A Managerial Guideline for the Development and Implementation of Purchasing Partnerships

BACKGROUND As the nature of the global competitive environment changes, the interest in various types of alliances and partnerships has grown. Many successful firms are turning away from adversarial relationships with trading partners and moving toward an increasing reliance on parties outside the firm. Further, as companies look more frequently to the purchasing function to help them meet their cost and quality goals, the possibility of forming partnerships with suppliers has become an area of great interest to many firms.[1] A purchasing partnership is defined here as, "An agreement between a buyer and a supplier that involves a commitment over an extended time period, and includes the sharing of information along with a sharing of the risks and rewards of the relationship."[2] Thus, a supplier partnership differs from traditional supplier relationships in that it involves an inherent trust, as well as a mutual commitment and sharing. Firms are interested in forming partnerships rather than adversarial relationships because the former can provide a number of advantages over the latter. These advantages are summarized in Table I. in addition, in some types of operating environments, such as one utilizing a just-in-time system, supplier partnerships are a requirement for effective operations.[3] Partnerships may well represent a logical form of relationship to develop if the supplier base has been reduced, if quality and dependability are critical, or if the quality of suppliers varies. Partnerships may also be important if the supplier's system is tightly coupled with the firm's manufacturing system. As more firms become interested and involved in forming supplier partnerships, a guide is needed to help these firms in the selection of potential partners, and in the development and implementation of the relationship. This article proposes a model for firms that are interested in developing supplier partnerships. The model provides guidance throughout the entire process - from the selection of a potential partner to the dissolution of an unsatisfactory relationship. The model was developed by combining a review of the relevant literature with the results of a series of case studies of firms that were successfully involved in purchasing partnerships. The first section of the article provides a brief overview of the relevant literature; this is followed by the development of a five-stage model for partnership development. The article concludes with a discussion of the importance of purchasing partnerships in the future. LITERATURE ON PURCHASING PARTNERSHIPS While work in the area of purchasing partnerships is growing every year, it is still limited. Work has been done that describes the different types of purchasing relationships,[4] the philosophical issues a firm must address in shaping its attitudes toward suppliers,[5] and the changes required in a firm's operating procedures before supplier partnerships can be implemented successfully.[6] The need for forming purchasing partnerships and the potential benefits of forming them are also recurring themes in the literature.[7] Leenders and Blenkhorn have written a book[8] that describes an eleven-phase process for implementing what they term "reverse marketing." Reverse marketing represents a purchasing philosophy in which the purchasing function takes a strong proactive approach to seeking out qualified suppliers that meet the firm's supply objectives. While reverse marketing does not require the development of a partnership type relationship, a partnership relationship may occur within reverse marketing if it is mutually beneficial for the buyer and the seller to share risks and rewards. Similarly, Hahn et al.[9] propose a conceptual model for supplier development. An outcome of successful implementation of their model could be a purchasing partnership. There appears to be a consensus in the literature that supplier partnerships develop over time, rather than being constructed overnight. …