeling, discovered and verified that the behavior variables of the WRI® model (Figure 1) were an accurate quantitative measure of a company’s working relations with its suppliers.

 

 


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Foundational Activites

In early 2014 it became increasingly apparent that there was something more than just the Relational Activities impacting buyer-supplier relations. After a year of research PPI identified and corroborated the presence of two sets of Foundational Activities that are associated with collaborative supplier relations as measured by the WRI®.

These Activities are called Foundational because they provide the necessary foundation for collaborative working relations, as measured by the WRI®, to develop, while not being sufficient to influence the Working Relations Index® to achieve a WRI® in the Good-Very Good category.

As is the case with the WRI®, these Foundational Activities both have their own Indices, the Purchasing Agent Index and the Basic Business Practices Index.




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Contribution to Profit

Results of our newest study, OEM Profitability and Supplier Relations, show that most manufacturing companies could significantly improve their profits – some by hundreds of millions of dollars — simply by improving their supplier relations. The results are determined by a unique economic model developed by Planning Perspectives that proves and predicts a direct cause-effect relationship between an OEM’s supplier relations and the OEM’s profitability, or in other words, a company’s return on supplier relations. Click on the links below for further information.

 

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