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ConTRACTing And RElATionsHiPs 177
As a way of encouraging appropriate decisions to be made by each party, and as a way
of preventing misunderstanding between the parties, efficient information exchange
and dissemination is vital. But, the nature of the information exchanged by the part-
ners may become increasingly sensitive; meaning that it would be embarrassing if one
party leaked it. And, if the information is commercially valuable, leakage could mean
one partner being placed at a commercial and/or strategic disadvantage.

Joint problem solving
Partnerships do not always run smoothly. In fact, the degree of closeness between
partners would be severely limited if they did. When problems arise, either minor
problems concerned with the day-to-day flow of products and services, or more fun-
damental issues concerned with the nature of the relationship itself, they will need to
be addressed by one or both partners. The way in which such problems are addressed
is widely seen as being central to how the partnership itself develops. In fact, it can be
argued that it is only when problems arise that the opportunity exists to explore fully
many of the issues we have been discussing regarding trust, shared success, long-term
expectations and so on.

Dedicated assets
One of the more evident ways of demonstrating a commitment to partnership, and one
of the most risky, is by one partner (usually the supplier) investing in resources that will
be dedicated to a single customer. A company will only do this if it is convinced that
the partnership will be long term, that advantages can be gained by both parties and
that the customer will not exploit the investment in order to bargain the price down
below what was originally agreed.

Limitations of partnership relationships
It is important to point out that trust ‘not only binds, but also blinds’ buyers and sup-
pliers. Long-standing relationships can result in a sub-optimal information search.
That is, organisations become ‘locked-into’ those relationships and thereby neglect
to obtain other relevant information from the market. Such information may, for
instance, prove vital for spotting shifting market trends or emerging innovative tech-
nology. In summary, as with contracting, relationships (with trust as their key com-
ponent) are equally unreliable as a stand-alone supply management mechanism and
therefore some form of formal control is still needed to reduce the hazards of opportun-
ism. In other words, we need to proactively develop both contracting and relationship-
building capabilities.

E-procurement

By making it easier to search for alternative suppliers, the internet has changed the
economics of the search process and offers the potential for wider searches. It has also
changed the economies of scale in purchasing. Purchasers requiring relatively low vol-
umes find it easier to group together in order to create orders of sufficient size to warrant
lower prices. E-procurement is the generic term used to describe the use of electronic
methods in every stage of the purchasing process, from identification of requirement
through to payment, and potentially to contract management. Many of the large auto-
motive, engineering and petrochemical companies, for example, have adopted such an

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