An optimization approach to business buyer choice sets: How many suppliers should be included?

In many new or repeat purchasing situations, business buyers must decide how many suppliers to consider (a “choice set”) in determining which supplier(s) to actually buy from or contract with. This paper develops an optimization approach to determining the size of the choice set, taking into consideration buyer utility and search and evaluation costs. A theoretical model is developed for both one-time and repeat purchase situations. The model is estimated using empirical data received from bids received for procurement auctions. In these auctions, suppliers provide bids for steel pipe based on two product attributes (price and delivery time). Model sensitivity to small changes in parameters is also tested.     

E-purchasing: profiles of adopters and nonadopters

As advancement in electronic commerce (EC) continues to revolutionize today's business practices, it became apparent that EC has become an integral part of the business landscape. EC generated a high level of interest because of its ability to expedite the purchase ordering process, simplify purchase payment, expand supplier bases, reduce paperwork, and eliminate order errors. Realizing such managerial benefits, a growing number of purchasing organizations are exploring the possibility of utilizing e-purchasing systems. This paper identifies contextual variables (e.g., organizational readiness, user characteristics, and information technology [IT] infrastructure) that influence the successful adoption of EC for business-to-business (B2B) purchasing by examining the differences in survey responses between adopters and nonadopters of e-purchasing.     

Key issues in global supply base management

Developing effective business relationships with suppliers is hard work, especially when suppliers are located in different parts of the globe. Doing business with a supplier in China entails a very different set of fundamental elements than with one in the United States or Europe. As such, managers cannot rely on information systems to conduct business with global suppliers, but in many cases must travel to the location and visit with the supplier face to face to build an effective business relationship. In this article, 11 key issues that buying organizations should consider in their efforts to manage a global supply base are presented. These issues focus on the need for the “human factor” in establishing positive supplier relationships and the development of a high-performing global supply base.     

An Agency Theory perspective on the purchase of marketing services

The purchase of business services has become an important part of organizations' acquisition of external resources, and is therefore receiving growing scholarly attention. The supply management function is increasingly supporting more complex service purchases, including a wide range of marketing services. The trend to involve supply management in the purchase of these complex business services is partially being driven by increasing awareness of the value of applying standard purchasing techniques to the purchase of these non-standard items. The purchase of such services has historically been managed by content experts, with limited involvement of supply management. However, the involvement of supply management in these purchases is driving the content experts to adopt a more facilitating relationship in which both areas interact with the supplier. This research uses Agency Theory as a lens to look at the Agency Triad among supply management, marketing, and suppliers. Elaborating on prior seminal work, the basic tenets of Agency Theory and its assumptions regarding human behavior are combined with the results of a focus group and case studies to develop propositions on the design of contractual arrangements between two Principals (marketing and supply management) and a single Agent who provides marketing services.     

Customer approaches to product development with suppliers

It has long been accepted that a realistic view of what happens between customer companies and their suppliers cannot be achieved by examining single purchases alone. Instead, a single purchase can only be understood as part of a supplier-customer relationship which both affects and is affected by it. Also in business markets, a customer's purchase behaviour is not simply a passive response to the marketing actions of a supplier, but part of the interaction between an active customer and supplier. A major element in this interaction is likely to arise from the efforts of the customer to develop its own products interactively with a network of suppliers. This paper reports on a study into the ways in which customers employ the skills of their network of suppliers and attempt to direct that network in product development projects. The paper suggests that customers are likely to use either of two alternative strategies for product development, that we term “network delegation” and “network intervention”. The paper draws on four in-depth case studies to highlight the types of situation where customers are most likely to employ each of these strategies and draws conclusions for marketers about the implications of each approach.     

Purchasing professional services: A transaction cost view of the antecedents and consequences of purchasing formalization

Professional services represent an increasing share of expenditures in contemporary organizations. While these services are often of strategic importance, they are also perceived as being difficult to purchase and use, which creates challenges for the purchasing process. In order to address these challenges, organizations are increasingly engaging in systematic efforts to improve their ability to purchase professional services. These efforts focus on formalizing the purchasing process by introducing policies, guidelines, and other measures for the hiring of service suppliers. Based on a transaction cost economic framework, the current paper investigates the nature, antecedents and consequences of formalization initiatives in the purchasing of professional services. The results from a cross-sectional study of 76 large Swedish organizations show that the formalization of purchasing professional services takes two different forms: the formulation of policies and the establishment of preferred supplier agreements. The former is driven by company size, whereas the latter is driven by the frequency of purchase transactions. Only the establishment of policies, however, is found to be positively related to organizations' perceived ability to purchase professional services.     

