The Solution
Keep in mind that the goal is to establish a collaborative relationship, rather than to take advantage of the other company, or allow the other company to take advantage of you. The size of the companies involved matters less than the willingness to work toward common objectives.
Dell Computer Corporation maintains a competitive advantage by having nearly seamless relationships with many of its suppliers. They have built up trust, communication and process integration to the point where monitors are shipped to Dell from suppliers the day the entire desktop (which includes the monitors) are shipped out to customers. They are never even unpacked from their original crates, and Dell keeps virtually none on hand in inventory. This allows them to reduce operating cost, react more quickly to innovation (they don’t have to cycle through old inventory before bringing new products to market) and meet customer expectations more quickly.
How can you build these types of “seamless” relationships with your business partners?
Pick Your Allies Carefully
Traditionally, companies selected business partners simply on the basis of finding those who could supply your needs at the lowest cost, or would pay the highest price for your products and services. They might also consider factors like breadth and depth of experience with like-sized contracts, etc. It is a key selection criteria of suppliers that the quality of their products and services will meet your customers’ expectations and not reflect badly on your company.
(If Dell's supplier provided faulty montiors, for example, they would not be able to ship them out in the original crates without testing them! Dell would risk damaging their relationships with customers and their reputation for providing a reliable product.)
Just as importantly, before initiating a relationship, be sure the company has a willingness to “play well with others.” Do some research on their previous alliances- are the other parties happy with the arrangement? Have there been legal battles, big misunderstandings, or any other “red flags?” Is the company willing to discuss the steps defined in the rest of this article?
Most companies understand the importance of choosing employees they can trust, communicate with, and depend on. Few take the same care in selecting the companies they do business with in their supply chain or delivery chain. This is unfortunate, because your allies involve a number of factors and usually a greater amount of risk (or money) than any individual employee.
Define Requirements
Spend the time to discuss, brainstorm, flesh out, and get appropriate approval from both sides of the requirements. Make sure everyone understands them.
In addition to the legal documents that usually accompany such relationships, include diagrams and flow charts to ensure that everyone has a clear understanding of what is expected or needed, when, and why.
Many times, these requirements take the form of a Service Level Agreement or similar document that outlines what both parties are expected to provide, and what consequences are tied to thresholds of performance.
Protect Your Information (and Theirs)
Speaking of legal documents, make sure you have the appropriate non-disclosure and non-compete documents drawn up by an attorney.
Non-Disclosure- These documents ensure that your information is not shared with the company’s other clients, and vice versa. Non-Disclosure give you legal protection in case your competitors or clients are given information that might damage your strategies.
Non-Compete- These documents ensure that the companies you’re dealing with do not circumvent you to do business directly to your clients, especially using inside information they gained from their relationship with you.
If their attorney draws them up, have your own attorney look at them. Now is the time to discover loopholes or restrictive provisions.
Find (or Build) Common Motivation
If at all possible, make sure that there is financial motivation to meet objectives. Tie timely, quality delivery of products or services, or of sales and referrals, to bonuses; or conversely, tie failure to meet deadlines and other expectations or specifications to deductions from the amount owed.
Ensure that these financial incentives are passed along to the actual people doing the work, not just to the company you’re dealing with.
Establish Communication Lines
Quick Change Management Process
So, your Service Level Agreements, legal documents, and financial incentive plans are in place and working perfectly, when all of a sudden, you have a brilliant idea to change your product line; or you need to react to a market change; or something gets thrown for a loop. (It happens, in this day and age!)
How and when do you inform your business partners, and how will they react to it? Will it take weeks or months going through their chain of command before a decision can be made, or will they be able to react quickly to your changing needs?
As you develop the relationship, make sure you have immediate access to decision makers in the company as appropriate; and make sure that they have immediate access to decision makers in your company. Subjecting one another to excessive bureaucracy is one of the quickest ways to sour a relationship.
Issue Resolution Process
To avoid finger-pointing, hard feelings, and productivity damage, put an issue resolution process in effect before you have a conflict. Include this process (along with the Change Management Process) in your initial Service Level Agreement document, if possible, so that everyone understands it and has agreed to it from the outset.
Determine who can resolve issues of what size. (The lower on the “food chain” these decisions can be safely made, the quicker and more efficient your resolution process will be.) Outline the escalation path up through the management levels of both companies and indicate at what point you will seek outside arbitration, what form that arbitration will take, and who will pay for it.
