Partnership relationships in supply chains are sometimes seen as a compromise between vertical integration on the one hand (owning the resources which supply you) and pure market relationships on the other (having only a transactional relationship with those who supply you). Although to some extent this is true, partnership relationships are not only a simple mixture of vertical integration and market trading, although they do attempt to achieve some of the closeness and coordination efficiencies of vertical integration, but at the same time attempt to achieve a relationship that has a constant incentive to improve.
Partnership relationships are defined as: ‘relatively enduring inter-firm cooperative agreements, involving flows and linkages that use resources and/or governance structures from autonomous organizations, for the joint accomplishment of individual goals linked to the corporate mission of each sponsoring firm’. What this means is that suppliers and customers are expected to cooperate, even to the extent of sharing skills and resources, to achieve joint benefits beyond those they could have achieved by acting alone.
At the heart of the concept of partnership lies the issue of the closeness of the relationship. Partnerships are close relationships, the degree of which is influenced by a number of factors, as follows: •Sharing success. An attitude of shared success means that both partners work together in order to increase the total amount of joint benefit they receive, rather than manoeuvring to maximize their own individual contribution. •Long-term expectations. Partnership relationships imply relatively long-term commitments, but not necessarily permanent ones. Multiple points of contact. Communication between partners is not only through formal channels, but may take place between many individuals in both organizations. •Joint learning. Partners in a relationship are committed to learn from each other’s experience and perceptions of the other operations in the chain. •Few relationships. Although partnership relationships do not necessarily imply single sourcing by customers, they do imply a commitment on the part of both parties to limit the number of customers or suppliers with whom they do business.
It is difficult to maintain close relationships with many different trading partners. •Joint coordination of activities. Because there are fewer relationships, it becomes possible jointly to coordinate activities such as the flow of materials or service, payment, and so on. •Information transparency. An open and efficient information exchange is seen as a key element in partnerships because it helps to build confidence between the partners. •Joint problem-solving.
Although partnerships do not always run smoothly, jointly approaching problems can increase closeness over time. •Trust. This is probably the key element in partnership relationships. In this context, trust means the willingness of one party to relate to the other on the understanding that the relationship will be beneficial to both, even though that cannot be guaranteed. Trust is widely held to be both the key issue in successful partnerships, but also, by far, the most difficult element to develop and maintain.