Understanding users' performance evaluation of IT solutions

Traditionally, buying center research in business marketing has long focused on the role of various buying center members, including users, in influencing purchasing decisions. Recent studies have also established the important role users play in successfully implementing information technology (IT) initiatives of buying organizations and its influence on future relationships with sellers. Consequently, in order to ensure future business, marketers need users to evaluate their solutions favorably. This study attempts to understand the factors influencing user evaluation of performance of sellers' IT solutions. Based on an inter-disciplinary approach, a model of antecedent factors to explain user evaluation of suppliers IT solutions is proposed and tested. Results gleaned from a survey of 361 users of Internet-based technology in an automotive supply chain indicate that user attitudes toward technology, satisfaction with the new technology, users' overall understanding of supply chain management principles, and job-related consequences influence user evaluation of IT solutions.     

Exploring the impact of a supplier portal on the buyer-supplier relationship. The case of Ferrari Auto

This article concentrates on the relationship between companies and their suppliers with a specific focus on the impact that information and communication technologies (ICTs) have on industrial (business to business) purchasing processes. After reviewing the extant literature, we classify the potential impact of ICTs on the buyer-supplier interactions into three main categories, i.e. impact on buyer-supplier relationship, impact on purchase process efficiency and impact on logistics process performance. Whilst scholars generally agree on the impact ICTs may have on buyer-supplier exchanges, they have not investigated concurrently all of these three impacts to understand their comparative relevance and the context in which this comparative relevance may change. In order to redress this gap in the literature our research study focuses on a particular form of ICT solution - supplier portals - and takes a supplier (rather than buyer) perspective. We explore empirical evidence from a single customer-multiple supplier case study, that of the Ferrari Auto supplier portal. Our study leads us to contend that suppliers view such portals as offering far more significant benefits to their relationship with customers than to the improvements in purchase process efficiency or to the performance of buyer-supplier logistics processes. We conclude with a short discussion of the main managerial implications and suggestions for future research.     

Involving suppliers in product development: Insights from R&D directors and project managers

While there is increasing evidence that involving suppliers in new product development (NPD) is important, and for many firms even inevitable, there is also evidence that not all such efforts are successful. Firms aiming at implementing this strategy effectively have to pay close attention to several contingency factors on the organizational level and properly manage supplier involvement on the project level. The exploratory case study research underlying this article explores key issues to be considered when involving suppliers in NPD and the counter measures they can take. Our research shows that companies differentiate between so-called “know-how” and “capacity” projects, and that they manage them differently. Furthermore, this research shows that firms outside the automotive and high-tech manufacturing industries are likely to intensify supplier involvement in the future.     

The relationship between buyer and a B2B e-marketplace: Cooperation determinants in an electronic market context

“Stop thinking like a supplier and start thinking as a customer.”

The authors argue that cooperation may be achieved by augmenting the core product with technology-based services. Given the growing importance of real time information exchange and interactivity, a better understanding of the use of technology to the establishment and development of the buyer-supplier cooperative relationships is essential for knowledge advancement. This paper argues that firms should aim to put themselves into their customers' shoes and use the “voice of the customer” to take their major relationship management decisions. To do so, the authors use a sample of nearly 400 SMEs' purchasing managers, to better understand cooperation determinants from the buyers' perspective. The study reveals that in an electronic marketplace, cooperation is positively affected by termination costs, supplier relationship policies and practices, communication and information exchange, and negatively affected by product prices and opportunistic behavior. Moreover, both relationship commitment and trust play a major role in mediating the relationships between these five determinants and cooperation. Surprisingly, resources relationship benefits do not show a significant impact on either commitment or cooperation. Theoretical and managerial implications of these findings are discussed.     

