Defining Effective Supplier Relationships

By Eric Cosman

ARC Report Abstract


Most asset owners have established processes and procedures for evaluating and selecting product and services suppliers; i.e. supplier relationships. In many cases, these are defined and managed as part of the procurement process, with the emphasis placed on commercial terms for acquisition and ongoing support.

However, selection and purchase leads to a much more comprehensive relationship, extending across all phases of the lifecycle from implementation, operation, and support to eventual decommissioning and replacement. This makes it important to manage the relationship properly, keeping the expectations, objectives, and requirements of all stakeholders in mind. When viewed from such a broad perspective, supplier relationships can be very complex, with implications in areas ranging from innovation and strategy to the performance of installed systems and solutions.

In their role as prospective customers, asset owners must clearly define their expectations and goals for a supplier relationship and insist that the supplier do the same. Achieving a true partnership is only possible when these complement each other. Goals must be comprehensive, and not limited to functionality, technology, and commercial terms. Other subjects to be considered include skills, processes, and business practices in areas such as support for installed systems and availability of new versions or updates. In some cases, there may even be opportunities for sharing of intellectual property.

Business Complexity and Supplier Relationships

The current business climate can be very complex, presenting significant Supplier relationships partnerinsight.JPGchallenges to asset owners. Some of these challenges relate to the use of technology to improve business processes and attain operational excellence. Asset owners are constantly challenged to improve their productivity and performance using a wide range of technology solutions.

In the past, it was sometimes possible to have a long-term relationship between a customer and a single supplier, confident that all our major needs and expectations would be addressed. This clearly is no longer the case.

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Keywords: Influence, Partnership, Suppliers, Sharing, Strategy, Vision, ARC Advisory Group.


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