This document discusses partnership sourcing in international supply chain management. It defines partnership sourcing as a long-term commitment between a customer and supplier based on clear objectives to improve competitiveness. The document examines the drivers, aims, benefits and risks of partnership sourcing. Key benefits include secured supply, faster product development, on-time delivery and improved quality for purchasers as well as long-term capabilities and financial stability for suppliers. Success requires commitment, trust, communication and compatible cultures between partners. Risks include lack of commitment, resources or unrealistic targets that can lead partnerships to fail if not properly managed.

1. International Supply Chain Management
Partnership Sourcing
Word Count: 2302
Module Code: 7BSP1011
Module Leader: David Wright
Prepared By: Mustafa Mert Dikmen
Student Number: 10252709
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2. Table of Contents
1.0 - Introduction ..................................................................................................... 3
2.0 - Drivers of Partnership Sourcing ................................................................... 3
3.0 - Aim of Partnership Sourcing ......................................................................... 4
4.0 - Drivers of Success ........................................................................................... 5
4.1 Strategic Colloboration: Commitment and Loyalty......................................... 5
4.2 Trust ................................................................................................................. 5
4.3 Communication ................................................................................................ 6
4.4 Culture Compatibility....................................................................................... 6
5.0 - Benefits of Partnership Sourcing................................................................... 6
5.1 Benefits for Purchasers .................................................................................... 7
5.1.1 Secured Supply ........................................................................................ 7
5.1.2 Faster Product and Service Development ............................................... 7
5.1.3 Delivery on Time ..................................................................................... 7
5.1.4 Reduction of Supply Base ....................................................................... 7
5.1.5 Improved Quality .................................................................................... 8
5.2 Benefits for Suppliers ....................................................................................... 8
6.0 - Risks and Limitations of Partnership Sourcing........................................... 8
7.0 - Conclusion........................................................................................................ 9
8.0 - References and Bibliography ....................................................................... 10
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3. 1. Introduction
Competition amongst suppliers is rapidly increasing due to the threat of trade regulations, excessive
development of technologies and globalisation. Promoting strategic partnerships with suppliers has
been the strategy of organisations in response to the threat of undesired costs arising from the highly
competitive business environment (Ellram, 1991). According to DTI (1992), “partnership sourcing”, a
new name of alliances of organisations with suppliers can be defined as “a commitment by both
customer and suppliers, regardless of size, to a long term relationship based on clear mutually agreed
objectives to strive for world class capability and competitiveness”
“Adversarial competition” and “partnership sourcing” are two forms of purchasing strategies
that organisations use. Among these two, partnership sourcing is considered to be more beneficial than
the other since it creates a relationship based on trust between two sides (Macbeth and Ferguson,
1994). There again, single sourcing was considered as a dangerous strategy because it gave the
supplier the occasion to take advantage of the potential opportunities (Newman, 1988). Interestingly
enough, the term “adversarial competition” was being referred to as short-term, competitive supply
around 20 years ago, when now it is purposely enunciated as adversarial.
On some occasions, the relationship between the supplier and the buyer is best described as
“dependency” rather than partnership. For this reason, Van Weele (1995) states these partnership
relationships as to be misleading. This clearly necessitates the need of some specific conditions for
partnership sourcing such as a clear definition of mutual responsibilities and specific, measurable
milestones for improved performance (Parker and Hartley, 1997). If not critically evaluated,
partnership sourcing can be damaging.
This paper aims to evaluate the term “partnership sourcing”, exploring its advantages and
disadvantages. Long term strategic and operational implications of the term will also be examined
with the intention to draw a conclusion if partnership sourcing is truly beneficial to all parties
concerned.
2. Drivers of Partnership Sourcing
The availability of low-cost manufacturers located in Eastern Asia and the increased legislations
especially regarding the environmental concerns necessitated an improvement of co-ordination
throughout the supply chain. The need of co-operation is what stimulated the need of partnership
sourcing in this respect. The competition arising from the availability of cheap manufacturers has led
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4. organisations to focus on their core businesses to maintain their place in the market and remain
competitive. Organisations try to identify the aspects which are strategic in their procurement activities
by using a variety of positioning techniques to anticipate the potential impacts of a probable supply
failure. These types of procurements generally lead to partnership sourcing. Professor Andrew Cox
(1995) has defined strategic procurement as “the development of an external sourcing and supply
strategy which link the total business plan of an organisation so as to maintain a sustainable position
for that organisation in the total value chain”.
