To the extent that buyer-supplier relationships can be cooperative, value can be created for both customers and vendors. Regrettably, the traditional behavior of some industries, particularly the U.S. automotive industry, often precludes cooperation. The authors describe one successful case — the experiences of ABB and the Ford Motor Company during the design and construction of a $300 million facility. The authors explain the key factors that led to ABB’s and Ford’s success and how value-adding cooperation between buyers and suppliers can be fostered.
1. T.F. Lyons, A.R. Krachenberg, and J.W. Henke, Jr., “Mixed Motive Marriages: What’s Next for Buyer-Supplier Relations?,” Sloan Management Review, Spring 1990, pp. 29–36.
2. S. Helper, “How Much Has Really Changed between U.S. Automakers and Their Suppliers?,” Sloan Management Review, Summer 1991, pp. 15–28.
3. P.S. Ring and A.H. Van de Ven, “Structuring Cooperative Relationships between Organizations,” Strategic Management Journal 13 (1992): 483–498.
4. R.M. Axelrod, The Evolution of Cooperation (New York: Basic Books, 1984).
As observed by Ring and Van de Ven (1992), dynamic cooperation created by repeated encounters is a promising alternative to traditional but static transaction-cost analysis. See:
O.E. Williamson, The Economic Institutions of Capitalism (New York: Free Press, 1985).
This article has been written with the support of the Training in International Operations (TIO) and Darden-IFL Case Development Project. The authors thank the executives of ABB and Ford Motor Company who have helped develop this material, especially John Camardella, Krister Ericsson, Jim Dixon, and Tom Mark of ABB, Vince Coletta and Steve Roberts of Ford, and Anna Järkestig of IFL.