Introduction
This module addresses the benefits to be gained from closer working relationships
between companies operating at the same stage of the supply chain. While
particular emphasis has been given to specialist material suppliers working
together to produce integrated construction packages, the principles involved
are also applicable to horizontal partnering between other supply chain
parties.
The benefits
By definition, specialist manufacturers and trade contractors have an
unrivalled level of knowledge relating to their own areas of expertise.
And, working in partnership, they are often in a position to offer more
cost-effective, innovative and efficient solutions to construction projects.
In an age where construction customers are increasingly demanding integrated
'best value solutions' rather than just discrete products, the
need for suppliers to pool their expertise and resources has never been
greater. For example, the modern customer doesn't really want, say,
a roof tile nor even a roofing system; he wants a weatherproof and aesthetically
acceptable weathershield that is defect-free, fit for purpose and economic
from a whole-life perspective. Furthermore, since the majority of defect
problems in construction occur at the interface between different components
and elements, where competent organisations are working together as
a team, optimal solutions in terms of both functionality and cost are
more likely to occur than at present.
Through consciously working as part of a strategic alliance, complementary
organisations can benefit from real synergism, where the individual
parties gain disproportionate rewards from their collective activities.
It is particularly important to realise that formalised horizontal partnering
relationships can result in predetermined supply chain groupings that
are extremely attractive to lead contractors and clients seeking long-term
procurement relationships or are assembling partnered multi-project
teams.
Relevance
Construction product manufacturers/material suppliers seeking closer,
long-term working relationships with other specialist manufacturers.
The object of this might be to:
a) Develop integrated, added value, construction solutions, e.g. branded
or unique system 'packages'.
b) Gain competitive advantage through exerting collective market leverage.
This can be of significant benefit to the smaller organisation with
little individual clout.
c) Engage in collaborative ventures such as joint research and development
programmes. This has the potential to give substantial cost savings,
more technically competent solutions and an accelerated route to market.
Such a horizontal partnership can take several forms including:
1) Peer-to-Peer
A one-to-one coalition of two equal partners.
2) Principal/subordinate
A partnering relationship involving a lead organisation and one or more
junior partners. This might, for example, be a lead assembly company
partnering with subordinate component suppliers.
3) Cluster groups
Several compatible organisations, perhaps SMEs (see Module
5), working together in partnership towards communal goals
Using this Toolkit module
Each key step in the development of a formal partnering relationship
between manufacturers and supplier is identified in the 'Process' column.
The 'Culture and Activities' column then provides a summary of the necessary
ethos and actions required for their implementation. The adjacent 'Tools
and Techniques' column provides recommendations, Toolkit cross-references
and links to external supporting information.
Note: Users of this Toolkit Module are encouraged to explore the other
sections of this Toolkit to determine their position in the overall construction
supply spectrum, to better understand the benefits and workings of the
integration concept and to gain an appreciation of the need for collective
supply chain focus to ensure a satisfactory end result.
Workbook
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Step
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Process
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Culture and activities
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Tools and techniques
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4.1
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Determine the need
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Two or more organisations working collaboratively can leverage
significant advantages in terms of efficiency, profitability and
the creation of added-value solutions. However, intimate collaboration
is not suitable for all companies. It requires 100% commitment
from all/both parties and is generally NOT an easy option.
Consider:
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Is this form of partnering appropriate?
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For which of your products/services/systems is it appropriate?
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Does it open up the potential for supplying highly differentiated,
added-value systems, improved quality, efficiency enhancements
and other bottom-line benefits? Consider the competitive advantages
this might afford.
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Are you, your staff, and your partners, REALLY committed to
partnering?
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Conduct a cost/risk/benefit analysis to determine the feasibility
of this approach and examine the market implications – cost,
competitor reaction, customer perceptions, commercial opportunity.