According to Brown et al. (1994) partnership sourcing is strongly associated with quality
initiatives. When organisations understood that “total quality management” was not a competitive
advantage but a definite requirement, they tried to find new ways of maintaining their quality
management approach. Partnership sourcing offers organisations the opportunity to compel the
suppliers to take quality initiatives. Hence, it is accepted that quality initiatives is one of the main
drivers of partnership sourcing.
3. Aims of Partnership Sourcing
Traditional procurement methods which include aggressive bidding and negotiation have often caused
lack of trust, poor quality, bad service and stiff prices. Lewis (1995) asserted that if each part of the
supply chain sees itself as an investor these consequences will not appear. He further indicates that
working co-operatively with the supplier helps an organisation to maximize their benefits and argues
that the co-operation between the purchaser and the supplier “unleash a capacity for innovation that far
outweighs the short term cost savings offered by arm’s length competitive bidding”. Therefore the aim
of partnership sourcing is to achieve greater benefits through good supplier and buyer relationships.
According to Sadler (2003), partnership sourcing is an element of competitive strategy of an
organisation and is developed and implemented with the intention to provide benefits. The aim of a
successful partnership is reducing stock times, shortening lead times, achieving a greater flexibility,
improving the cash flow and lowering the administrative costs. In addition this approach aims to
improve the quality of the information and its flow which leads to successful long-term planning,
innovation and technological development. However, partnerships won’t work unless the limitations
are possible problems are not diagnosed and managed the way it should be.
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5. 4. Drivers of Success
There is a variety of partnership dynamics which should be present to be able to consider the
collaboration of the supplier and the buyer successful. Both parties should make further considerations
to proceed with the partnering decision if most of the characteristics identified below are not present.
4.1 Strategic Collaboration: Commitment and Loyalty
The sense of mutual interdependence between the buyer and the supplier brings about a long term
relationship between two parties concerned. However, in order to achieve high buyer commitment and
supplier loyalty, both parties have to perceive that there is a soaring level of strategic fit between them.
Therefore for the buying party the initial phase of undertaking a partnering relationship should be the
analysis of the value of the supplier considering its long-term purchasing needs. However, by forming
close partnerships with suppliers, purchasers have realized that the development of the suppliers to
meet its demands is expensive and time consuming. This is a reassuring factor for the supplier as
expenditure is considered to be a necessity of true partnership and brings about trust. Trust is seen to
be more difficult to build if the buyer and the supplier have a record of adversarial negotiations.
4.2 Trust
The suppliers and the purchasers have to work closely to reduce cost and improve quality. A
successful partnership relationship arises from a substantial amount of trust. Cry (1999) states that in
any kind of alliance between two organisations building trust is a necessity for success. When there is
a level of trust between the purchaser and the supplier, both parties believe that the other is committed
to mutual success.
Successes of the purchaser and the supplier are often interdependent. A trustful purchaser will
cater its needs using the same supplier and a trustful supplier will use its resources fully to be able to
satisfy the purchaser’s needs. Both parties will win if they can obtain the degree of collaboration and
trust.
Buttler (1999) asserts that the level of complexity of the negotiations between the supplier and
the buyer decreases when both parties trust each other. This allows organisations to get rid of the
concerns regarding each other’s behaviours and to communicate more important matters rather than
losing time on discussing small details. Thus, negotiations consume less time and resources with
mutual trust.
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6. 4.3 Communication
Suppliers appreciate it when the purchasing organisations use collaborative communication (indirect
influence strategy, formality and feedback) to communicate and perceive this as a mechanism to
enhance their relationships. The suppliers expect commitment, loyalty and long life from their
relationships with the purchasing organisations. According to Prahinski and Benton (2004), the
purchasing organisations can influence the supplier’s commitment through improved communication
and relationship development. They further indicate that this development comprises of improving
cooperation, problem solving, and reflecting commitment, loyalty and aspiration to proceed with the
partnership for a significant amount of time.
