A supplier alliance is a collaborative arrangement between a buyer and a supplying firm, formed within a supply chain setting, in which one party (i.e. buyer) transforms the output of another party (i.e. supplier) into end products. By establishing a supplier alliance instead of conducting a transaction-based exchange, buyers and suppliers sacrifice independence in order to improve their competitive advantage. This chapter discusses the supplier challenge and focuses on the issues upon which managers responsible for supplier alliances must focus. These are: interdependency, scope and intensity, alliance governance, alliance-specific investments and collective identity. A supplier alliance is associated with the alliance development framework in order to develop guidelines for decision making. The increased focus on core competences and greater reliance on more flexible structures has led to suppliers playing a greater role and has changed how suppliers are managed. The chapter concludes with a summary and a case illustration.