Case: The Sigma Project

Sigma is a product development project led and carried out by a medium-sized company in Norway. The product to be developed is a new version of an existing product where the latest available technology is being utilized. The purpose is to create a product that will maintain the company’s position as a global market leader.

To achieve this goal, the choice of the main supplier is considered very important. Therefore, in the project, they have chosen to conduct internal analyses of several potential technology suppliers, rather than a traditional open tender process. Factors to be emphasized in the selection of suppliers are technical solutions, geographic location, service, follow-up possibilities, good references, and the opportunity for long-term contracts.

For the company, it’s important to establish a good relationship of trust between the parties and ensure that they interact with relative transparency. According to the project manager, the project will to a large extent listen and take into account suggestions that the supplier puts forward. The company hopes that this can lay the foundation for long-term cooperation between the parties.

The project must also enter into a contract with another supplier for deliveries of what can be defined as standard components. The choice of this supplier was based on a tender evaluation of price offers.

Discuss what kind of relationship the company and the project should initiate with these two suppliers.

In this situation, it is crucial for the company and the project to establish different types of relationships with the two suppliers, based on their roles and significance in the project. Here is the discussion of the relationships that the company should initiate:

Main supplier (technology supplier): With the main supplier, who is responsible for the latest technology and product development, the company and the project should strive to establish a strategic partnership. This entails close collaboration, trustful communication, and sharing of information and knowledge. The company should encourage the supplier to provide suggestions and ideas, and be open to evaluating them. The long-term perspective is important, as the company wants a long-term collaboration that can support their position as a market leader. Mutual trust and mutual benefit should be central elements in this relationship.

Supplier of standard components: With the supplier of standard components, chosen based on a tender evaluation of price offers, the company and the project could initiate a more transaction-based relationship. In this relationship, the focus is primarily on fulfilling specifications and delivering products at the agreed price and time. Communication could be more formal and limited to contractual matters, such as orders, delivery schedules, and quality control. Even though a relationship of trust might be desirable here too, it’s crucial to ensure that the supplier reliably meets the requirements.

Generally, the company should be open and transparent in its communication with both suppliers. Clear expectations, requirements, and agreements should be explicitly communicated, so that both parties are aware of what is expected of them. Efficient communication, regular updates, and close follow-up are key to ensuring that both suppliers are on the right track and that any issues are dealt with promptly and effectively.

It is also worth noting that establishing good relationships does not rule out the need for contractual agreements and clear boundaries of responsibility and obligations. Even in trustful relationships, it’s crucial to have a legally binding agreement that protects both parties’ interests and ensures that the project’s goals are achieved reliably.

This case is taken from the book “Prosjektledelse – fra initiering til gevinstrealisering” – 2016, 4. Edition, by Jan Terje Karlsen.

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