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teamwork vs autonomy
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known capital costs vs. potential cost savings
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short-term disorder vs long-term productivity gains
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market opportunities vs market restrictions
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Board/Senior Management 'buy-in' to the ethos of supply chain
integration is essential.
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4.2
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Core principles
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Mutual trust amongst all participants.
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Genuine commitment from top management of the partnering organisations.
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Equal commitment from the participant organisations.
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Communicating the vision – the need to sell the idea
internally.
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Where possible, systems and assemblies supplied as all-inclusive
'material packages'.
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Principal Company capable of exerting leadership to achieve
communal goals.
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Comprehension and dedication to integrated working throughout
the network.
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A clearly defined strategy that sets out the aims, objectives
and long-term goals.
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Clear, measurable, value-for-money benefits for all parties.
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Agreed, measurable and realistic performance indicators.
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Formal and informal communication between all parties.
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Creation of an environment of continuous learning and improvement.
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Suitable dispute resolution systems.
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The Construction Manufacturers Partnering Association (COMPASS),
through its Charter scheme, provides a means of establishing a
cultural framework for the pursuit of supply chain integration.
See the Compass
website for more information.
Principal Companies
Principal Companies must visibly commit to promoting the partnership
both internally and externally.
Tip: Chief Executive of Principal Company, or other individual
with the authority to commit the organisation and lead the necessary
cultural change, to set up and lead a series of in-house seminar/workshops
covering the rationale behind the partnering model, the objectives
and the cultural/organisational changes necessary. These must be
positive, interactive sessions with the aim of securing 100% staff
commitment to the network/partnering philosophy.
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4.3
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Planning stage
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Determine the goals of the partnership. These might include, for
example:
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market penetration through competitive advantage
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improved bid outcomes
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workflow 'smoothing'
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product leadership
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package solutions
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earlier project involvement
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strategic marketing targets
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quality improvements
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technology transfer
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cost savings
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new product development
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electronic trading partnerships
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distribution/logistics collaboration
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shared infrastructure, e.g. research resources, marketing
resources, etc.
It is essential that the goals of the partnership are clearly established
and defined at the outset. This is undoubtedly a task for the directors
of the partnering organisations.
However, by the same token, remember that partnerships evolve over
time. Partnership boundaries are often fuzzy at first until the
relationship(s) settle down and mutual respect and trust are established.
Determine the type of partnership that will be necessary to achieve
your goals:
1) Peer-to-Peer
A one-to-one coalition of two equal partners.
2) Principal/subordinate
A partnering relationship involving a lead organisation and one
or more junior partners. This might, for example, be a lead assembly
company partnering with subordinate component suppliers.
3) Cluster groups
Several compatible organisations, perhaps SMEs,
working together. Most cluster groups will be, or become principal/subordinate
relationships.
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See Partnering
Flowchart
The stakeholders in the relationship must be properly represented
and active in the relationship. A 'lop-sided' relationship where
one party feels it is carrying the other is doomed to failure and
might prove catastrophic.
Tip: Although to work properly the partnership must have
the support of the board and the entire management team, it is recommended
that each party appoint a partnering 'champion' to ensure that partnering
principles do not slip out of focus.
Tip: Don't expect overnight results. It takes time to establish
trusting relationships. Typically, 6–18 months might elapse
between the exploration phase and the commencement of a working
relationship.
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Identify the products/systems to be included in the partnership.
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Methodology:
Step 1 - Consider the major components involved.
Step 2 – (a) is a consultant specification of individual components
necessary, or, (b) can a clear overall output related performance
specification be given?
Step 3 –
If (a), consider opportunities for standardisation, off-site fabrication
and/or packaging of specified components.
- If (b), consider horizontal partnering approach.
Step 4 – Assemble network to identify relevant component suppliers
Step 5 – Establish Joint Management Team or Select Principal
Company (where a complete package is being supplied, this will normally
be the assembly company)
Step 6 - Formulate a Partnering Charter that reflects the spirit
and substance of the relationship.
