Manufacturing success strategies: Use well-crafted agreements to build strong supply chain relations

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SupplyChainBrain.com offers a summary of a new whitepaper on outsourced manufacturing that focuses on how to develop agreements with supply chain partners that lead to positive relationships and successful results. The whitepaper was written by practitioners and academics from University of Tennessee, Georgia Southern University, Cranfield School of Management and the International Association of Contract and Commercial Management. Titled “Unpacking Oliver,” it’s based on the work of 2009 Nobel Prize-winning economist Oliver Williamson, who studies transaction cost economics and its impact on contracts and organizations.

The whitepaper offers 10 lessons for crafting agreements that help you make the most of your relationships with contract manufacturers and other supply chain partners. At a high level, these lessons are:

  • Outsourcing is a continuum, not a destination.

  • Develop contracts that create “mutuality of advantage.”

  • Understand the transaction attributes and their impact on risk and price.

  • The greater the bilateral dependencies, the greater the need for preserving continuity.

  • Use a contract as a framework – not a legal weapon.

  • Develop safeguards to prevent defection.

  • Predicted alignments can minimize transaction costs.

  • Your style of contracting matters; be credible.

  • Build trust; leave money on the table.

  • Keep it simple.

An excerpt of the executive summary of the whitepaper, with more detailed descriptions of these lessons, can be found at SupplyChainBrain.com. The complete whitepaper can be downloaded from the Vested Outsourcing website (registration required).

 

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