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Index >> Supply Base and Vendor Management >> Reciprocal Trading

Reciprocal Trading
However, modeling and valuing the flows of value between p arties is not straightforward. We need to calculate the value of the account from a sales perspective in terms of gross revenue and profitability, as well as considering any procurement savings which may be achieved by changing course.

This is simplistic because there are a number of assumptions that have to be made in modeling the net value of a relationship:

what period of time should we use to value the customer? It may be a different period than any proposed procurement arrangement

how will the current value flows change during the foreseeable future?

how likely is it that we may lose one part of the value if the other party retaliates?

how can we assess the strategic value of an account, whether from a sales or procurement point of view, when intangible factors like longer term market development underpin a given strategy?

Before entering into any reciprocal deal, agree the exit criteria, the circumstance in which either party will terminate the relationship. Try to decouple the two arrangements, so that you do not mortgage our ability to take advantage of other commercial opportunities.
This does not guarantee good behaviour, but it may help.