Definition: Developing Collaborative Supplier Partnerships

Definition

p. In order to maintain pace with today’s increased competition, larger organizations are becoming more dependent on suppliers. Outsourcing has become a way of life at many companies as they are looking toward suppliers for solutions. It is important to address varying definitions of collaboration and supplier development to discern different viewpoints. Though there are similarities between the definitions, each definition covers something that the others do not.

According to Partnership Sourcing Ltd., a body created by England’s government and various industries, partnership sourcing is defined as:

Where customers and suppliers develop such a close and long-term relationship that the two work together as partners. It isn’t philanthropy: the aim is to secure the best possible commercial advantage. The principle is that teamwork is better than combat. If the end customer is to be best served, then the parties must work together – and both must win. Partnership sourcing works because both parties have an interest in each other’s success (1).

Monczka, Trent, and Handfield, define collaboration as:

The process by which partners adopt a high level of purposeful cooperation to maintain a trading relationship over time. The relationship is bilateral; both parties have the power to shape its nature and future direction over time. Mutual commitment to the future and a balanced power relationship are essential to the process. While collaborative relationships are not devoid of conflict, they include mechanisms for managing conflict built into the relationship (2).

Finally, Krause and Handfield define supplier development as:

A bilateral effort by both the buying and supplying organizations to jointly improve the supplier’s performance and/or capabilities in one or more of the following areas: cost, quality, delivery, time-to-market, technology, environmental responsibility, and managerial capability, and financial viability (3).

The importance of developing relationships with collaborative suppliers has risen within the past three decades in the United States. Nowhere else is this more apparent than in the auto industry. The Japanese have made impressive strides by chipping away at the Big Three’s market share starting back in the 1970s (4). Spurred by this competition, domestic automobile producers have begun to understand the importance of integrating suppliers into their networks and leveraging this into a competitive advantage (5).

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