Relationships: Transactional or Strategic, which is Preferred?

The preferred relationship type is both!  Both transactional and strategic relationships have the potential to bring value to our organizations.  When determining which relationship types we prefer, the essential question is: “what business results are we looking to achieve?”

When focusing on the ability to obtain OEM and product components better cheaper, and faster, a transactional relationship may be preferred.  On the other hand, when focusing on broader business goals such as creating new revenue streams, increasing market share, increasing productivity and improving customer service, a strategic relationship may be preferred.

There are points along our supply chain that require different types of relationships.  The key is to understand what type of relationship works best given the specific business need.  The table below may help to identify which relationship type might work given differing situations.

Situation

Transactional

Strategic

Fix an immediate problem

X

 
Generate New Revenue Streams  

X

Increase core competencies  

X

Product pricing pressures

X

X

Leverage resources  

X

Once a relationship type is matched to a particular need within our organization, it may be useful to explore the attributes associated with the two different approaches to relationships.  The table below lists attributes of both relationship types.

Strategic Relationship Attributes

Transactional Relationship Attributes

High relationship participation Limited relationship involvement
High commitment Specific requirements
High level coordination Easy Role definition
High level of trust Contract driven
Collaborative problem solving Little training needed to purchase
Conflict resolution Concrete outcomes
Open communication Limited communication
Shared risk Low risk
Complex information sharing Simplistic information sharing

Interestingly, when examining business needs, matching relationship types and reviewing relationship attributes; it may be possible that a combination of both is the best option.  Understanding what kind of relationship works best for our specific business need enables us to include characteristics and attributes from both relationship methods into our selection processes.

Combining desired business outcomes and relationship types into selection processes has the potential to help our businesses operate more effectively.

What have your experiences been with strategic and transactional business relationships?

4 Responses to Relationships: Transactional or Strategic, which is Preferred?

  1. Jaime Taylor says:

    Hi Sara – Another great blog post! I love the multidimensional analysis here in the two charts you provided. The first to identify your situation and the other to view attributes of each relationship type. This by itself is a useful tool when challenged by a situation.

    I also thought about that “fix immediate problem” situation. I have found that where I do not have a solid strategic relationship I find a high occurrence of “fix immediate problem” situations. This usually manifests in poor quality, shortages in supply and/or low throughput; all of which negatively impacts the customer. I believe these are preventable with strategic relationships with my suppliers and providers.

    The “fix immediate problem” situation I would rather have is when I have more demand than capacity…in this case I would still go to my strategic partner to help me out on these short term capacity issues because I can trust they will meet my need based on our strategic relationship. So I agree with your suggestion that both may be best particularly in this context.

    Thanks,
    Jaime

    • Sara Taylor-Niemann says:

      Hi Jaime, Thanks for your thoughtful and articulate comment. I agree, often a benefit of a strategic relationship is trust. Trust enables the implementation of solutions designed to comprehensively solve complex problems. Some times we miss the “fix the immediate problem” pattern that is often indicative of a more complex problem. Missing the pattern can lead to a misjudgment of the situation / problem we are attempting to solve.

  2. Buffy Rayne says:

    Great post! It really helps a lot for companies and certainly be beneficial for them. I recently read an interesting blog post about how to increase your buyer prowess for labels that you might find interesting. It had some really interesting tips, check it out http://www.labelink.ca/consumer-package-goods-labels/increase-buyer-prowess-labels-flexible-packaging-tip/

    • Sara Taylor-Niemann says:

      Buffy, Thanks for visiting, reading and commenting on my blog post. I appreciate your feedback. Thanks also for the link, I found the information there very interesting.

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