with its accompanying price haggling, there is little chance of its
maturing into a life stage in which the maximum financial benefit
is realized for all concerned. The knowledge transferred back into
the organization will be limited in the early stages. The outsourc-
ing supplier may indeed have evolving and increasing levels of
competency that will be tailored to the customer’s need over time.
The longer the relationship is, the higher the return on the sup-
plier’s investment will be. This is because the supplier can amortize
its costs of ramping up for the relationship. Furthermore, the longer
the relationship, the higher the potential of knowledge transfer to
the customer, if managed properly.
80 LEADINGORGANIZATIONALLEARNING
Exhibit 8.1 Managing a Supply Relationship like an Alliance
Supply Relationship Management Alliance Relationship Management
Pressure on price Pressure on deliverables
Compatibility is no issue—just Compatibility is an issue—
supply products and services at high integrated working conditions
quality, low cost over time require understanding of
style, life cycle stage of company,
personalities, goals, and market
factors
Other suppliers stand ready to Other providers have been
supplant the contracted supplier screened and this supplier
if it does not was chosen as the best partner;
certain compromises will be made
to deliver value
Mutuality is not a big issue— Mutuality is a big issue since both
supplier is presumed to make some parties should be cognizant of each
margin, and it’s the suppliers other’s success potential
problem if it doesn’t
Multiple parties in the supplier mix Multiple parties in the alliance, or
are the responsibility of the buyer with whom the alliance partners
are partnered, become the
responsibility and concern of all
parties in order to gain the most
from the alliance