Question

If your firm fears being “held up” by an outsider of a critical part to your production process, what can your firm do to reduce the chance of such a hold up?

Answer 1

There are two options:

i) Sign an enforceable contract; e.g. a legal contract, which stipulates the delivery of a specific minimum quantity of inputs by a specific date
and/or
ii) ask for a lumpsum money advance, the amount of which quantitatively reflects the lost benefits or higher costs (both translating to lower profit) to your firm as the harm done by the other party's failure to comply;

in both cases, the approach is to increase the magnitude of the other firm's negative payoff in case the other firm doesn't comply.
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On the flipside, you may want to incentivize compliance - increase (magnitude of) the positive payoff in case the other firm does comply. This can be done by:

iii) perks for consistency: this is where Personal Relationship (PR) is of greatest importance; build a relationship with suppliers and build long-term relationship with them, offering side-benefits as the "payoff" for continued positive performance