Opinion: To commit or not to commit

Christopher Barrat: In today's fast-changing world, a long-term relationship with one strategic partner may leave you out in the cold.

The recent collapse of MG Rover came as a big blow to many of its suppliers. Not least to several companies reported to have been owed more than £1 million each by the giant car maker. Only days before the crash, one of these, Tata Motors of India, had declared it wanted to become MG Rover's 'principal strategic partner'. The marriage they had arranged so carefully is now in tatters, prompting a timely reminder of the value of such relationships.

Partnerships have for some years been one of  the best examples of the 'emperor's new clothes' syndrome in business. In today's world there are strong market forces at work, showing both economic and ethical arguments why procurement should no longer deal in the currency of strategic partnerships. Procurement has a long history of being at the sharp economic end of the commercial spectrum, so that's where the questioning of strategic partnerships should start. There are three main market forces at work here. Globalisation, the move from supply chains to supply networks, and the speed of market developments have all taken their toll.

Globalisation has had a double-whammy effect. From a procurement perspective it has opened up new supply options, not only in terms of suppliers of materials, but also in the ability to outsource and 'offshore' whole segments of the supply network. This makes it harder to be sure that today's partner will always provide the best long-term options.

The move to supply networks has increased relationship complexity. Companies are finding that they are both a supplier and a customer to other organisations. A big airline needs software, and big software companies need preferred travel partners. It gets very complicated to work out who exactly is the customer and who is the supplier. Such 'two-faced' relationships can be hard to control.

The sheer velocity of some markets is the third nail in the coffin for long-term strategic partnerships. The average life cycle of products has dramatically reduced. Whereas cosmetic brands used to last 15 years, it is now down to just five. Companies themselves are churning at a faster rate than ever, with mergers, acquisitions and divestments creating a vast variability of relationship options.

You could argue that with all this variability a strategic partnership is precisely what you need - the very thing that over-arches these perturbations, with the longer-term collective good in mind. Admirable sentiments, but they do not stack up. The threefold changes that come from products, companies and personnel present constant opportunities for breaking agreements. With short-term goals often dominating Western business, procurement professionals cannot resist - indeed, are encouraged - to re-evaluate relationships. They are right to do so. If they don't, they could find themselves on the next personnel churn. Getting locked into strategic relationships is therefore not the place to be.

The ethical argument is founded on these economic forces, combined with the fact that procurement is increasingly positioning itself as a 'profession'. Its own qualifications, certifications and guidelines are gaining credence and it wants to move firmly away from supplier selection based on how many lunches they have paid for. If so, then procurement must also look at the promises it makes. A key part of the strategic partnership appears to be a good degree of investment by the supplier. This may go as far as dedicated capital investment, but there can still be massive investments from suppliers in terms of time and money that are not capital.

So many times strategic suppliers are asked for discounts 'to help us through this difficult financial period', while the payback remains in a mythical market upturn. The reality of procurement today is that purchasing should stop tempting partners to the altar of strategic relationships to hear the words 'I do'. The circumstances of business simply change too rapidly. Saying, 'I probably will' may cause the bride to pace more carefully down the aisle, but that may not be such a bad thing.

Christopher Barrat is a director of the Greystone Partnership and co-author of Buying for Business: Inslghts in Purchasing and Supply Management