Partnering & Strategic Alliances Chapter 5 Partnering & Strategic Alliances

Objectives After reading the chapter and reviewing the materials presented the students will be able to: Understand partnering and strategic alliances Explain partnering with suppliers Explain partnering with potential competitors Understand global and business partnerships

Partnering and Strategic Alliances The simplest way to understand the concept of partnering or the strategic alliance is to think of it as working together for mutual benefit. Those who work together may be suppliers, fellow employees, customers, and even businesses that are potential competitors.

Benefits of Partnering Partnering can lead to continual improvements in such key areas as processes or products, relationships between customers and suppliers, and customer satisfaction. Internal partnering can improve relationships among employees and among departments within an organization. When taken as a whole, these individual benefits add up to enhanced competitiveness.

Partnering Model 1. Develop a partnering briefing: partnering is about creating cooperative alliances. Make sure everyone involved understands partnering as a concept. 2. Identify potential partners: Choose partners in an order determined by how much value the partnership can have towards enhancing quality, productivity, and competitiveness. Partnerships between the manufacturing department and major external suppliers have excellent potential. 3. Identify key decision makers: Their support must be won if a successful partnership is to be formed. 4. Conduct a partnering briefing: This briefing should answer questions such as: (1) How can we mutually benefit from the partnership? (2) What is expected of each partner? 5. Decide whether there is sufficient commitment: There is no need to proceed any further with potential partners who seem reluctant. 6. Identify key operational personnel: Identify the people who are needed to put into action the commitment made by executive level decision makers. 7. Form the partnership team: They must be given the opportunity to get to know and trust each other. 8. Develop a mission statement: So that everyone understands what the team is supposed to do. 9. Develop objectives: The objectives are specific and measurable. 10 Prioritize objectives and begin: Results should be monitored and appropriate action taken when problems arise.

Internal Partnering Internal partnering is creating an environment and establishing mechanisms within it that bring managers and employees, teams, and individual employees together in mutually supportive alliances that maximize the human resources of an organization.

Partnering with Suppliers The goal is to create and maintain a loyal, trusting, reliable relationship that will allow both partners to win, while promoting the continuous improvement of quality, productivity, and competitiveness.

Mandatory Requirements of Supplier Partnerships 1. Supplier personnel should meet with buyer personnel who actually use their products so that needed improvements can be identified and made. 2. The price only approach to buyer supplier negotiations should be eliminated. The goal of the negotiation should be to achieve the optimum deal when price, features, quality, and delivery issues are all factored in. 3. The quality of supplier products should be guaranteed by the supplier’s quality process. The buyer should have no need to inspect the supplier’s products. 4. The supplier should fully understand and be able to practice just-in-time (JIT). Buyers should not need to maintain inventories. 5. Both partners should be able to share information electronically so that the relationship is not inhibited by paperwork. Electronic data exchange is particularly important for successful JIT.

Stages of Development in Supplier Partnerships 1. Uncertainty and Tentativeness: Neither party knows what to expect from the other. 2. Short Term Pressures: The buyer will be under pressure to cut costs. The supplier will be under pressure to increase sales volume. 3. Need for New Approaches: It will dawn on them that quality is not being served by traditional negotiating. 4. Adoption of new paradigms: Both partners will explore ways to move forward for mutual benefit and to work together to lower costs. 5. Awareness of potential: The potential for a true win-win relationship can now be seen. 6. Adoption of New Values: Trust, openness, and sharing. 7. Mature Partnering: Continuous interfacing between pertinent employees at all levels exists.

Partnering With Customers The rationale for partnering with customers is that it is the best way to ensure customer satisfaction which in turn is the best way to being competitive.

Manufacturing Network A manufacturing network is a group of individuals (SMEs – small and midsized enterprises) that cooperate to improve their quality, productivity, and resultant competitiveness to levels beyond what the individual member companies could achieve by themselves. Two concepts that make a manufacturing network succeed: interdependence of member companies and mutual need. The member companies depend on each other in developing mutual solutions to common problems.

Network Activities 1. Production: Networked SMEs are able to pursue production contracts larger than any individual member company could undertake alone. 2. Education and Training: By bringing together employees from member companies who need training, networks can produce classes large enough to attract educational institutions. 3. Marketing: Members share the cost of participation in selected trade shows, joint marketing brochures, and other related costs. 4. Product Development: When costs can be divided among network members cost becomes a more feasible concept. 5. Technology Transfer: Technology commercialization is the transfer of a new technology from a research lab to a production setting. A common hotline that members can access for assistance in solving problems. 6. Purchasing: Jointly purchasing things like insurance to save on the cost of premiums.

Education and Business Partnerships The need to continually improve employees’ work skills is a primary force driving the business and education partnerships. In such a partnership educational institutions provide on-site customized training, technical assistance, and consulting services to help organizations continually improve their people and their processes. They also provide workshops and seminars and facilitate focus groups.

Summary The simplest way to understand the concept of partnering or the strategic alliance is to think of it as working together for mutual benefit. Partnering can lead to continual improvements in such key areas as processes or products, relationships between customers and suppliers, and customer satisfaction. Supplier personnel should meet with buyer personnel who actually use their products so that needed improvements can be identified and made. The rationale for partnering with customers is that it is the best way to ensure customer satisfaction which in turn is the best way to being competitive. A manufacturing network is a group of individuals (SMEs – small and midsized enterprises) that cooperate to improve their quality, productivity, and resultant competitiveness to levels beyond what the individual member companies could achieve by themselves. Technology commercialization is the transfer of a new technology from a research lab to a production setting. The need to continually improve employees’ work skills is a primary force driving the business and education partnerships.

Home Work Answer Questions 1, 2, 6 on page 79. 1. Define the term partnering. 2. What are the benefits of partnering? 6. Explain the mandatory requirements of supplier partnerships.