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Give consideration to any necessary re-organisation to facilitate
and progress partnering principles.
Determine the optimum number of partners? Will this change over
time?
Ensure that operational issues such as confidentiality, investment
risks, dependency risks, etc, are all addressed.
Put together a form of 'Partnering Charter' between the various
parties. Depending on circumstances, this may range from a non-binding
'statement of accord' to a full binding contract but in most cases
it is preferable to keep this as an uncomplicated, non-legal, document.
Subsidiary to the Partnering Charter must be a dispute resolution
procedure. One of the prime benefits of partnering stems from
its non-adversarial nature. However, even in the best-constituted
partnering relationships, disagreements and misunderstandings
will arise from time to time and it is prudent to have contingencies
in place.
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Refer to Examples of Partner
Charter
for an example of a simple partnering charter.
Tip: Be aware of the legal and contractual implications
of a partnering agreement. It would be prudent to take legal advice
when creating a Partnering Charter and before entering into any
formal partnering relationships.
The basis for a dispute resolution procedure might take the following
form:
1. Always attempt to resolve the dispute at the lowest level of
authority.
2. If this fails, both parties should escalate the dispute upwards
without triggering unnecessary delays or costs.
3. All disputes must be escalated up the authority hierarchy without
jumping any levels.
4. Disregard for the problem or failure to reach a decision is
not acceptable.
5. Provision for independent and speedy resolution in the event
that agreement cannot be reached.
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4.4
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Selecting partners
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The selection of the right partners is of utmost importance in
a concept that revolves around mutual trust and support.
Partner selection programme:
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How many partners are necessary to achieve the goals?
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There must be no weak links amongst the partnering members
and they must all bring congruent skills.
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The number of partners will vary depending on factors such
as the nature of the business and the availability of suitable
candidates
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Consider the impact of site-wide specifications for certain
components and the adequacy of partner product portfolios.
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Sell the business case to prospective partners, e.g. strategic
advantage, exclusivity, mutual support, long-term relationship,
cost savings, etc.
Tip: Invite prospects to introductory, no obligation, seminars
or one-to-ones to discuss the possibilities and gauge their commitment.
Assess candidates using a rigorous quality-based selection system
covering both quantitative and qualitative criteria.
Tip: Where appropriate, identify the partner best suited
to a Principal Company role. In 50:50 relationships this role could
alternate annually or biannually.
Use this Toolkit to give structure to the partnership and a shared
belief foundation.
See Resources for generic
issues surrounding Partner selection issues.
Make sure you comply with the provisions of the Competition Act
1998 (see the HMSO
website for more information), and relevant
EU Procurement Directives and other legislation.
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4.5
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Address relational/ process interface issues
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In most construction procurement scenarios, transactional and
process-related improvements offer huge scope for cost/efficiency
gains.
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See Module 1: Customer/supplier
procurement integration for transactional cost reduction
examples.
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4.6
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Agreeing measurable objectives
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Set short- medium- and long-term targets. Distinguish between
global objectives and project-specific objectives, e.g:
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health and safety, e.g. universal C.S.C.S compliance
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profitability
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technical
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environmental, e.g. attainment of ISO: 14000
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commercial
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cultural
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cost
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quality, e.g. attainment of ISO: 9000
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resources
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service levels and response times
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third party partnering certification, e.g. attainment of
COMPASS Charter Status
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Tip: Make sure you set objectives that encourage a high
degree of engagement and interaction. Remember – the greatest
success will accrue from the mutual attainment of common goals.
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4.7
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Determination of Key Performance Indicators
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Benchmarking through KPIs is an essential part of the management
process-enabling, continuous improvement to be measured and compared
against both the partnership objectives and industry norms.
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Ensure, through regular communications, that everyone involved
in the partnering coalition are fully aware of the KPIs and their
significance.
