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The Missing Ingredient in Your Partnerships

Written by Ken Kinlock
Published on Tuesday, 24 April 2012

Kinlock HandShakeIn Lean Supply Chain Management and in Virtual Supply Chain Management discussions there are many references to “partnering”. Partnership means much more than just: purchasing parts from a supplier; contracting for services from a vendor; or selling products to a customer. In a partnership, both of you are “teaming” to help each other succeed.

It is not usually a formal partnership in the legal sense, but instead is an ad hoc  “virtual partnership.” Many times this is referred to as ”collaboration.” It is all about sending new customers or other beneficial resources, like cost savings, to your partner; and receiving benefits in return.

 It is a formalized process. It is not usually the “hand shake agreement” like the one that formalizes the relationship between manufacturer Whirlpool and retailer Sears. The most prevalent document is the “Non-Circumvention and Non-Disclosure Agreement.”  This is used so that partners can freely discuss business processes just as if they were the same company. Many companies have a formal “Partnership Agreement” in which vendors provide a “Master Services Agreement.”

Suppliers may require a “Credit Application” and in partnerships, a vendor may use a “Reseller Agreement.” Other manufacturers require a “Supplier Qualification” form which requests company information and products. In the case where the government is the ultimate customer, additional information about the company is typically required. And usually, companies that are truly partnering will exchange Business Plans and Product Catalogs.

Joost W. van der Laan of Retaileconomics  describes the virtual partnership:

“Imagine a virtual organization that encompasses a group of trading companies, all working together to maximize customer service, slash costs and share the profits. By optimizing not only their internal processes but also their interactions with each other, they realize benefits of a truly integrated supply chain. This concept is basis for the next revolution in development of supply chain integration and synchronization, to create "excellent service organizations". “

A  classic example of collaboration between retailers and manufacturers is Wal*Mart and Procter & Gamble. This partnership began in the 1980's. Up to that point retailers did not share information with their suppliers. P&G hooked up electronically with the Wal*Mart distribution centers and could use the data to determine shipping requirements. This arrangement progressed to real time Point Of Sale information from the stores. That is when P&G benefits got better - they knew when to make the products. Wal*Mart benefits got better too: P&G gave them “low everyday prices”.

 

Procter & Gamble (on their website) describes its attitude on partnering with suppliers:

“P&G wants to be the business partner of choice because we believe more value can be created in effective collaboration with the right partners than we could achieve alone. In our efforts to foster effective collaborations, we continually seek to understand how our needs and capabilities can be aligned with our partners’ to build our businesses together.”

 3PL Logistics Providers fit it here too. After all, they replace your corporate transportation and your warehouses. Gotta trust them!

 Much of the information flow can be simplified if all the companies in a virtual partnership (suppliers, service vendors, etc.) join Retail Universe. Not only will it provide information throughout the partnership, but it will give each team member additional exposure.

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