When the necessary measures of partnership sourcing is taken and fully implemented, the
quality and reliability of the data exchanged between two parties is significantly improved. The most
important aspect of this relationship will be the improvement of communications. The purchaser and
the supplier will be able talk through the problems they have and try to resolve any kind of problems
with pure and mutual intent.
4.4 Culture Compatibility
For the partnership of the purchaser and the supplier organisation to be successful, their culture has to
be adaptable with one another. This is important to corroborate the cooperative relationship of the
organisations. Behaviours such as adversarial purchasing have to dispelled to serve the cause of
strengthening the organisational relationship.
The similarity of size, working environments between two parties will simplify the partnership
relationship. In addition it is possible that good relationships between the management of these
organisations will increase the chance of success of partnership sourcing.
5. Benefits of Partnership Sourcing
The main benefit of partnership sourcing is the fall in total cost. Frequently encountered advantages of
partnership sourcing are reduction of handling, accounts activities, buying and dispatching activities,
and examination necessities. In addition to these, increase in stock return and scope for increasing
sales can be identified as common benefits of partnership sourcing (Lock, 1998).
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7. 5.1 Benefits for Purchasers
5.1.1 Secured Supply
Successful partnership sourcing provides the buying organisation with a variety of benefits and a
secured supply chain is one of them. Through to help of partnership with the supplier, the purchasing
organisation enjoys improved “product safety”, “inventory management”, “supply chain visibility”,
“product handling”, “process and speed”, “problem identification time” (Blanchard, 2006).
5.1.2 Faster Product and Service Development
Another benefit arising from successful partnerships with suppliers is the faster development of
product and service. Shared benefits due to mutual dependency with the supplier lead to improved
communication with the supplier. Subsequently, it results in benefits such as faster engineering
changes, reduced assembly time, improved productivity, improved responsiveness and faster product
development.
5.1.3 Delivery on Time
Partnership sourcing usually increases the efficiency of JIT (Just in time) purchasing. According to
Fenneteau (1990), an organisation chooses to partner up with the supplier to encourage the supplier to
deliver better performance than it would otherwise deliver. The supplier can give better service if there
is a partnership relationship between them because the supplier will perceive the needs of the
purchaser, such as the expectations regarding deliveries and services or the type of demand, better.
5.1.4 Reduction of Supply Base
With the reduction of the supply base organisations neutralize the wastage of resources arising from
adversarial relationships with suppliers. According to Brown et al, there is little to lose from
partnering up with suppliers since the competitive tendering approach usually leads to potential
suppliers conniving so as to fix the price. However, partnerships yield benefits for companies by
means of increased commitment of suppliers to improve their products and services. Reducing the
supply base for organisations allow them to spend more time with suppliers, thus allows them to build
close relationships. This permits the purchasing organisation to influence the degree of quality and
cost. Taken as a whole, reduction of the supply base helps the company to improve its products and
reduce its costs.
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8. 5.1.5 Improved quality
Improvement of the quality of products and services is a common result of partnership sourcing
relationships. However, the improved quality of products/services can be originating from different
approaches. The buyer firm may have insisted that the quality should be improved or another
possibility is that the purchaser company may have made the supplier firm to understand the
importance of quality. Both ways partnership sourcing provides the purchasers with the benefit of
improved quality.
5.2 Benefits for Suppliers
Unquestionably the suppliers benefit from partnership sourcing as well, like the purchasers
organisations. This partnership provides the suppliers with an improved long term management
capability; improved technological capability via long term relationships, learning and better
communication; marketing improvement and with an improved cash flow and financial stability.
6. Risks and Limitations of Partnership Sourcing
Partnership sourcing may not always work as there are many reasons for failure when implementing or
after the implementation phase of the activity. The necessary commitment and involvement from the
purchaser and supplier to successfully partner up are not often accomplished from the beginning. Even
when everything seems to be in order regarding the implementation process of partnership, there is a
possibility that one partner or some third party organisation can stop the progress of partnership
sourcing.
