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Operations: key factors to consider when establishing a relationship with a customer

What key factors should a supplier consider when establishing a long-term relationship with one of its customers?

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Partnering is a form of collaborative working between customers and suppliers. Partnering is characterized by a greater degree of openness, communication, mutual trust and sharing information. The aims of partnering arrangements are often expressed in terms of business outcomes rather than specific outputs or improvements; their success is particularly dependent on the people and relationship aspects.

The tone of a partnering arrangement differs from a traditional contract and the behaviors of those involved are different too. The management of a partnering arrangement is usually proactive rather than reactive. Both parties work together to identify optimum solutions and to anticipate and resolve problems in a constructive, collaborative way. The arrangement needs to be based on mutual trust and openness, recognition that the relationship itself is as important as the contract and a conviction that partnering makes good commercial sense for a particular program.

Partnering is a long-term relationship, usually over five years and often much longer, where customers and providers adopt long term rather than short-term views. Partnering may be suitable for:
? Using new methods of service delivery (such as providing services online)
? Outsourcing business processes or services, perhaps to allow customer staff to concentrate on core areas.
Partnering is unlikely to be suitable for:
? Projects where the customer requires complete or significant control over the specification and service delivery, with little or no flexibility for the provider to propose new ways of doing things
? Contracts where the customer requires an outcome, but cannot transfer key elements of control or major risks to the provider.

Partnering seeks to create a 'win-win' relationship, where both sides feel that the investments and concessions they have made, and the risks they have taken on, have helped them realize genuine benefits and achieve strategic goals.

The key features of what the partnering approach is seeking to achieve must be set out in both the requirement and the formal contract - both partners must be clear about what they want and fully understand what is being proposed from the earliest stage and throughout procurement. Plans for how the risks will be managed must be made clear. Partnering focuses on what can be achieved together. Compromises may be required from either party and each should stress their organization's willingness to take a collaborative approach at all stages.

At the outset of the relationship, the customers' and suppliers' objectives are unlikely to be aligned; incentives have to be designed to achieve this. Contracts that reward providers for helping deliver business objectives, but without attempting to transfer risks best managed by the customer, are an essential foundation for a good partnering arrangement.

Partnering principles should guide both parties' actions throughout the procurement process and into contract management. There must be top management commitment from the start and throughout, from both parties. The right people need to be in place from the start that can build and maintain open relationships. As well as technical and business understanding, they will need to draw on abilities in communication, diplomacy and problem solving. They will need strong interpersonal skills, tact, patience, honesty and the ability to form strong professional relationships. A partnering approach takes time to plan so that the right people are in place from the start. Both parties will need to think about the ...

Solution Summary

The 2100 word solution gives us a full explanation of the partnering concept between customers and suppliers. It is an excellent and detailed source with adequate cites. Key factors of partnering are listed which can be used as a basis for an arrangement. Pitfalls are given too.