{"id":1369,"date":"2019-05-17T17:49:05","date_gmt":"2019-05-17T07:49:05","guid":{"rendered":"https:\/\/comprara.com.au\/procurement-glossary\/alliance\/"},"modified":"2020-08-19T02:53:19","modified_gmt":"2020-08-19T02:53:19","slug":"alliance","status":"publish","type":"glossary","link":"https:\/\/www.comprara.com.au\/procurement-glossary\/alliance\/","title":{"rendered":"Alliance"},"content":{"rendered":"<p>In the spectrum of business relationships an alliance represents a co-operative but non-controlling relationship between two or more parties, often motivated by shared goals such as <a class=\"glossaryLink\" aria-describedby=\"tt\" data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Cost&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;Cost is the economic value that has been used to do something or create goods or services. There are many different measures of &#x2018;cost&#x2019; in accounting but to non-accountants it generally refers to the full cost of production, including allocated overheads. The term has many applications in procurement. Suppliers incur costs in producing their goods or delivering their services and the supplier may calculate their price by adding on a margin to their cost. The true cost to the buyer includes not only the seller&#x2019;s price, but also the acquisition cost of buying the goods or services, raising the order and paying the invoice. The total cost of the purchase may include the seller&#x2019;s price, the acquisition costs of raising an order etc. and the lifetime cost of using the goods or receiving the service, including disposal and close out. See also Total Cost of Ownership.Cost Management e-Learning courses are available at Academy of Procurement.&lt;\/div&gt;\" href=\"https:\/\/www.comprara.com.au\/procurement-glossary\/cost\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>cost<\/a> reduction, or improved customer service.  Alliances are similar to partnerships, though the parties in an alliance may co-operate under a formal <a class=\"glossaryLink\" aria-describedby=\"tt\" data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Agreement&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;The word agreement can have both informal and formal meanings.  Informally the word may be used to describe a contractual agreement between parties: &#x2018;the agreement has three months to run&#x2019;.  The formal meaning of the word is used in a legal context to describe one of the prerequisites for considering a contract valid.  The parties must have &#x2018;a meeting of the minds&#x2019;, sometimes called &#x2018;consensus ad idem&#x2019;, meaning that for a contract to exist the parties must share a common understanding, and there must be no mistake as to what is being agreed.  See also Contract. &amp;lt;br\/&amp;gt;&lt;\/div&gt;\" href=\"https:\/\/www.comprara.com.au\/procurement-glossary\/agreement\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>agreement<\/a>, perhaps including sharing of <a class=\"glossaryLink\" aria-describedby=\"tt\" data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Risk&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;Risk is the potential for a chosen course of action or unexpected external or internal events to lead to an undesirable outcome. ISO 31000 defines risk as &amp;#039;effect of uncertainty on objectives&amp;#039;. This definition mentions uncertainty as the cause of risk, and includes events that may not happen, as well as perceiving risk as creating both negative and positive impacts, rather than simply negative outcomes. Risk and uncertainty are related concepts. If a supplier agrees to fix the price of bananas for 12 months at $10 per kilo, both buyer and supplier have certainty about what the price will be in 11 months time. The risk for each party is different: if the market price of bananas is $5 per kilo in 11 months time, the buyer risks incurring unnecessary cost; if the market price of bananas is $15 per kilo in 11 months&#x2019; time the seller risks losing potential profit. Risks in the procurement process can occur in a variety of dimensions: the operational risk of non-performance, the technical risk of poor quality performance, the commercial risk of uncompetitive markets and the reputation risk of unsustainable practices by suppliers are just a selection of potential operational risks. Portfolio Analysis is a key tool used by buyers to develop procurement strategies as the approach incorporates an understanding of the key risks and opportunities in developing these strategies for different categories. The key stages of risk management are risk analysis, risk assessment and risk treatment, and in procurement terms the treatment of risk by transferring risk to suppliers is a key part of the procurement practitioner&#x2019;s role. The buyer needs to understand the risk, identify which party is best able to manage the risk, and then allocate the risk appropriately and at a cost that secures best value and appropriate behaviour. See also Portfolio Analysis.Risk Analysis &amp;amp;amp; Management &#x2013; Procurement &amp;amp;amp; Contracts training is available at Academy of Procurement.&lt;\/div&gt;\" href=\"https:\/\/www.comprara.com.au\/procurement-glossary\/risk\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>risk<\/a> and\/or rewards and, may include dedicated teams or other co-ordinating mechanisms to realise potential <a class=\"glossaryLink\" aria-describedby=\"tt\" data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Benefits&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;Benefits are positive outcomes from the procurement process apart from financial savings.  There is some consensus about categorising different types of savings, such as cash-releasing savings and cost avoidance, but there is little agreement on defining or measuring other positive outcomes from procurement.  Examples of benefits other than financial savings include reduction in risk, reduced time to market and preferential access to supply.  