One effective way to reduce costs and improve service in the supply chain is to develop strategic partnerships. These alliances should be chosen based on the overall strategy of the firm, and are typically limited to suppliers of strategically important goods and services. These partnerships are based on trust and rely on predictable communication streams and management systems. Rules of engagement between the parties normally include how schedules are communicated, how engineering changes are executed seamlessly, how engineering expertise is shared, how often deliveries are expected, how often demand expectations are forwarded or otherwise made available to the supply chain, and how suppliers are involved with product and processes at the customer’s site.
Other considerations in these partnerships include what securities are offered in terms of longer contract expectations, defining options and features and their lead time expectations, and any other communication requirements specified by either party.
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