Question 17

Explanation

Partnership is a form of strategic sourcing that involves a long-term and mutually beneficial relationship between a buyer and a supplier. Partnership can offer many advantages for both parties, such as:

• Reduced costs and risks

• Improved quality and innovation

• Enhanced trust and communication

• Greater flexibility and responsiveness

However, partnership may also fail due to lack of value-added benefits, which are the additional value that the partners create or receive from the collaboration. Some of the common reasons for the failure of partnership are:

• Selecting the wrong supplier or partner, who does not share the same vision, values, or goals as the buyer, or who does not have the required capabilities, resources, or reputation to deliver the expected outcomes.

• Partners become complacent, meaning that they take the partnership for granted and stop investing in the relationship, or that they fail to adapt to the changing needs and expectations of the buyer or the market.

• Changes in the market eroded the value-added benefits, meaning that the external factors, such as competition, regulation, technology, or customer demand, have reduced the attractiveness or relevance of the partnership, or have created new opportunities or threats for the partners.

• The relationship is not being effectively or actively managed, meaning that the partners do not have a clear and agreed-upon governance structure, performance measurement system, communication mechanism, or conflict resolution process to monitor and improve the partnership.

• Unrealistic value-added benefits or expectations, meaning that the partners have overestimated or underestimated the potential benefits or costs of the partnership, or that they have different or conflicting expectations about the nature, scope, or duration of the partnership.

In the scenario, the procurement manager is concerned about uneven distribution of benefits, which is another possible reason for the failure of partnership. This means that one partner receives more benefits or value-added than the other, or that the benefits or value-added are not aligned with the contributions or efforts of the partners. This can lead to dissatisfaction, resentment, or opportunism among the partners, and undermine the trust and commitment that are essential for the success of partnership.

To solve this problem, the procurement manager should work with the supplier to develop a joint value-sharing model, which is a tool that helps the partners define, measure, and allocate the value-added benefits of the partnership. A joint value-sharing model should include the following elements:

• The objectives and scope of the partnership, which specify the purpose, goals, and boundaries of the collaboration.

• The value drivers and indicators, which identify the sources and measures of value-added benefits, both financial and non-financial, such as cost savings, revenue growth, quality improvement, innovation enhancement, risk reduction, or customer satisfaction.

• The value-sharing formula, which determines how the value-added benefits will be split between the partners, based on the proportion, fixed amount, or performance criteria.

• The value-sharing mechanism, which describes how the value-added benefits will be calculated, verified, and distributed, and how often and by whom.

• The value-sharing review, which evaluates the effectiveness and fairness of the value-sharing model, and makes adjustments or revisions as needed.

By developing a joint value-sharing model, the buyer and supplier can ensure that the partnership is mutually beneficial and sustainable, and that the partners are motivated and rewarded for their contributions and efforts. A joint value-sharing model can also enhance the transparency and accountability of the partnership, and foster a culture of trust and cooperation among the partners.

Reference: CIPS L4M6 study guide page 172 / The new syllabus 2024

LO 3, AC 3.3