Supplier Alliances: Using Contractual Terms to Increase Reliability

By Lois D'Costa | Tuesday, January 23, 2018

COMPANIES AS DIVERSE as Apple, Boeing, LyondellBasell, and Tesla depend on suppliers for inputs critical to their business (Exhibit 1). Suppliers might possess technological, locational, or infrastructural advantages that make them irreplaceable in the short-term. As such, even temporary disruptions in supply can create severe consequences. For example, bottlenecks in Panasonic’s supply of lithium-ion battery cells recently slowed Tesla’s Model 3 production ramp. Meanwhile, interruptions in power supplied from its electric utility supplier forced LyondellBasell to shutdown its Houston refinery, and deal with the resultant flaring and releases into the surrounding environment.

So how can companies in supplier alliances for critical inputs ensure that supplies are reliable?

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Alliances: Getting Non-Equity Collaboration Right

By Joshua Kwicinski | Tuesday, October 10, 2017

PARTNERSHIPS HAVE COME of age in the last 20 years, becoming a central tool for corporate strategy and competitive advantage across industries and geographies. Companies as diverse as Amazon, GlaxoSmithKline, Google, IBM, Microsoft, News Corp, Philips, Siemens, Shell, Starbucks, and Uber all routinely see partnerships accounting for 20-50% of their corporate value – whether measured in terms of revenues, assets, income, or market capitalization. Meanwhile, the proliferation of partnerships continues unabated; almost 50% of CEOs surveyed in 2016 expected to enter into a new partnership within the next 12 months.

The vast majority of these collaborations are structured as non-equity alliances – i.e., purely contractual agreements where no new equity structure or separate joint venture company is created.

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The Basics: Why Alliances Underperform and Fail

By Gerard Baynham | Tuesday, November 1, 2016

THE ROSTER OF NON-EQUITY ALLIANCE success stories is diverse and eye-catching, and includes Accenture-Cisco, Pfizer-Amgen, Starbucks-Barnes & Noble, and KLM-Northwest Airlines (Exhibit 1). But step back from these bright lights, and the truth is darker. Over the years, there have been many different studies on the success rates of alliances – some by us, many by others. Each asks slightly different questions and has slightly different results. But, on average, the odds of being happy with an alliance are no better than a coin flip, and few are without their headaches.

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