Supplier collaboration

While observing the case company's supplier management situation, it is pointed out that re-markable recruitments and team structure arrangements have been made lately for maximizing benefits of contract management and analyzing and metering procurement processes and sup-pliers. However, the division of supplier management is defined to be threefold and the third, still in some way lacking aspect is supplier relationship management. There are instructions available for this, but it is opined by the in-depth interviewee that to some extent, the content is not clearly communicated to the relevant persons.

In ideal case, supplier relationship is based on a fluent process which benefits both of the parties and whole supply network. By collaborating with suppliers, parties are able to discover new cooperation methods and innovations. Case company's viewpoint is expanded and amount of knowledge and know-how remarkably added by adding supplier network perspective to the one's view. However, all of the ideas generated in the supplier network may not result to actions, but it is essential to even preliminary evaluate their feasibility. Innovation work requires that the buying company is able to listen and collect suppliers' suggestions of processes, products and/or specifications. Buying company should have an ability to internally process the ideas and enable tracking a potential of the suppliers. In addition to innovation point of view, in-depth interviewee assesses: "Value is achievable also by having long-term and long-lasting

relationships, which are aiming towards development and tailoring the ways of working ac-cording win-win mentality."

Supplier collaboration instruction of the case firm initiates that supplier relationship manage-ment is an iterative, ongoing process of engaging suppliers to ensure that case company and suppliers are continually improving the business relationship and performance to achieve safety, quality, schedule compliance, availability of the commodities and total cost of owner-ship in all aspects of collaboration. Core of the supplier relationowner-ship management is i) to main-tain a holistic view of the relationship, ii) to organize and orchestrate collaboration model in order to review relationship and performance and iii) to keep track of performance and im-provement action record and to escalate emerging issues.

Correspondingly to the last point, the in-depth interviewee recognizes that there are challenges in partnerships. Major challenge is the opportunistic behavior of the supplier partner: in case a supplier realizes their irreparable role, they might also start to behave differently, e.g. increasing the price levels or lengthening the delivery times. It has been noted that suppliers tend to press their advantages. In order to mitigate the risk of opportunistic behavior, case company makes sure that the competition is an ongoing process, or alternatively, the case company owns a part of the supplier. Interviewee summarizes: "Having supplier alternatives is risk management."

Other risks identified in the project plan document are i) lack of resources, such as HR, time and know-how, ii) too tight time frame which, mixed with other challenges, might result to lack of human resources' willingness to participate the project, iii) ability to successfully categorize suppliers due to unambiguous matrix, iv) lack of stakeholder involvement and engagement, v) multiple overlapping digital tools and systems which cause uncertainty and resistance to change, vi) inability to combine category specific minimum criteria, supplier selection and audit requirements into a unified form cause uncertainty and resistance to change and vii) lack of ICT support.

As a conclusion, an ideal case is that there is not only one but a few suppliers for each product or service category. The optimal amount of suppliers is depending on the category risk and spend estimations. According to supplier collaboration instruction of the case firm: based on the segmentation process case company ensures that management efforts and resources are fo-cused on the right suppliers. Segmentation is based on the i) supply risk, i.e. impact on business

continuity, availability and ease of procurement and ii) adjusted spend, which refers to relative impact of profitability, i.e. what companies want to achieve together, level of management's commitment and engagement, ability to develop and align processes, accuracy of key perfor-mance indicators, availability of resources, duration of venture, organizational design an culture and potential areas of conflict and their mitigation. Based on the segmentation, a tailored sup-plier collaboration model is created.

Supplier collaboration model specifies the suitable and appropriate level of supplier relation-ship management activities, such as cyclical supplier relationrelation-ship related meetings, including formats and roles for these, and other regular interaction modes, carried out with selected key supplier. Each supplier segment has a different set of basic interactions, requiring different ef-fort and with slightly different roles. Level and depth of the supplier collaboration is defined by the supplier coordinator in close cooperation with the procurement team and relevant stake-holders.

When supplier collaboration discussions or meetings are planned, the reasoning the need for the meeting and targets shall be clearly defined and relevant participants are identified. Agenda is predetermined and shared with participants before the meeting, and in addition, meetings and action points with responsible persons for the follow-up are documented. It is crucial that in-formation sharing, e.g. issue escalation path, with relevant persons is ensured. Typical elements of supplier collaboration are inter alia roadmap discussions, business reviews, supplier perfor-mance reporting routines, regular, standardized Supplier evaluations, contract management and compliance procedures and standardized approach for issue escalation and corrective action.

For sake of clarity, supplier collaboration model should preferably be agreed as a supplement in the frame agreement.