Partnering: Going beyond lip service

06/01/1997

Partnering: Going beyond lip service

A buyer in search of a vendor has many choices. If Vendor A`s quality, product features, delivery, or prices do not meet the needs for a particular order, the customer can simply call Vendor B. A partner, on the other hand, is something unique - something relied on through good times and bad.

Edwin Richard Rigsbee, a management consultant and author of The Art of Partnering, has an interesting article on the Internet titled "The Boomerang Always Returns" (http:// speakers.com
igsbee/partc008.txt). Discussing the cost of not partnering with suppliers, Rigsbee examines how auto companies tried to control costs in the early 1990s. General Motors (GM) used its

clout with suppliers to dictate price reductions. Result: The benefits of suppliers` latest technologies gravitated away from GM and went to its competitors and to other industries.

Chrysler, on the other hand, had an entirely different approach. "When you start to see your suppliers as the experts, then they become valuable partners instead of a switchable commodity," said Chrysler`s Thomas T. Stalkamp (The Wall Street Journal, May 14, 1993). Chrysler, notes Rigsbee, was the only US automaker to make money in 1992.

Stalkamp succinctly articulates the difference between a vendor and a partner. Let`s apply his insight to our own experiences during the semiconductor boom of 1995 and the industry downturn of 1996. The cycle provides all participants in the supply chain with an opportunity to examine the success (or failure) of relationships with customers and suppliers. Was true partnering in evidence, or did the rules change when the chips were down?

Successful partnering: How to start

Good partners, by definition, have a closely interwoven business relationship. This relationship is a dynamic process that begins with clearly stated expectations.

Performance in meeting expectations - as a supplier or as a customer - invites or shuts out competition. Ultimately, the time and money a company invests in enhancing its net worth is either eroded or supported by its performance on expectations. If performance exceeds expectations, the company is adding value for its partner. The added value sets the company apart from competitors.

That is why the first step of creating a partnership is for each party to define their expectations for partnering. Worthwhile goals for a supplier might include establishing a beachhead for a new product or maximizing sales productivity and thereby lowering the cost of doing business. A customer`s goals for partnering might include getting preferred access to limited resources, gaining new insights and expertise, or achieving more predictable quality.

The next step is to select the best candidates for partnering. This involves:

Understanding the potential partner`s company culture. Is it complementary? All parties should be customer-driven to assure a unified focus. Has top management been effective in getting employees to "buy in" to the relationship? Many relationships fall apart because the people expected to make the alliance work on a day-to-day basis have different agendas than executives higher up .

Identifying the value that each company adds. Together, develop a list of the strengths that each party brings to the relationship. Proximity is a strength, so try to keep relationships as local as possible.

Identifying "champions." To be successful, the partnering arrangement must ultimately enhance each participant`s goals. Successful alliances are often described as win/win situations. The winners should be not only the partnering companies, but also the individuals involved. That is why potential partners should find champions in each other`s organization who have something at stake in the alliance, and who understand that their personal goals are threatened when expectations are not met. Champions can be at any organizational level, but enthusiastic support from visionary senior executives is vital.

Building the relationship

The three keys to success in real estate are commonly known: location, location, and location. In partnering, it is communications, communications, and communications.

Communication with a partner starts with keeping an honest agenda on the table. Suppliers need to inform customers immediately of resource shortages or other problems that impact quality or delivery. Likewise, fabs need to inform suppliers of unexpected shifts in demand. In volatile markets, any changes in bookings should be communicated weekly. Share information openly and honestly to help each other get through the business cycle. Work together in revising inventory-stocking agreements, adjusting minimum inventory levels, and restructuring delivery schedules.

Partners need to be advised when a company is restructuring its organization. Be open about financial constraints, too. A supplier that is financially strong is generally more amenable to providing long-term financing. Willingness of both parties to share the burden of excess inventory can be a milestone for a win/win relationship.

Another hallmark of good communications is helping the partner improve its operations. For example, both parties can reduce costs by using each other`s strengths. To keep blueprints current and accurate, share technical staff such as engineers, draftsmen, or quality control (QC) specialists. Source inspection programs, which are often the precursor to "dock-to-stock" programs, may avoid duplication of QC equipment and staff. Share physical plant space for inventory storage and packaging supplies.

Periodically re-evaluate each other`s strengths and weaknesses. Mutually agree on the technique of monitoring success and identifying problems.

Taking it to the next level

Think of the relationship built so far as a child who needs lots of attention and nurturing to mature to his or her full potential. Here are some tips for building long-term relationships with business partners.

1. Offer training and technical sessions to customers and to suppliers. Invite them to in-house training sessions or offer to have seminars at their site. For example, Heraeus Amersil offers a Quartzware Symposium that examines the physical and chemical properties of quartz glass, explains how these properties relate to wafer fab applications, and describes how quartz materials are manufactured from raw sand to finished glass.

2. Offer cross training, timesharing, or exchange of personnel. Provide for resident experts at each other`s facilities. Communicate in the design phase of new products. Coauthor technical papers and present them together at conferences.

3. Trumpet the success of the relationship by marketing the strengths of partners. In the case of equipment suppliers, build customer confidence by introducing strategic partners to customers. This supports the "we`re in this together" concept of partnering. Joint interfacing with the customer further obliges suppliers to provide support. By spreading the ownership of customer service, responsiveness in serving the end customer improves.

Is partnering for your company? Only if it is willing to make the investment of time and energy vital for the alliance to take root and flourish. Consider your company a candidate for partnering if it is open to innovation, excited about its potential, and committed to meeting two sets of expectations: your`s and your partner`s.

Howard Young is sales and marketing manager of Heraeus Amersil Inc., 45875 Northport Loop East, Fremont, CA 94538; ph 510/226-9477, fax 510/226-8951.