Your company has recently moved from single sourcing to dual sourcing, adding a second supplier for a key component of your product. While the relation with the incumbent supplier is based on a long track record of reliable business, experience with the new supplier naturally is still very limited. With competition in the industry becoming more and more intense, your company’s management has decided to initiate a comprehensive cost cutting project in cooperation with both suppliers.

You are asked to prepare suggestions for supplier involvement. Given the very different track record, which governance mechanisms do you consider to be most appropriate for each supplier’s integration in your company’s project? Why would the mechanisms differ between partners? Which problems do you foresee for your own company when setting up the different mechanisms?