What Is a Vested Partnership
Proponents of the integrated outsourcing model argue that traditional outsourcing and business relationships are geared toward win-lose deals where one party benefits at the expense of the other. In contrast, an acquired agreement creates a win-win relationship in which both parties are equally invested in each other`s success.  Unfortunately, in today`s supply chain, there are few, if any, companies that truly effectively manage their extended supply chain, from source to consumption. In my 20 years of experience in manufacturing, sales, transportation, and supply chain technology support, I haven`t seen a supply chain that`s fully synchronized from source to consumption. These include DELL, GE and even Toyota.Je would like to congratulate Vitasek and their contributing authors, as the book provokes conversations and gets straight to the point in terms of the value vested Partnerships could bring. I use the word conversation vs. dialogue because the difference between word choices is that conversation is free of bias and “good and bad” goals. I`ve had a number of conversations within our internal team and with clients about the concept. Is this a new concept? The answer is “NO”, Japanese automakers have used acquired partnership agreements to distribute production waste for more than 40 years, and over the past 10 years, the same mindset has applied to their distribution network to serve their dealers. For 3rd Party (3PL) logistics service providers, this book should be a wake-up call. I know at least two big 3PLs who discuss the concept of direct partnership with their customers and prospects at global roadshows.
What for? Because the basic principle behind the partnership is to move to a Type III level that requires a new way of thinking: what does this bring to the United States, not to ME? An “acquired partnership” seems to be common sense. I question the fact that an acquired partnership is an evolutionary or revolutionary process. However, common sense is often lost in personal agendas and political constraints within an organization. The endgame, which I call a Type III partnership, requires time, commitment and openness to think differently about solving difficult and complex supply chain problems. But before you can move to a Type III partnership, you have to go through what I call a Type I and II partnership (Reference Figure 1). This appeared in my conversation with ADAY co-founders Meg He and Nina Faulhaber in episode 1 of the Chief Best Friends podcast. I didn`t know much about acquisition schedules at the time, so I decided to dig deeper. Here`s what I learned: Can you achieve a Type III acquired partnership? The answer is yes. At enVista, we have proven the concept and developed a methodology to bring any company to it. In fact, we implemented these practices in one of our own business units (enVista Freight Management) during a proof-of-concept test with a very large e-commerce retailer.
We are a supply chain consulting company that has a unique touch. We carry out many transport operations for customers. What a concept to actually execute what you are viewing! It`s hard to be a trusted advisor to a client, but never exactly execute or implement the practices you preach. That`s why we guided our client through our acquired partnership model and asked: What kind of partnership do you want? We expected them to say somewhere between Level I and Level II, but to our surprise, they wanted a Level III partnership from the start. We openly discussed the pros and cons of each level of partnership and they insisted that they wanted a Phase III partnership. What happens to co-founder capital when any of these things happen? Without acquiring, you must rely on the goodwill of your partner to reach an agreement on what is right. You rely on your business partner`s good faith and fairness to reach an agreement. But as I`ve seen too many times to count, when money and work come into play, all bets are lost. And it`s even worse if your business partner was your friend. Let`s look at an example of a company that doesn`t have an acquisition. Best friends Juan and Pedro start a business.
Each has 100 shares. They are both very excited to start the business and get to work. After three months, it`s much harder than Pedro expects and comes to the office less and less. Juan is still fully motivated and continues to work full-time on the project. Personal relationships depend on collaboration, transparency, flexibility and trust. Instead of traditional business relationships where companies purchase transactions or services from suppliers, OTC relationships focus instead on purchasing outcomes.  Vesting states that if a co-founder leaves within the first year, he sells all his shares to his associates at a pre-agreed price. If the partners stay together for a full year, 25% of the redemption options expire. This means that no matter what happens, they will each have 25% of their shares in the company. This is called a one-year cliff because you don`t get anything until you cross the “cliff”, and then 25% of your shares are acquired. For the next three years (36 months), 1/36 of the options expire, which means that if a co-founder leaves after 1.5 years, he can keep 25% of his shares (the amount acquired in year 1) plus 6/36 of the total amount.
In summary, I want to thank Kate Vitasek for inspiring me. Your book confirmed the importance of Vested Partnerships, the same type of partnership that enVista has advised and practiced with its own clients over the past eight years. Formal agreements such as an acquisition schedule give you and your business partner the opportunity to know who will do what in the company, who is entitled to what, and to avoid major disruptions in communication in the future. A legal agreement also shows that you are both serious about the company. If you or your partner disagree with this, the company may not be right for you. In addition, it is important to establish procedures to assess whether the provider has achieved the incentive targets and to establish incentives that are not too cumbersome to track and monitor. Administrative costs should in no case exceed the expected benefits. If something is difficult to measure, you may be suffering from what we call “measurement minutes.” The role of risk in pricing is one of the most important criteria when choosing the appropriate pricing model.
It plays an important role in deciding which type of contract is best for your business. I was fascinated by Vitasek`s writing, and it turned out that I fully support his message and the general premise of the book. Vested outsourcing explores the concept of going beyond what I call “Type I partnerships,” where a contract between a supplier and a customer is based directly on price and activity. Vitasek rightly stresses the value and importance of moving to acquired outsourcing instead. However, I would say that the term “acquired partnership” is a better term than outsourcing for several reasons, but most importantly because the ultimate goal of any business partner relationship is to create a partnership based on transparency, collaboration, and better control or reduction of costs, with all parties having a “personal interest” in the outcome. .
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