The upcoming Supply Chain Resource Cooperative Bi-annual meeting is taking place on April 19, in historic Reynolds Coliseum, (with the memories of Jimmy V echoing in the hallways). It is only fitting that this year’s meeting takes place in a location with so many memories, as the meeting theme of relational contracting is one that Jimmy V. himself believed firmly in.
What is relational contracting? One definition espoused by IACCM:
A legally enforceable contract establishing a commercial partnership within a flexible contractual framework based on social norms and jointly defined objectives, prioritizing a relationship with continuous alignment of interests before the commercial transactions.
The inherent assumption in this definition is that both parties are in it for the long-haul, that they can’t predict what the future will bring, but that they agree to work together to resolve issues as they arise in a collaborative, honest, ethical and productive manner. Or as I like to say, “trust is based on a series of small promises kept“.
This is all well and good in theory, but how does this work in the real world of supply chains, which are fraught with uncertainty and risk? Where the dominant discussion on the part of procurement is to “hammer suppliers on price”, while sales people try to find ways to “make the most margin possible from this guy”?
In fact, the SCRC is conducting extensive research in conjunction with IACCM on this new form of contracting, and we introduced a new class on relational contracting this semester. The MBA class involved having students 1) reviewing a contract and highlighting the risks, 2) conducting a contract negotiation for a poorly developed contract in a relationship with a history of problems, and 3) writing a research paper on different applications of relational contracts in different sectors at the companies these online students were working in. I will be publishing a few of these papers on this blog in the weeks ahead.
Meanwhile, our upcoming SCRC meeting on “Relational Contracting in an Uncertain Ecosystem” will involve an extensive discussion of this topic from a variety of perspectives. I will begin with an overview of what we know about relational contracting, and this will be followed by a great presentation by Joseph Martinez, CPO of MUFG, on “Emerging Digital Imperatives for Financial Sector”. This will be followed by an overview of the global economy under the new era of looming trade wars by Jason Schenker, a renowned economist who is a #1 top ranked forecaster by Bloomberg. Next, my good friend Tim Cummins, CEO of IACCM, will share his thoughts on “Trends in global contracting: terms, standards and technology”. (If you haven’t been to either of Jason’s or Tim’s speaking events, I promise you, you are in for a few good laughs as well!”) Next, Pete Suerken from RTI will talk about “Key Drivers of Cost in Global Resin Markets”. This discussion will open up the curtains on what is really happening in global commodity markets (not just resin), and how the use of specialized market intelligence can drive significant value in procurement. Finally, we will have a panel discussion from a series of experts, including Ted Botzum from Global SRN, Tim Cummins from IACCM, Raj Goyal from Boddhala, Lynn Digirolamo from MetLife, Bill Knittle from Cheniere, and Fred Vitale from Accenture.
What a lineup! You don’t want to miss this opportunity to hear some of the leading experts talk about relational contract. And maybe the spirit of Jimmy V in the old Reynolds Coliseum as well.