What does collaboration mean?

Collaboration between companies and suppliers needs to be more tightly defined, according to IMD, the international business school.

by IMD Perspectives for Managers
Last Updated: 20 Aug 2015

Special efforts to create and maintain what are called 'super-collaborative' relationships can achieve benefits that vastly outweigh typical arms-length customer-supplier relations.

The automotive industry has demonstrated the effectiveness of such relationships over the last decade in achieving competitive gains, with Honda and Toyota using collaborative relationships to overtake Ford and General Motors.

'Super-collaboration' is characterised by mutual trust, honesty, integrity and an objective focus on results, as well as a reduction in risk for the supplier. It can take several forms: combative, cooperative, partnership and super collaborative.

Combative
Playing 'hard-ball' is how this means of collaboration can best be described; negotiating hard with suppliers to bring down prices or leverage vendors. But this approach gives suppliers no incentive to increase value/cost and, although shouldn't be abandoned as a way of doing business, IMD warns it needs to be applied to a carefully chosen supplier segment and it is vital not to allow all supplier relationships become combative.

Cooperative
Many procurement relationships are cooperative ones, and usually exist as joint business exchanges for goods and services. Shared costs in the supply-chain relationship are discussed and understood.

Partnerships
These tend to make up a small percentage of customer-supplier relationships, and place an emphasis on creating mutual benefit for both sides. Partnerships can support increased productivity and joint product development.

Super Collaborative
This is the truest sense of collaboration, and often means that some firms invest in procurement engineering and benchmarking to create 'should cost' or 'absolute best cost' models. The customer focus on super collaboration signals a commitment on the part of the firm to create significant competitive advantages for the supplier, and in return the supplier creates competitive advantage for the firm.

Prior to starting any super-collaborative relationships however, firms should check that they have a procurement strategy and that they've identified a buying category where a market opportunity exists. Also, they must be sure that both organisations can commit to the relationship and that a structure has been created that can evaluate the relationship and its fruits as it develops.

Source: Super Supplier Collaboration
IMD Perspectives for Managers No 134, June 2006

Reviewed by Deborah Bonello

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