Relationship Model

Attributes to determine the best-fit Relationship model Transactional Contract Relational Contract Investment
Overall cost In switch suppliers Low Low Medium Medium to High High High
Physical asset specificity (location, machinery, processes) Low Low Medium Medium to High Medium to High High
Skill level needed for predominant personnel Unskilled Semi-skilled Skilled Professional Professional Expert
Level of supplier integration/interface required (systems, support processes) None Low Medium High Very High Critical
Overall availability of service/product in marketplace Widely Available Widely Available Moderate Availability Limited number of capable suppliers Limited number of capable suppliers Scarcely Available
Availability of qualified and skilled personnel High High Medium Low Low Low
Availability of required technology Universal Limited Restricted Restricted to Scarce Scarce Unique
Access to buyer's systems and critical processes None Low Medium High Very High Critical
Product/service is strategic differentiator or core competency for buyer No No No Possible Strategic Differentiator Strategic Differentiator Core Competency
Profit impact from the buyers perspective (volume purchased, % of total purchased costs, impact on business growth) None Low Medium High Very High Critical
Product/service delivery failure impact on end customer/brand experience None Low Medium High Very High Critical
Product/service delivery failure impact on internal customer experience None Low Medium High Very High Critical
Regulatory compliance policy Meet Standard Meet Standard Meet Standard or Higher Meet Standard or Higher Meet Standard or Higher Meet Standard or Higher
Uncertainty of demand N/A Manage unanticipated demand spikes with multiple sources Provider response to unanticipated volume spikes limited Contractual ability for supplier to respond to spikes Contractual flexibility for supplier and client to respond to spikes to optimize the business Capacity is set based on captive assets + using market if not asset specific

Economy Model

Attributes to determine the best-fit Economic Model Transactional-Based Output-Based Outcome-Based
Potential efficiency gains None Low Medium High Very High Significant
Potential for revenue increase None Low Medium High Very High Constant
Potential for innovation None Low Medium High Very High Critical
Size of investments needed to achieve outcomes (buyer or supplier) Low Medium High High to Invest Invest Invest
Degree of supplier control over outcome Low Low Low High Medium-High N/A
Type of success measure desired/required Transactional Task Metrics Transactional Task Metrics Transactional Task Metrics Output SLA Metrics Strategic KPI or Business Outcomes Strategic KPI or Business Outcomes
Ease at which task/workscope can be specified High High Medium Medium Can Vary Very Difficult or Impossible
Risk related to operational safety Minimal Low Medium High High Critical
Risk related to operational reliability Minimal Low Medium High High Critical
Financial risk tolerance for buyer High Risk High Risk Medium Risk Medium-Low Risk Shared Risk N/A
Financial risk tolerance for supplier Low Risk Low Risk Low Risk Medium Risk Shared Risk N/A