Tip: Adopt the COMPASS Charter Key Performance Indicators
or equivalent as a straightforward means of monitoring and measuring
continuous improvement. Note that the COMPASS KPIs meet the market
monitoring requirements of ISO 9001: 2000, saving unnecessary
duplication of work. For details go to the COMPASS
website.
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4.8
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Management and communications
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Ensure that a democratic and transparent partnership management
process is in place to engender trust, commitment, enthusiasm and
network 'ownership'.
Establish a mechanism for driving the partnering relationship throughout
the partnership parties. The aim is to oversee the integration strategy
with your partners, and to guide and monitor implementation.
Cultural transformation through education, emulation training and
example.
Risk management
Establishing a horizontal partnering group is not about risk transferral;
it is about risk management and removal. At this stage, the team
should set out the basis for sharing risks. The correct management,
monitoring and measurement systems will ensure that risk is identified,
minimised and shared equitably. In some areas, insurance can be
a means of transferring/controlling risk.
Relationship building
Partnering relationships must be nurtured, stimulated and rewarded.
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Principal Company or Joint Management Team to set up a review
team to review network progress against objectives and KPIs, agree
on new objectives and resolve contentious issues as they arise.
Prepare a joint training programme to meet the commercial, technical
and cultural aspects of the programme and in accordance with the
agreed KPIs.
See Control of Risk – A Guide to the Systematic Management
of Risk from Construction, available from CIRIA.
See The Partnering Toolkit pp 26, 27 available from
BSRIA.
Tip: Ensure, through regular communications such as face-to-face
meetings, conferences and newsletters, that everyone involved in
the partnering relationship are fully aware of the strategic importance
of the relationship and their personal role in making it work.
Tip: Hold regular, at least annual, joint conferences to
foster team spirit and trust, share knowledge, educate and motivate.
Encourage social and team-building events.
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4.9
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Adding value, differentiation and control through collateral guarantees
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Assured performance can be offered through insurance-backed supply-and-fix
guarantees. Shared liabilities and independent auditing of materials
and workmanship ensures quality compliance.
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For further information on manufacturer's combined product/workmanship
insurance-backed guarantees refer to the COMPASS website.
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4.10
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STEPS FORWARD
Product co-development and innovation
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A mature partnering alliance will develop the trust, confidence,
mutual respect and interdependence to allow collaborative innovation
and product development programmes to flourish.
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Consider regular collaborative design workshops with the aim of
reducing waste, improving quality, simplifying interfaces and producing
value-engineered solutions.
Start small and concentrate on easy-to-implement and cost-efficient
product enhancements rather than long-term R&D programmes.
Design for installability, manufacturability, sustainability, rationalisation,
standardisation, simplification and safety.
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4.11
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Collaborative marketing
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Established horizontal partnerships can collaborate in promoting
the participants' collective 'best value' packages and advantages.
In this way even a small horizontal cluster group can exert significant
promotional leverage.
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Consider joint promotional programmes.
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4.12
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Develop electronic and other streamlined interfaces
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Explore opportunities for extranet/intranet collaboration.
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See Module 1: Customer/supplier
procurement integration
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4.13
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Vertical integration
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Strong horizontal partnerships are in a powerful position to develop
commercially attractive vertical partnering relationships with clients,
principal contractors, consultants etc.
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See Resources.
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4.14
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Refine, improve and develop
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The constant monitoring of performance has been identified as
one of the most critical factors in achieving partnering success.
Partners must continually apply the lessons learned from feedback,
reviews, successes and failures. Improve, improve, improve!
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Review and continuously audit performance. Don't compromise on
quality or commitment. If a partner consistently fails to deliver
against its agreed objectives then:
a. Reconsider the objectives to determine their validity/ attainability.
Adjust if necessary.
b. Discuss the requirements with the partner in question with
a view to rectification.
c. If all else fails, determine the partnership agreement in accordance
with the termination terms therein.
See Module 1: Customer/supplier
procurement integration; PSL Partnering Guides at the PSL website.
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