Managing customer share in key supplier relationships

Supply base consolidation is an important issue in many business markets. Against this background, the allocation of purchasing budgets across vendors becomes an area of vital interest to suppliers. In the present research, we argue that customer share is a key decision variable in business marketing settings and investigate how a supplier can proactively manage the share of its customer's business. We report the results of a cross-sectional study among purchasing managers in U.S. manufacturing industries. Our findings confirm the role of customer value as an antecedent to customer share in business relationships. The study further shows that customer share influences the stability of key supplier relationships. Rather than displaying a direct impact, our results suggest that trust mediates and dependence moderates the link between customer share and search for alternative suppliers. Based on these findings, we propose a framework for managing customer share in key supplier relationships. Four approaches of how industrial vendors can proactively manage customer share are discussed.     

“I want you back”: On the strategic roles of boundary spanners in supplier switching-back processes

This paper builds upon literature addressing boundary spanners and switching suppliers in order to explore an under-examined aspect of buyer–supplier relationships: how different individuals at multiple organisational levels affect processes by which firms return, or “switch back”, to former suppliers after breaches in their relationships. Our study followed a qualitative approach by applying an abductive research methodology to make sense of 85 semi-structured interviews with executives involved in the erstwhile buyer–supplier relationships that we investigated. We found that supplier switching-back processes (SSBPs) can be understood as constituted by a set of alignments and misalignments between boundary spanners (i.e. top management, purchasing and sales agents, engineers and technicians) in the organisations involved. Thus, peoples' interactions, or lack thereof, directly affect the possibility for buyers and suppliers to restore their severed relationships. We conclude that boundary spanners pursue seven distinct roles during different periods in SSBPs, roles that relate to three identified functions of boundary spanners in such processes. The paper closes by highlighting what our findings imply for business managers, limitations and some possible directions for future research.     

A Model of Supplier Integration into New Product Development*

In many industries, firms are looking for ways to cut concept‐to‐customer development time, to improve quality, and to reduce the cost of new products. One approach shown to be successful in Japanese organizations involves the integration of material suppliers early in the new product development cycle. This involvement may range from simple consultation with suppliers on design ideas to making suppliers fully responsible for the design of components or systems they will supply. While prior research shows the benefit of using this approach, execution remains a problem. The processes for identifying and integrating suppliers into the new product development (NPD) process in North American organizations are not understood well. This problem is compounded by the fact that design team members often are reluctant to listen to the technology and cost ideas made by suppliers in new product development efforts. We suggest a model of the key activities required for successful supplier integration into NPD projects, based on case studies with 17 Japanese and American manufacturing organizations. The model is validated using data from a survey of purchasing executives in global corporations with at least one successful and one unsuccessful supplier integration experience. The results suggest that (1) increased knowledge of a supplier is more likely to result in greater information sharing and involvement of the supplier in the product development process; (2) sharing of technology information results in higher levels of supplier involvement and improved outcomes; (3) supplier involvement on teams generally results in a higher achievement of NPD team goals; (4) in cases when technology uncertainty is present, suppliers and buyers are more likely to share information on NPD teams; and (5) the problems associated with technology uncertainty can be mitigated by greater use of technology sharing and direct supplier participation on new product development teams. A supplier's participation as a true member of a new product development team seems to result in the highest level of benefits, especially in cases when a technology is in its formative stages.     

The role of boundary spanners in the formation of customer attractiveness

This paper examines the question of how to understand the formation of suppliers perceived customer attractiveness. It argues that existing conceptualization of buyer–supplier relationships are too simplistic to understand the full complexity involved in the formation of such perceptions, and models the buyer–supplier relationship as a set of micro-dyads and intra-, inter-organizational exchange relationships. In exploring these micro-dyads this research apply an embedded case study approach and explores three buyer–supplier relationships. Following Bacharach et al. [Bacharach, S.B., Bamberger, P., & Sonnenstuhl, W.J. (1996). The organizational transformation process: The micropolitics of dissonance reduction and the alignment of logics of action. Administrative Science Quarterly, 41(3), 477–506.], it is interested in the involved actors sense-making processes and the concept of “logics of action” is deployed. The analysis demonstrates how suppliers' formation of perceptions related to customer attractiveness can be understood as constituted through a set of discrete historical means/ends alignments and misalignments between boundary spanning roles in the involved organizations.     

