The relationship between supplier management and firm's operational performance: A multi-dimensional perspective

This paper presents an empirical study on the multidimensional relationships between supplier management practices and firm operational performance. Specifically, we focus on three supplier management practices, namely strategic long-term relationship, supplier assessment, and logistics integration, and test their effects on four operations performance measures, namely quality, delivery, flexibility, and cost. We use data collected from 232 manufacturing firms in Australia to conduct the study. Ten hypotheses were tested simultaneously using Structural Equation Modeling (SEM) technique. The results show that different supplier management practices have different unique effects on different operations performance measures. Supplier assessment has a positive relationship with quality performance. Both strategic long-term relationship and logistics integration have positive relationships with delivery, flexibility, and cost performance. From a theoretical perspective, this study demonstrates the relative contributions of different kinds of resources (i.e., supplier management practices in our case) to different performance measures. Our research findings provide practical insights for managers to understand the effectiveness, as well as the limitations, of different supplier management practices in enhancing different operations performance measures of firms.     

Supply chain integration and performance: The effects of long-term relationships, information technology and sharing, and logistics integration

Supply chain integration is widely considered by both practitioners and researchers a vital contributor to supply chain performance. The two key flows in such relationships are material and information. Previous studies have addressed information integration and material (logistics) integration in separate studies. In this paper, we investigate the integrations of both information and material flows between supply chain partners and their effect on operational performance. Specifically, we examine the role of long-term supplier relationship as the driver of the integration. Using data from 232 Australian firms, we find that logistics integration has a significant effect on operations performance. Information technology capabilities and information sharing both have significant effects on logistics integration. Furthermore, long-term supplier relationships have both direct and indirect significant effects on performance; the indirect effect via the effect on information integration and logistics integration.     

Bundling digitized logistics activities and its performance implications

Bundling information technology (IT) applications to support logistics activities provides a means for firms to improve their logistics performance. Grounded in the logistics management and management information systems literature, as well as the resource-based view (RBV) of the firm, this study empirically: (i) investigates if there exist digitized logistics activities bundles in firms; and if so, (ii) explores the association between digitized logistics activities bundles and logistics performance of firms in terms of logistics cost and logistics service improvements. We surveyed 227 trading firms in Hong Kong and performed a factor analysis of the survey data, from which we identified three digitized logistics activities bundles and found the sample firms were clustered into four types based on the patterns of their digitized logistics activities. We then carried out a MANOVA on the data, the results of which show that different patterns of digitizing logistics activities are associated with different logistics performance outcomes. Specifically, firms with more extensive digitized logistics activities bundles and utilizing them more intensively achieve better logistics performance. Academic and managerial implications for digitizing logistics activities to improve logistics performance are discussed.     

An empirical study of supply chain performance in transport logistics

A cross-sectional survey was conducted with firms in three transport logistics industry sectors, i.e., air and sea transport, freight forwarding, and third-party logistics services, to evaluate their perceived SCP in transport logistics from both cost and service perspectives. The study results showed that all the three sectors were mature, attaining a certain degree of sophistication in their SCP. On the other hand, there were significant differences in SCP between firms in the three sectors. They differed in their perceived service effectiveness towards shippers and consignees and in their operations efficiency in performing the services. The study's findings provide managerial insights for firms in the industry to understand their SCP in transport logistics and to benchmark areas to improve their performance.     

Leveraging supplier capabilities: The role of locus of capability deployment

This study adds to the resource‐based view by studying how client firms may gain performance benefits from supplier IT capabilities in market‐based arrangements where the supplier's IT capabilities are readily available to multiple client firms. I argue that the locus of supplier capability deployment, i.e. whether supplier capabilities are deployed at the client (in‐sourcing) or supplier (outsourcing), has implications for client firm performance. The findings show that in‐sourcing leads to complementary effects between supplier IT capabilities and client operational capabilities. In contrast, clients with weaker operational capabilities benefit from outsourcing the respective activity to the supplier, and may even be able to reduce their capability disadvantage through outsourcing. The data on 964 U.S. credit unions contracting with 22 technology solution providers is archival. Copyright © 2012 John Wiley & Sons, Ltd.     

Gaining from vertical partnerships: knowledge transfer,relationship duration,and supplier performance improvement in the U.S. and Japanese automotive industries

We study sources of operational performance improvement in supplier partnerships. We argue that supplier performance will benefit most where time‐bound relational assets have developed between a buyer and supplier and the firms exploit the resulting communication efficiency by transferring productive knowledge. We examine the effects of two forms of knowledge exchange together with the prior duration of the buyer–supplier relationship. We find similar interaction patterns in two survey samples of Japanese and U.S. automotive suppliers. The effect of ordinary technical exchanges on supplier performance improvement does not vary with relationship duration. The effect of higher‐level technology transfer, however, grows more positive as relationship duration increases. Other results show relevant contrasts consistent with heterogeneous sourcing behavior between the two countries. The findings highlight the role of relational assets and show that it is important to distinguish between simple techniques and higher‐level technological capabilities when studying interfirm relationships. This research extends the literatures on knowledge transfer, buyer–supplier partnerships, and the performance dynamics of interfirm and intrafirm relationships in general. Copyright © 2002 John Wiley & Sons, Ltd.     