Partnership is not a one way relationship. Both the purchaser and the supplier has to contribute
completely if not equally, to maintain a steady relationship. If one of the partners try to attain a
relationship with another organisation, for instance for the sake of accessing new technologies, the
partnership relationship will not turn out to be successful. A partnership in which only one of the
organisations contributes is not likely to succeed.
Good partnerships take time to develop. During the process of development there are some
types of behaviours both parties would want to avoid such as impatience, arrogance, complacency and
over-dependency.
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9. The following have been identified as common causes of failure in partnership sourcing (Lock,
1998):
Lack of commitment
Lack of resources and planning
Poor communication
Unrealistic and arbitrary targets
Targets which cannot be measured
Behavioural changes or conflicts in the key personnel within two parties
However, perhaps the most common cause of concern is that the volume of business the supplier
is reaching does not reflect the intended expectations. Yet, this is supposed to be something that
should be agreed on through collaborative communication.
7. Conclusion
This paper has evaluated the term “partnership sourcing” and uncovered some of its principals in
terms of the advantages and limitations to be considered by both buyers and suppliers. The aims,
drivers, advantages and failure risks have been evaluated thoroughly by taking into account all the
aspects of partnership sourcing that both of the organisations can encounter to come to a conclusion if
the practice of partnership is beneficial to the parties concerned.
It is here concluded that if the organisations measure the risk of success and failure by analysing both
oneself and the other party, there are no real impediments for success. By avoiding and overcoming
adversarial behaviours such as impatience, arrogance, complacency and over-dependency, both
organisations are likely to take advantage of the benefits presented by partnership sourcing.
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10. 8. References and Bibliography
Blanchard, D. (2006), IndustryWeek [online], Available from:
http://www.industryweek.com/articles/the_benefits_of_a_secure_supply_chain_13103.aspx
[Accessed: 26 April 2011].
Brown, A., Boyett, I., Robinson, P. (1994). The Dynamics of Partnership Sourcing. Leadership and
Organisational Development Journal, 15: 7, 15-18.
Cox, A. (1995), “Strategic procurement management in the public and private sectors: the relative
benefits of competitive and collaborative approaches” In: Lamming, R. and Cox, A. (eds) Strategic
Procurement Management in the 1990s: Concepts and Cases, Earlsgate Press, Boston 5-22
Cry, D. (1999), High Tech, High Impact: Creating Canada’s Competitive Advantage through
Technology Alliances, Academy of Management Executive, 13:2.
DTI (1993), Partnership Sourcing, Department of Trade and Industry, London.
Fenneteau, H. (1990), “Mise en concurrence de fournisseurs ou partenariat?” Revue internationale,
PME 3:2, 167-191
Ellram, L.M. (1991), “A Managerial Guideline for the Development and Implementation of
Purchasing Partnerships”, International Journal of Purchasing and Materials Supply Management,
August, pp. 2-8.
Lock, D. (1998), The Gower Handbook of Management, 4th. ed. England: Gower Publishing Limited.
Lewis, J. (1995), The Connected Corporation, New York: Free Press.
Macbeth, D., Ferguson, N. (1994), Partnership Sourcing: an Integrated Supply Chain Approach.
Pitman, London.
Newman, R. (1988), Single source qualification. Journal of Purchasing and Materials Management,
Summer, 10-17.
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11. Parker, D., Hartley, K. (1997), The Economics of Partnership Sourcing Versus Adversarial
Competition: A Critique, The European Journal of Purchasing & Supply Management, 3:2, 115-125
Prahinski, C., Benton, W. (2004), Supplier evaluations: communication strategies to improve supplier
performance, Journal of Operations Management, 22: 39-62.
Sadler, P. (2003), Strategic Management, 2nd. ed., London: Kogan Page Limited.
Van Weele, A. J. (1995) Myths and Truths in Purchasing and Supply “Some Provocative Ideas for
Thought” IPSERA 4th International Conference, 11-12 April, University of Birmingham.
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