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Leveraging Strategic Alliances



ISM's 88th Annual International Supply Management Conference

Nashville, TN
May 2003

Author(s):

Roberta J. Duffy

Lee Buddress, Ph.D., C.P.M.
Associate Professor of Supply and Logistics Management
Portland State University
Alan Raedels, Ph.D., C.P.M.
Professor of Supply and Logistics Management
Portland State University
Michael Smith, Ph.D., C.Q.A.
Assistant Professor of Management and International Business
Western Carolina University

"If we can't become first-class customers, we're going to end up with second-class customers. We need to get to the point where we deserve t have first-class suppliers." This is a key theme in a presentation Monday at ISM's 88th Annual International Supply Management Conference, given by Lee Buddress, Ph.D., C.P.M., Alan Raedels, Ph.D., C.P.M. (both of Portland State University), and Michael Smith, Ph.D., C.Q.A., of Western Carolina University.

The sessions focused on leveraging strategic alliances and discussed some characteristics that are "musts" for such alliances.

Real Alliances Require the Best Efforts of Real Partners!

There are instances where buying firms are able to grudgingly gain compliance from so-called "partners" through the use of power, particularly if the buying firm is relatively large and a major customer. But these presenters ask: At what cost? Yes, the firms will have compliance, but will they have commitment? A true alliance can only exist when there is sincere, voluntary commitment from both parties, even when power is available.

Create Alliances in the Appropriate Circumstances

Another characteristic of the successful alliance is that it is created only when the relationship is appropriate as such. This is usually when the market criticality for the product or service is high and the internal criticality (of the buyer) for that product or service is also high. In these instances, the buyer is looking for a long-term relationship.

Alliances Involve Successful Communication

The presenters told of an interesting experiment that they performed in their classroom settings. It illustrated the importance of effective communication, particularly with regard to negotiations. The professors divided the class into two groups, with each half segmenting into negotiation pairs. In one group, all the pairs were to negotiate a proposition, but none were allowed to use two-way verbal communication. Everything was to be done electronically, with just bits of information being transferred back and forth. In the other half, all the were pairs were to negotiate the same proposition, but they were allowed to converse and work on an interpersonal level. The results were quite insightful. All of the "talking" groups were complete with the negotiation in about 1.5 hours. Each person involved said they were satisfied with the outcome of the negotiation and the process. The "non-talkers" did not complete the task until three hours later, with some pairs deadlocked unable to reach an agreement at all. Furthermore, many were dissatisfied with the process and the outcome, some even so much so that they remained on non-talking terms with certain classmates for an extended period, even after the exercise was over!

The message here is that while online communication techniques can be helpful in some situations, it's important to use them judiciously. These presenters argued that for the most successful strategic alliances, face-to-face communications and negotiations go a long way.

By Roberta J. Duffy, editor of Inside Supply Management

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