Effects of Supplier and Customer Integration on Product Innovation and Performance: Empirical Evidence in Hong Kong Manufacturers

While the beneficial impacts of supplier and customer integration are generally acknowledged, very few empirical research studies have examined how an organization can achieve better product performance through product innovation enhanced by such integration. This paper thus examines the impact of key supplier and customer integration processes (i.e., information sharing and product codevelopment with supplier and customer, respectively) on product innovation as well as their impact on product performance. It contributes to existing literature by asking how such integration activities affect product innovation and performance in both direct and indirect ways. After surveying 251 manufacturers in Hong Kong, this study tested the relationships among information sharing, product codevelopment, product innovativeness, and performance with three control variables (i.e., company size, type of industry, and market certainty). Structural equation modeling with correlation and t‐tests was used to test the hypothesized research model. The findings indicate a direct, positive relationship between supplier and customer integration and product performance. In particular, this study verifies that sharing information with suppliers and product codevelopment with customers directly improves product performance. In addition, this study empirically examines the indirect effects of supplier and customer integration processes on product performance, mediated by innovation. This has seldom been attempted in previous research. The empirical findings show that product codevelopment with suppliers improves performance, mediated by innovation. However, the sampled firms cannot improve their product innovation by sharing information with their current customers and suppliers as well as codeveloping new products with the customers. If the adoption of supplier and customer integration is not cost free, the findings of this study may suggest firms work on particular supplier and customer integration processes (i.e., product codevelopment with suppliers) to improve their product innovation. The study also suggests that companies codevelop new products only with new customers and lead users instead of current ones for product innovation. For managers, this study has demonstrated that both information sharing and product codevelopment affect performance directly and indirectly. Managers should put more emphasis on these key processes, especially when linked with product innovation. Managers should consider involving their suppliers and customers in the early stages of design. Information sharing with suppliers is also important in product development. As suggested by this study, extensive effort on supplier and customer integration should be made to directly augment current product performance and product innovation at the same time.     

Logistics scheduling to minimize inventory and transport costs

We study a logistics scheduling problem where a manufacturer receives raw materials from a supplier, manufactures products in a factory, and delivers the finished products to a customer. The supplier, factory and customer are located at three different sites. The objective is to minimize the sum of work-in-process inventory cost and transport cost, which includes both supply and delivery costs. For the special case of the problem where all the jobs have identical processing times, we show that the inventory cost function can be unified into a common expression for various batching schemes. Based on this characteristic and other optimal properties, we develop an O(n) algorithm to solve this case. For the general problem, we examine several special cases, identify their optimal properties, and develop polynomial-time algorithms to solve them optimally.     

Bridging inter- and intra-firm boundaries: management of supplier involvement in automobile product development

Outsourcing has become an important strategy for many firms. Yet, firms need to compete with their competitors who also outsource and may share the same suppliers. This article explores how a firm could outperform others in managing the division of labor with a supplier in product development. Drawing on the empirical data collected from the Japanese auto industry, this paper shows that an automaker needs capabilities to coordinate various activities both externally with a supplier and internally within its own organization, in order to gain better component development performance. Overall, the results imply that outsourcing does not work effectively without extensive internal effort. Copyright © 2001 John Wiley & Sons, Ltd.     

Supplier traits for better customer firm innovation performance

Previous research on embedded ties with suppliers in an innovation context has ignored the need for customer firms to assess and select suppliers on the basis of market orientation strategies and relationship marketing attributes. To address this void, this study investigates the effects of suppliers' downstream customer orientation and supplier-customer homophily (i.e., similarity of the supplier and the customer) on the customers' innovation performance. Data pertaining to new product development projects with contributions from supplier firms was collected on both sides of the supplier-customer dyad. The analysis shows that downstream customer orientation and supplier-customer homophily have a significant impact on the customer firms' new product efficiency (i.e., project cost and project speed) and new product effectiveness (i.e., innovativeness), which in turn positively influence new product performance in terms of profitability, market share, and growth.     

