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As the heat of competition among wireless carriers in the United States increases, partnerships and joint ventures continue to grow as well. Such partnerships may involve tier-one carriers partnering with disruptive market entrants (e.g., cable operators, nontraditional carriers) for the purchase of airtime and capacity for resale, in lieu of making extensive capital investments on their own. One often-overlooked benefit of such partnerships is the collective buying leverage that established carriers and disruptive entrant partners may be able to realize together. Focusing on a few key strategic sourcing and category management fundamentals can help to ensure that those benefits are realized and maximized.
Step 1: Identify common suppliers
While seemingly simple, identifying common suppliers between both parties is key in recognizing and realizing potential increases in buying power. Without this knowledge, neither party can begin to understand where to focus its energy in researching the complexities and nuances of contractual relationships, purchasing commitments and service level agreements. This information is also critical for developing a joint strategy to drive opportunities for additional savings or greater supplier value. Identifying common suppliers also helps each party determine which of them may be better suited to lead the identified strategy.
Step 2: Understand contractual drivers
While both parties may have overlapping suppliers, their contract terms are likely very different. To determine the best options for leveraging combined purchasing power, both organizations should gather a detailed summary of the key terms and conditions regarding their supplier agreements and compare them to determine which existing partner contract has the most beneficial terms and pricing. Examples may include the ability to purchase at greater discount tiers based on combined volumes, or securing preferred shipment priority or new technology development due to higher aggregated purchase levels.
Step 3: Develop a category management strategy
Once common suppliers and key contract terms and conditions are identified, the parties can evaluate their combined needs over the coming months and years and begin to plan an effective category management strategy. Understanding demand needs and the timing of expected demand will allow the buying party to structure an effective approach for negotiations with identified suppliers. This could include timing potential purchases to coincide with quarter or year-end closes for certain suppliers to realize potentially greater discounts. Additionally, effective category management for a joint partnership must include developing a structure for managing which aspects are off-limits during any supplier negotiations. This must be agreed upon prior to any negotiations, in order to assure the party not present “at the table” that only agreed-upon items will be included in negotiations.
Step 4: Negotiate with suppliers
The designated buying party can now begin to negotiate with identified suppliers and yield dividends from the work invested in the prior steps. In all cases, negotiations should (wherever possible) include competition in order to ensure the buying party has as much leverage as possible to achieve the targeted goals. During negotiations, the buying party can provide its wants and needs to targeted suppliers and determine the extent to which those suppliers wish to earn their business. Price concessions, increased service levels and potential vendor investments in new capabilities may all be offered by the supplier as a means to secure the greater volumes or increased cachet from winning the business.
Step 5: Implement effective supplier relationship management
As surprising as it may seem, many companies go to extensive lengths to prepare, conduct and execute strategic negotiations with identified suppliers, only to provide little, if any, relationship management or governance of those relationships on a steady-state operational basis (post contract execution). Effective supplier relationship management is essential to ensuring that the expected value is actually realized. And with a leveraged partnership potentially at stake, effective supplier relationship management is even more important. Defining the stakeholders, designating their tiers, and establishing the process and cadence for relationship management are all imperatives for the relationship to operate smoothly and effectively.
Partnerships and joint ventures are designed to provide benefits to both parties. However, such partnerships often overlook the added benefits of combined purchasing power and leverage. Understanding and implementing an approach that incorporates these best practices can help to ensure that partners yield maximum benefits for joint strategic purchasing initiatives, thereby further boosting the partnerships’ overall value.
