Maintaining Buyer-Supplier Partnerships

INTRODUCTION Long-term, participative partnerships between companies are a significant development for many U.S. firms.[1] Collaborative relationships have permitted many industrial buyers to strengthen their competitive positions by concentrating bilateral efforts on improving areas of mutual concern, such as quality, productivity, delivery, and customer satisfaction.[2] The cumulative success of such initiatives is normally the result of mutual efforts focused on: * Improved communication * Clarification of needs and expectations * Elimination of problems and concerns * Consistent performance * Creation of competitive advantages[3] Effective buyer-supplier partnerships are also instrumental in stimulating cross-functional activity within the individual companies, resulting in cross-functional improvements between companies.[4] Given these benefits, it appears that developing and maintaining collaborative relationships between buyers and selected suppliers will continue to be a critical activity in many industrial firms.[5] The purpose of this article is to provide a model that illustrates the fundamental stages necessary to develop and maintain a buyer-supplier partnership - and to propose possible alternatives that can restore performance stability when a partnership encounters problems. In the following section, a background of related research identifies the need for the model. In the next section, the stages necessary for establishing buyer-seller partnerships are presented. The subsequent section describes three alternatives for reestablishing performance stability when a buyer-seller partnership encounters a significant disruption of expected performance. And finally, a conclusion focuses on explicit managerial and operational implications. While the findings presented in this article have not been tested empirically, they are based on data gathered from more than 30 field interviews with supply and marketing managers involved in buyer-supplier partnerships - and they should be useful to others involved in similar relationships. These managers were employed in large and medium-sized manufacturing firms, had two to three years experience in buyer-seller partnerships, and additionally had experienced more than one partnership. WHAT RESEARCH HAS DISCOVERED ABOUT PARTNERING A number of researchers have written about how to develop and manage buyer-supplier partnerships. The major findings of their studies are summarized below: * Buyer-supplier partnering relationships can offer positive and clear-cut advantages to both parties.[6] * Guidelines for deciding when to use partnerships and how to select partners have been developed.[7] * Life-cycle patterns in industrial buyer-supplier partnerships have been indentified.[8] * Specific guidelines for establishing buyer-supplier partnerships have been developed.[9] * Buyer-supplier partnering creates an important path for the development of total quality in the purchasing function.[10] * A strategic view of the partnering process suggests that successful partnering must include defining partnership types and management modes, coupled with the mapping of potential relationships.[11] Only a limited amount of research has examined the factors behind the survival and progression of buyer-supplier partnerships.[12] Key findings are: * Product information and social exchange among partners lead to both cooperation and adaptation. Adaptation is the process of making investments in the relationship, and is affected by the degree of coordination and cross-functionality between the firms.[13] * The maintenance of long-term buyer-supplier partnerships requires an ongoing commitment from both parties if the relationship is to continuously improve. * Partners must develop trust and assure commitment through open and candid communication, shared product and process developments, achievement of joint performance requirements, and positive responses to performance problems. …