Supply network dynamics as a source of new business

Supply networks where operational control extends well over organizational boundaries have emerged in industries producing relatively complex and customized products with tight profit margins. Products like ships, automobiles and telecommunication systems incorporate complex design and engineering skills that are produced through a tier-structured, multi-level supply networks. Efficiency in these networks has stemmed from specialization and cost efficiency in individual value adding operations. This paper demonstrates how supplier networks have evolved and how the inherent dynamics of these networks generate constantly new business opportunities for fast moving companies with a clear focus on operational efficiency. We use action research methodology on cases from the shipbuilding and constructions industry to document some of the dynamic features of supply networks. This insight is then applied to the electronics manufacturing services business to explain the fundamentals of successful operations in this highly competitive business with ever narrowing margins. In this dynamic market of contract manufacturing companies with constant focus on the reduction of production lead times by incorporating value added operations either physically or logically to maintain and recreate profitable business. To succeed in doing this, issues related to industrial parks, local tacit knowledge and reverse/repair logistics must be managed in cross-organizational manner. We conclude that there is an ever-changing limit to the expansion of supplier networks through specialization and cost efficiency, and that at one point contracting and integrating parts of the supply network will create operationally outperforming business models that further boost the inherent dynamics of supply networks.     

Firm-internal key account management networks: Framework,case study,avenues for future research

Key account management (KAM) is used for managing relationships between a supplier and its strategically important customer firms, that is, the key accounts. KAM activities typically involve a firm-internal network of actors. While there is a rich body of literature on key account managers' work with external networks in customer firms, this study focusses on the much less explored KAM activities in interaction with the firm-internal network that is required to mobilise resources and develop activities towards key accounts. The purpose of this study is to develop a conceptual framework explaining how the firm's capability to manage the internal KAM network contributes to firm performance. We illustrate our framework using case study material and develop avenues for future research along the elements of our framework.     

Performance-based strategic resource allocation in supply networks

One driving force behind continued logistics planning research is firms’ need to maintain competitive performance and efficient resource allocation. Operations research has been instrumental in advancing logistics planning research particularly in the petroleum industry. The impact and potential of incorporating performance imperatives however, have been largely unaddressed while the problem's general complexity has grown. This paper focuses on performance planning through resource allocation in supply networks by developing a profit-maximizing network model for distribution planning, and explicitly incorporating order performance criteria for distribution centers and delivery vehicles. The approach has been tested on forty realistic-sized problems, and tradeoff models provide insight and guidelines for assessing the interaction among expected profits, customer service, and operational efficiency for resource acquisition and redistribution. Managerial implications are also provided.     

Assessing performance factors for a 3PL in a value chain

Business continuity of the logistics companies in the twenty first century highly depends on the value chain performance. As the variety of services outsourced to third party logistics (3PL) companies increase, success strategies for these companies are to be revised. This study explores and illustrates an analytical framework to assess the performance factors for 3PL companies through a managerial view. The factors integrating the strategical and operational targets are evaluated within a framework based on four levels; performance targets, planning activities, logistics operations, and performance attributes of logistics operations. The analytic network process is used to determine the most effective performance attributes. The framework is applied and studied in two major logistics companies active in the South East Europe. The proposed framework will contribute to the logistics sector by demonstrating the paradigm shift in performance measurement.     

Small and medium-sized firms' import behavior: The case of Danish industrial purchasers

This paper focuses on the foreign purchase behavior of small and medium-sized industrial firms in a small European country, and is guided by three main research issues: (1) to what extent are small and medium-sized firms involved in international sourcing; (2) how do small and medium-sized firms initially make contact with foreign suppliers, and what are their motives for choosing a supplier; and (3) how do small and medium-sized firms perceive relationships with foreign suppliers in terms of perceived problems and cooperation? Through a survey administered in Denmark, the results show that small and medium-sized industrial firms are highly involved in international purchasing both within the European Union and abroad. Surprisingly, this involvement does not appear to be significantly driven by lack of domestic availability. Instead, the primary drivers for choosing a foreign supplier are price and quality. Finally, product adaptation appears to be a significant element of relationship formation between importers and their suppliers. The paper concludes with a discussion of results, implications, and directions for future research.     

Lead time reduction through ICT application in the footwear industry: A case study

This paper analyses some relevant supply chain management issues for Italian firms operating in the footwear industry. The analysis is carried out on representative firms, located in a specialized regional district with a high density of shoe manufacturing companies. Companies were experiencing substantial problems in the management of supplier relationships, as well as in the commercial/distributive channel. Specifically, synchronization issues in the logistics pipeline were weakening firms’ lead time performances.The case study presented strives to highlight the critical points in the set up of the supply chain management programme, as well as the main results obtained. The case study also shows that the adoption of tailored Information and Communication Technology (ICT) tools has the potential to save significant lead time in supplier/buyer relationships. From the case study, generalities can be drawn and transferred to the footwear industry.     

