Part - I

The benefits of good relationships with suppliers are now clear. But some partnerships are a waste of time and money, others are actually dangerous, and only a few will justify taking the risks that fully integrated collaboration demands.

Recent press on supply chain management in the business-to-business sector of the eEconomy leaves the impression that collaborating with suppliers is a little like participating in a 1960s love-in: The more partners, the better.

It's easy to understand why. Transaction and communication costs, which previously limited the extent of inter-company relationships, have fallen dramatically. Thanks to some well-publicized success stories, such as Dell Computer Corporation and Cisco Systems Inc., the business benefits of good relationships are now clear to all.

The risks associated with bad relationships are only beginning to be discovered, however. In fact, Accenture's work with high-tech companies and our research on organizations in other industries show that indiscriminate collaboration is as unhealthy a practice in business as it is in other facets of life. Some relationships are dangerous, others waste time and money, and only a few justify taking the risks demanded by fully integrated collaboration.

What risks? Collaboration demands not only a commitment of resources but also the sharing of proprietary information. In some cases, the information exchanged during collaboration may be the most valuable investment a company makes in the relationship.

Leveraging Relationships

But, of course, it will not be the only investment. Time must be invested in defining business objectives for the collaboration, people must be dedicated to the effort, and measurement systems must be in place to monitor progress. It may also be necessary to integrate and align processes and organizations. All of these elements constitute investments at risk in a collaborative effort.

So the decision to collaborate with suppliers should not be taken lightly. But how does one decide whether a collaborative relationship is worth the investment and the work? Collaborative relationships are suitable only under certain conditions. When these conditions are not present, collaboration is not only inappropriate, it may also be counterproductive. Some of these conditions relate to the nature of the market, others to the nature of the product itself.

For example, consider the personal computer. Each one is an aggregation of components-boards, chips, wires, screws, switches, disks and software. Each component exists in a distinct market. The people who supply chips do not supply software, the people who supply screws and nuts are a different group from those who supply hard disks, and so forth.

Next

* Timothy Mould is a Boston-based senior manager in the Accenture Strategic Services practice. His work focuses on developing and implementing integrated value-chain strategies through eCommerce capabilities.
Edwin Starr, a partner in the Accenture Supply Chain Strategy practice, leads the firm's eProcurement and Strategic Sourcing practice. He is based in Chicago.