See also Savings and Value Adds.&amp;lt;br\/&amp;gt;&lt;\/div&gt;\" href=\"https:\/\/www.comprara.com.au\/procurement-glossary\/benefits\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>benefits<\/a>.  As an example, the airline industry uses alliancing to secure <a class=\"glossaryLink\" aria-describedby=\"tt\" data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Economies of Scale&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;The benefits that come from having large or very large operations.  In economics, the term means the reduction in a producer&amp;#039;s average cost per unit that results from having large output compared with that of competitors.  Examples of the benefits which arise from economies of scale in production include the ability to price lower in the market than competitors, the ability to negotiate improved supplier pricing in return for greater volumes, the ability to allow managers to specialise, the ability to gain access to loans at lower interest rates etc. Procurement strategies that focus on volume aggregation and leverage rely on the principles of economies of scale.  The corollary of the concept is that there is a point where diseconomies of scale begin.  In procurement, an example might be that improving the percentage of spend with a preferred supplier arrangement from 80% to 90% of the total category spend might yield savings, but the organisational cost of securing the next 10 per cent of compliance might outweigh the incremental benefits.  See also Leverage.&amp;lt;br\/&amp;gt;&lt;\/div&gt;\" href=\"https:\/\/www.comprara.com.au\/procurement-glossary\/economies-of-scale\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>economies of scale<\/a> and <a class=\"glossaryLink\" aria-describedby=\"tt\" data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Offer&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;In a legal context an offer is &#x2018;an expression of willingness to contract on certain terms, made with the intention that it shall become binding as soon as it is accepted by the person to whom it is addressed&#x2019;.  Typically suppliers make offers in the form of bids, quotations or tenders, which may then be accepted by the buyer.  The offer defines the terms upon which the supplier is willing to be bound, which normally include price, date of delivery, payment terms and a description of the category.  One of the essential prerequisites for the formation of a contract is the existence of an offer.  See also Contract and Counter Offer.&amp;lt;br\/&amp;gt;&lt;\/div&gt;\" href=\"https:\/\/www.comprara.com.au\/procurement-glossary\/offer\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>offer<\/a> a broader network to customers.  See also <a class=\"glossaryLink\" aria-describedby=\"tt\" data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Partnership&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;Partnership is a label given to a relationship in which the parties forego short-term opportunism and demonstrate a longer-term commitment to jointly strive for lower costs and the creation of new ways of working together to improve joint competitiveness.  In a partnership, senior managers from both organisations will meet to align longer term planning and goals, and commission joint teams to work across organisational boundaries to align systems, processes and behaviours. In practice the label is sometimes used in situations that do not qualify as a partnership.  It is not possible, for example, to have partnerships with every supplier in the supply base, and &#x2018;preferred suppliers&#x2019; do not meet the criteria for a partnership.  See also Partner and Win:Win.&amp;lt;br\/&amp;gt;&lt;\/div&gt;\" href=\"https:\/\/www.comprara.com.au\/procurement-glossary\/partnership\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>Partnership<\/a> and <a class=\"glossaryLink\" aria-describedby=\"tt\" data-cmtooltip=\"&lt;div class=glossaryItemTitle&gt;Supplier Relationship Management&lt;\/div&gt;&lt;div class=glossaryItemBody&gt;Supplier Relationship Management [SRM] is the segmentation by buyers of the business relationships with their suppliers. The process involves reviewing the portfolio of suppliers, categorising supply relationships by their significance, devoting resources in proportion to the relationship&#x2019;s significance and managing processes between the parties to realise the relationship objectives.Supplier Relationship Management and Masterclass - Supplier Relationship Management training is available at Academy of Procurement.&lt;\/div&gt;\" href=\"https:\/\/www.comprara.com.au\/procurement-glossary\/supplier-relationship-management\/\" data-gt-translate-attributes='[{\"attribute\":\"data-cmtooltip\", \"format\":\"html\"}]'>Supplier Relationship Management<\/a>.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>In the spectrum of business relationships an alliance represents a co-operative but non-controlling relationship between two or more parties, often motivated by shared goals such as cost reduction, or improved customer service. Alliances are similar to partnerships, though the parties in an alliance may co-operate under a formal agreement, perhaps&#8230; <br \/><a style=\"color:#00b4cd;\" class=\"excerpt-anchor\" href=\"https:\/\/www.comprara.com.au\/procurement-glossary\/alliance\/\">Read more<\/a>.<\/p>\n","protected":false},"author":2,"featured_media":0,"menu_order":0,"template":"","meta":{"_acf_changed":false,"_uag_custom_page_level_css":""},"acf":[],"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.6 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>Alliance - Comprara<\/title>\n<meta name=\"description\" content=\"Alliance\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.comprara.com.au\/procurement-glossary\/alliance\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Alliance - 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