The Role of Suppliers in Market Intelligence Gathering for Radical and Incremental Innovation*

Drawing on transaction cost economics theory, this study addresses the following research questions: (1) Does supplier involvement in market intelligence gathering activities have a greater impact on innovation success in predesign or commercialization activities? and (2) Does supplier involvement in market intelligence gathering activities have a greater impact on success in radical or incremental product innovation? Hypotheses are tested using both subjective and objective measures of success from a study of 205 incremental and 110 radical new product development projects. Results from the estimation of a two‐group path model suggest that this theoretical framework is useful in providing guidance as to when product developers should emphasize the gathering of market intelligence through suppliers. Consistent with conventional wisdom, the findings suggest that supplier involvement in market intelligence gathering activities are positively related to success in incremental innovations across predesign and commercialization activities. However, supplier involvement in market intelligence gathering activities is found to have no significant impact on market share and is negatively associated with perceived product performance in radical innovations in predesign tasks. Also, while there was no significant difference in market share for supplier involvement in market intelligence gathering activities between radical and incremental innovation in commercialization activities, supplier involvement in these activities did have a greater impact on perceived product performance in radical innovation than it did in incremental innovation. Although current practice suggests that teams allocate fewer resources to the gathering of market intelligence through their suppliers during predesign activities in incremental innovation projects compared with radical innovation projects, the findings in this study suggest that they should do the opposite. Shifting resources allocated for engaging suppliers in market information gathering activities in predesign activities from radical innovation projects to incremental innovation projects could increase the return on these investments. Alternatively, these resources currently allocated to the gathering of market intelligence through suppliers in predesign activities of radical innovation projects could also provide greater benefits if allocated to commercialization activities of radical innovation projects, where they have the greatest positive impact.     

Improving Supplier New Product Development Performance: The Role of Supplier Development

Suppliers play an increasingly central role in helping firms achieve their new product development (NPD) goals. The literature implicitly assumes that suppliers are able to meet or exceed the quality standards and technological expectations of the firm, and yet, in practice, suppliers often lack the technological capabilities needed to undertake collaborative NPD. In such situations, a firm may choose to intervene and actively develop the supplier's technological and product development capabilities. We develop a theoretical framework that conceptualizes supplier development activities within interorganizational NPD projects as part of a bilateral knowledge‐sharing process: design recommendations, technical specifications, and new technology flow from supplier to the firm, and in turn, the firm can implement supplier development activities to upgrade the supplier's technological capabilities. Antecedents (supplier responsibility, skills similarity, single sourcing strategy) and consequences of supplier development activities (on supplier, product, and project performance) are examined using a sample of 153 interorganizational NPD projects within UK manufacturers. We find broad support for our hypotheses. In particular, we show that the relational rents (in the form of improved product and project performance) attained from supplier development activities in new product development are not achieved directly, but rather indirectly, via improvements in the supplier's creative and technological capabilities. Our results emphasize the importance of adopting a strategic view of the potential returns available from investing in the NPD capabilities of key suppliers, and provide clues about underlying reasons for the suboptimal experiences of many companies' collaborative NPD projects.     

Customer identification: The missing link between relationship quality and supplier performance

Maintaining good relationship quality (RQ) with customers is crucial for supplier firms to remain competitive. Yet, empirical evidence linking RQ with supplier-firm performance remains inexplicably vague. Drawing on social identity theory and the relationship marketing literature, this study therefore examines the role of customer identification—a customer firm's sense of shared connection with a supplier organization—in bridging the gap between RQ and outcomes beneficial to the supplier firm. A study involving 389 CEOs and directors of Australian firms finds that customer identification mediates the effects of affective RQ-dimensions (i.e., benevolent trust and affective commitment) on customers' willingness-to-pay premium price (WTP) and positive word-of-mouth (WOM) behaviors. Further, the mediating effect of customer identification is moderated by organizational distance and supplier's relationship-specific investments (RSI), such that the indirect effects are stronger when the organizational distance between the supplier and customer firm is low and supplier's RSIs are high. Moreover, while cognitive RQ has direct effects on WTP, its influence on WOM is mediated by customer identification. By identifying the role of customer identification in facilitating the link between RQ and supplier-firm performance, our findings provide valuable insights for supplier firms to optimize their relationship marketing efforts.     

Assessing the relational benefits of logistics services perceived by manufacturers in supply chain

The growing importance of logistics activities that span the boundaries of supply chain firms has put an emphasis on supply chain relationship management. Based on the existing marketing concept on relational benefits and the supply chain management literature on consumer satisfaction, this research evaluates logistics service performance from the eyes of manufacturers. Using data collected from US manufacturing firms, the study has identified the factors that influence manufacturer's satisfaction, as well as the key to understanding the benefits-satisfaction-loyalty triads in supply chain relationships. The contribution of the paper includes developing a conceptual model, adding new theoretical insights into benefits-satisfaction-loyalty triad that has been applied by manufacturers and LSPs, and providing some meaningful perspective on how to strategically assess the use of logistics providers so as to transform a logistics firm from a tactical service provider to a hand-in-glove strategic partner.