The agreements in a supply chain can differ depending on their purpose and the nature of the relationship
Purpose and Relationship
To clarify, an agreement to purchase a spot has a specific purpose and vendor relationship that differs from an agreement to acquire a capital asset through a strategic partnership.
Value Added: Price, Performance and Duration
When thinking about making a spot buy, your main concern is likely to find the lowest fixed price. Your goal for performance should be to guarantee on-time delivery since the lead time is short. It’s important to remember that the agreement or contract for a spot buy is usually short-term.
When deciding to purchase a capital asset or crucial raw material, the price is an important consideration, but it should not be the only factor taken into account. Other value-added activities, such as incentive arrangements and long-term supplier partnerships, should also be considered. Typically, the longer the agreement lasts, the more intricate it becomes.