Better Solutions

In any partnership, there will always be a balance between risk and reward. Both parties must be willing to base their contract on both of them. Bottom line, they should agree upon what is fair to both parties concerned.

The supplier’s side

You can say that the relationship between the buyer and supplier are two sides of the coin. They may be facing different directions but are still part of the same coin. Of course the supplier is in it to make money, but they would like to operate as a partner instead of a vendor. The supplier must be able to establish a relationship where they are able to customize their services so that the needs of the buyer are met.

The buyer’s side

Not all relationships would be able to work well. This is why the client should be able to choose a supplier that would be compatible with its needs. This is where consultancy comes in. With a consultant as the middleman, the client would be able to assess which suppliers would be able to work with them well and on a long term basis.

Constant dialogue

What’s important is that the buyer and supplier are both constantly in communication with each other. This would mean regular meetings or so to discuss different issues and possible changes. After all, no one can really predict what the future holds and it is important that both parties are able to address such issues and come upon an agreement.

Having an oversight group

Having a team to look after certain changes, strategy shifts, changes in location, and other important factors is important. They would keep both parties constantly informed about these changes and they help out with constant communication.

Be able to manage change efficiently

This is another way to keep partnerships well intact. If there are any shifts or changes, you should be able to manage it smoothly. This is the reason why certain companies prefer contracts that focus on strategies and outcomes rather than metrics. GP

To ensure the quality of goods and services, competition among companies is needed. This is the idea with competing companies, and not partnerships. You can say that outsourcing is a partnership between a buyer and supplier. The problem is the difference between discussions and disputes.

Whenever you are working as a team, there will always be discussions and debates as to how things are to be done, but this shouldn’t lead to an all out war. The relationship between the buyer and the supplier is very important, especially since long term contracts are usually involved. If there is dispute, then productivity and efficiency will also be affected. Here are a few ways to alleviate or avoid such disputes.

Flexibility is important

For a buyer-supplier relationship to work, flexibility should be included in the contract. Certain outsourcing contracts are already based upon flexibility principles. They are able to define how both parties should act when they face changing circumstances that are beyond their control.

The Importance of contract concepts

Both parties should be able to use the concepts in the contract for management. A well-structured contact would be the best reference for the buyer and supplier when rising issues are needed to be addressed. If the contract was made in the belief that the parties would constantly communicate, then they should be doing so. They should be able to hold meeting periodically about the course of action based on the contract.

The documentation of results

Whenever the buyer and supplier hold meeting, the results should immediately be written down, and put into practice. This way, both parties would have a better understanding of what they have agreed upon, and may refer to it whenever certain issues arise. This is important so that party A may refer to the results of the meeting whenever party B fails to deliver.

Resolve disagreements immediately

A lot of small disagreements tend to grow when they are left unchecked. Some may think of them as small problems, but these are where more serious issues arise. It should become a rule of thumb that no disagreements should be left unresolved.

Fairness and Equality

Both parties should be able to operate with fairness and in good faith. This is actually the basis of all relationships and business ethics. A relationship would only work if both parties are willing to do their actions thinking if it is fair to all concerned. This is probably the most important way to avoid any disputes among the buyer and the supplier. GP

The need for flexibility

A lot of buyers and suppliers have been raising the question as to how flexibility can be achieved and if it is actually feasible. It becomes difficult for the buyer to be tied to a long term contract when technology seems to be moving at such a fast pace. The thing is that companies don’t want to be in long term contracts, but would want to renew the contract with the supplier. One way of doing this is by giving incentives to the supplier so that it would be encouraged to renew the contract.

The contradictory nature of outsourcing

You can say that outsourcing is quite a paradox; it requires high costs to get in or out of a relationship with a supplier, and a long-term agreement would be necessary in order to lower costs. The long term contract would define the costs and the metrics based on what they have predicted to happen in the future. The problem is that no one really knows what will happen in the future, and this requires an amount of flexibility in the contract. So what happens is that long-term and flexibility start to battle it out.

The root of the problem

In order to alleviate a problem, one must find the source and isolate it. In this case, the supplier offers to do certain services at a set amount of time, and amortize costs. The problem is that these do not cover changes and improvements.

Another problem is the future itself. The buyer and supplier agree upon costs, services, and expectations but the reality is that no matter what research you do, you never really know what the future holds. These are the reasons why flexibility really is the key to a successful outsourcing contract.

Proposed solution

On way to achieve flexibility is to differentiate the length of the contract, and the length of the relationship as well. This makes the buyer able to adjust whenever a contract expires, and a new one is about to start without having the problem of “courting” the supplier again. This would then result in long term relationships on short term contracts. GP