With more and more value being found with supplier relationships, such as, Chrysler in the 90’s creating collaborative and strategic relationships that reduced time to market by 30% and profit margins per vehicle increased an average of 750%, before being acquired by Daimler’s Mercedes Benz.

These relationships are attractive, however, the resource-intensive approach cause less glamorized failures of strategic supplier relationships. So what are some approaches to the common categorization of transactional, collaborative, and strategic relationships?

Transactional- These involve commodities, costs of doing business, and none value-add purchases. Transactional relationships, usually involve price volatility, demand volatility, and low barriers to switching suppliers. These constraints create problems to sharing risks and benefits when prices of commodities are high or low, causing suppliers to overstock or stockout due to buyer’s demand scheduling being unpredictable, and open markets allowing for a quick dollar to be saved when switching.

Questions of identifying transactional relationships:

· Are many suppliers providing relatively the same product on the market place?

· Does the product add value to the customer or just a means of doing business?

· Is the part being sourced follow standardized procedure?

Collaborative- Relationships that bring value to the business or customer either in cost reduction, time to market, superior quality, and other advantages to be gained. Collaborative characteristics include, geographic proximity, ease of business, low-cost bottleneck, neglected cost areas, and reduction of supplier dependency, are just a few reasons to be collaborative. One trait that all collaborative relationships have is the reduction of some pain being experienced in supply chain. The key is managing relationships that go the distance to benefit the end customer and not just a process pinch point.

Questions of identifying collaborative relationships:

· How does the Supplier X relieve Y pain?

· Does Supplier X create an advantage over Suppler Y?

· How often do we communicate with Supplier X? Why? Supplier X resolved?

· Supplier X has contributed by? With Y metrics showing evidence.

· How are we good customers to Supplier X?

Strategic- Relationships that create a competitive advantage or provide both organizations with increased stakeholder value. The key differentiator for strategic compared to collaborative, mutual trust through good and bad times. Strategic relationships have joint C-suite level interaction, integral connection of departments, computer systems, and share a unique strategic product that gives both firms a competitive advantage on: technology, cost, agility, and joint responsiveness to supply disruptions. Strategic relationships are built on trust, power dynamics, and long-term value that is reproduced year over year raising stakeholder value across both organizations.

Questions of identifying Strategic Relationships:

· Working with Supplier X creates Y competitive advantage. How do we leverage that?

· Are both organizations aligned with the most valuable costumer's views as valuable?

· Are technology paths for both firms following similar trajectory?

· Will this relationship cause Supplier X to act opportunistic in the future?

· How often does Senior Management meet with Supplier X? What value comes from the meetings?

The wonderful life of supply chain professionals allows the creativity and vision that finds unique relationships and structures that go outside of what is presented above, below, and around much of what is covered. These are simple outlines for introducing topics of relationships with suppliers.

Please, share and comment some of your creative solutions with relationships that added value to your company!

References and visual:

“How Chrysler Created an American Keiretsu” by Jeffrey H. Dyer, Harvard Business Review, July/Aug (1996): 45-5

Ltd, B. T. (2016, September 27). Vendor Management. Retrieved from BMS Technology Ltd: http://www.bmstechnologyltd.com/vendor_management_northern_ireland_-_bms_technology_ltd

Proactive Purchasing in the Supply Chain. (2012). In S. D. David N. Burt, Proactive Purchasing in the Supply Chain (pp. 80-86). New York: McGrawHill.