STRATEGIC SUPPLY MANAGEMENT: THE CASE OF AN ITALIAN OEM

This paper investigates the governance mechanisms that are effective in a niche business with high product complexity, low volumes, and relatively short product life cycle. Building theory from case study, it is argued that under these circumstances, firms need to deviate from the conventional, mutually exclusive choices of either transactional or relational governance. It is observed that governance approach that suitably combines the contractual and relational aspects is likely to be more effective. Evidences from an important OEM in the high-end motorbike industry, and 4 of its most important suppliers, confirm that the combined alternative is not only tenable but also advantageous. It is observed that success (or failure) of a governance mechanism depends on conditions such as mutual dependence, appropriate setting of performance goals, and equitable contractual terms. Adoption of additional trust-building practices could help to reinforce the relationship.