Organizing and integrating marketing and purchasing in business markets: An introduction to the special issue, issues and implications

The article is the introductory paper to the special issue on “Organizing and Integrating Marketing and Purchasing in Business markets”. It analyses the different organizational issues in the marketing and purchasing interfaces by an extensive analysis of the literature. It introduces the different contributions to the special issue and draw some reflections on further research steps.     

Decomposing the effect of supplier development on relationship benefits: The role of relational capital

Buyers invest considerably in developing their suppliers, yet the performance effects of such investments are not universal. Drawing on social capital theory, this research investigates whether the relationship between supplier development and relationship benefits may be facilitated by the generation of relational capital. The authors examine mediating and moderating roles of relational capital in the relationship between two aspects of supplier development (capability development, supplier governance) and two dimensions of relationship benefits (supplier benefits, buyer benefits), using survey data collected from 185 suppliers of a large manufacturing firm. Investment in supplier development does not automatically result in benefits for the supplier or reciprocated benefits for the buyer. Rather, relational capital “bridges” supplier development and relationship benefits. Without relational capital, benefits from capability development do not accrue, and the impact of a supplier governance regime can be even detrimental. In conditions of high relational capital, capability development results in lower perceived buyer benefits. The results can help managers ensure that the benefits from their supplier development efforts fully materialize.     

Utilization of business technologies: Managing relationship-based benefits for buying and supplying firms

There is increasing evidence to suggest that organizations often fail to fully capitalize on the purchased business technologies due to their failure to utilize the new procurement throughout their corporate system. To this end, this study sets out to identify the factors that play a tangible role in facilitating the utilization of procured business technologies. In this context, we not only examine the direct effects of technology and organizational culture on utilization, but also assess the moderating effects of user environments and supplier service orientation on these direct relationships. More importantly, we focus on the impact of utilization in creating the relationship-based benefits for both the technology user and supplier. Using data on purchase and use of customer relationship management (CRM) system, we empirically validate that the user firm's corporate culture, perceived technology attributes, environmental turbulence, and the supplying firm's service orientation are critical in increasing the utilization level of business technologies, which in turn helps to create/sustain relationship-based advantages for both parties.     

Does how you pay influence the share of healthy items that you Buy? Assessing differences in nutritional quality of food purchases by payment type

Shoppers that use cash as a form of payment are more likely to evaluate the necessity of an item they purchase than shoppers that pay with other forms of payment, such as credit cards. In this paper, we hypothesize that the use of cash may nudge shoppers to buy more healthful food items. We empirically evaluate whether the payment method affects the nutritional quality of food purchases. We also test whether the effect of payment type differs between food-at-home and food-away-from-home events. Specifically, we test whether shoppers purchase a higher share of nutritious food items when they pay with cash compared to when they use credit and debit cards. We use the National Household Food Acquisition and Purchase Survey (FoodAPS) data that tracks individual’s food purchases over one week. Using the Guiding Stars Program (GSP) algorithm to measure the nutritional quality of food items, we calculate the share of healthy items purchased at each event. We find that shoppers using cash purchase a higher share of healthy items than when they use credit or debit cards, and this nudging effect is primarily driven by food-away-from-home purchases.     

Vertical Enclosure: Vertical Integration and the Reluctance to Purchase from a Competitor

Vertical integration can reduce integrating firms' trading opportunities and, contrary to predictions of two-firm models, this loss of trade can make integration unprofitable. If downstream units must commit to suppliers before contracting on the final terms of trade, then suppliers will have ex-post monopoly power. This monopoly power reduces the quality that an integrated supplier will provide to its competitors. Expectations of this quality reduction can prevent firms from purchasing from an integrated supplier even though the supplier would be better off if it could commit to provide its downstream competitors with sufficient quality to retain their business.     

Investigating the decision criteria used in electronic components procurement

Previous research has reported that the decision criteria used to evaluate suppliers differs by product category. Rather than investigating the “key buying criteria” across the entire gamut of products and services, this research takes a novel approach by investigating the evaluation criteria used in the procurement of component parts. The survey results suggest that the content and structure of the decision criteria used by business customers to assess their suppliers does not differ across an array of electronic components. The business implication is that business customers that formally track the performance of their suppliers along the critical evaluation criteria will be in a better position to gain a competitive advantage by effectively managing the inbound supply chain.