Examining the Impact of Interorganizational Systems on Process Efficiency and Sourcing Leverage in Buyer–Supplier Dyads

Manufacturing firms are increasingly seeking cost and other competitive advantages by tightly coupling and managing their relationship with suppliers. Among other mechanisms, interorganizational systems (IOS) that facilitate boundary‐spanning activities of a firm enable them to effectively manage different types of buyer–supplier relationships. This study integrates literature from the operations and information systems fields to create a joint perspective in understanding the linkages between the nature of the IOS, buyer–supplier relationships, and manufacturing performance at the dyadic level. External integration, breadth, and initiation are used to capture IOS functionality, and their effect on process efficiency and sourcing leverage is examined. The study also explores the differences in how manufacturing firms use IOS when operating under varying levels of competitive intensity and product standardization. In order to test the research models and related hypothesis, empirical data on buyer–supplier dyads is collected from manufacturing firms. The results show that only higher levels of external integration that go beyond simple procurement systems, as well as who initiates the IOS, allow manufacturing firms to enhance process efficiency. In contrast, IOS breadth and IOS initiation enable manufacturing firms to enhance sourcing leverage over their suppliers. In addition, firms making standardized products in highly competitive environments tend to achieve higher process efficiencies and have higher levels of external integration. The study shows how specific IOS decisions allow manufacturing firms to better manage their dependence on the supplier for resources and thereby select system functionalities that are consistent with their own operating environments and the desired supply chain design.     

Strategic Sourcing in the Presence of Uncertain Supply and Retail Competition

This study develops an analytical model to evaluate competing retail firms' sourcing strategies in the presence of supply uncertainty. We consider a common supplier that sells its uncertain supply to two downstream retail firms engaging in price competition in a horizontally differentiated product market. The focal firm has a dual‐sourcing option, while the rival firm can only source from the common supplier. We assess the system‐wide effects of supply uncertainty on the focal firm's incentive to pursue the dual‐sourcing strategy. We find that the focal firm's dual‐sourcing strategy can create a win–win situation that leads to increased retail prices and expected profits for both firms. Furthermore, under certain conditions, we show that it is beneficial for the focal firm to strategically source from the common supplier, even if its alternative supplier offers a lower wholesale price. Overall, we identify two types of incentives for adopting the dual‐sourcing strategy: the incentive of mitigating supply risk through supplier diversification and the incentive of strategic sourcing for more effective retail competition.     

Sourcing Decisions with Stochastic Supplier Reliability and Stochastic Demand

Supplier sourcing strategies are a crucial factor driving supply chain success. In this paper, we investigate the implications of uncertain supplier reliability on a firm's sourcing decisions in an environment with stochastic demand. In particular, we characterize specific conditions under which a firm should choose a single versus multiple supplier sourcing strategy. In an environment with both uncertain demand and supply, we characterize the total order quantity, the number of suppliers selected for order placement, and the allocation of the total order quantity among these selected suppliers. For deeper managerial insight, we also examine the sensitivity of the optimal sourcing decisions to interactions between uncertainties in product demand and supply reliability. We show that sourcing from a single supplier is an optimal strategy for environments characterized by high levels of demand uncertainty or high salvage values. A numerical analysis based on data obtained from an office products retailer further reinforces our analytical results. In addition, we also find that when minimal order quantities are imposed, there are situations where it is not optimal to place an order with the lowest cost supplier.     

存在信息更新时的双源采购和后备生产结合策略研究

在现实的采购运作中，双源采购和后备生产是两种最常见的风险应对策略。本文在考虑信息更新的情况下，探讨了一个两阶段动态采购决策模型：第一阶段，制造商向存在供应风险的一个或两个主供应商订货；第二阶段，制造商根据主供应商风险信息的更新，决定是否向供应可靠但价格较高的后备供应商订货。本文得到了两阶段的最优采购策略，分析发现，当固定采购成本较低时：若潜在市场需求较小，双源采购将排斥后备生产；若潜在市场需求较大，双源采购和后备生产共存；若潜在市场需求适中，后备生产可能排斥双源采购，两者也可能共存。特别地，在潜在市场需求适中时，可靠性改进概率的增大或后备供应商生产成本的降低，将使后备生产趋于排斥双源采购；反之，可靠性改进概率的减小、固定采购成本的降低或后备生产成本的增加，将使两者趋于共存。     

Toward a Typology of Buyer–Supplier Relationships: A Study of the Computer Industry*

Buyer–supplier relationship typologies are useful analytical tools for purchasing managers in managing exchange relationships with suppliers and monitoring their purchasing portfolios. Existing buyer–supplier relationship typologies are mainly focused on either relational contents or power‐dependence and have limited empirical support for their performance implications. In this study, we developed an alternative buyer–supplier relationship typology that integrates both relational content and power‐dependence dimensions, resulting in four generic relationship types: market, power, autonomous‐link, and constrained‐link relationships. We then performed a longitudinal exploratory investigation of eight leading firms in the U.S. computer industry to explore the performance implications of the typology, using a combinatorial qualitative approach that leverages the strengths of case study research, content analysis, and quasi‐experimental design. The results suggest three theoretical propositions. First, the association between the type of buyer–supplier relationships and buyer firm performance varies such that constrained‐link relationships are superior in terms of operational efficiency while autonomous‐link relationships are superior in terms of product innovation. Second, the positive association between buyer–supplier relational contents (i.e., relationalism) and buyer firm operational efficiency is strengthened as the suppliers' dependence on the buyer firm increases. And finally, the positive association between buyer–supplier relationalism and buyer firm product innovation is weakened as the suppliers' dependence on the buyer firm increases.     

Supplier competition and its impact on firm׳s sourcing strategy

Most research on firms׳ sourcing strategies assumes that wholesale prices and reliability of suppliers are exogenous. It is of our interest to study suppliers׳ competition on both wholesale price and reliability and firms׳ corresponding optimal sourcing strategy under complete information. In particular, we study a problem in which a firm procures a single product from two suppliers, taking into account suppliers׳ price and reliability differences. This motivates the suppliers to compete on these two factors. We investigate the equilibria of this supplier game and the firm׳s corresponding sourcing decisions. Our study shows that suppliers׳ reliability often plays a more important role than wholesale price in supplier competition and that maintaining high reliability and a high wholesale price is the ideal strategy for suppliers if multiple options exist. The conventional wisdom implies that low supply reliability and high demand uncertainty motivate dual-sourcing. We notice that when the suppliers׳ shared market/transportation network is often disrupted and demand uncertainty is high, suppliers׳ competition on both price and reliability may render the sole-sourcing strategy to be optimal in some cases that depend on the format of suppliers׳ cost functions. Moreover, numerical study shows that when the cost or vulnerability (to market disruptions) of one supplier increases, its profit and that of the firm may not necessarily decrease under supplier competition.     

Governance Choice,Sourcing Relationship Characteristics,and Relationship Performance

Past work on exchange relationships has debated the efficacy of partnership versus arm's‐length governance on performance of a buyer–supplier relationship. However, how these governance approaches leverage key supplier specific relationship characteristics has not been examined. In this study, we examine the moderating role of governance choice (arm's‐length versus partnership governance) in leveraging key supplier specific characteristics to achieve superior performance for the buyer in a relationship. Specifically, drawing from residual rights theory, we argue that the governance choice buyers make moderates the impact of supplier flexibility, supplier human capital and relationship dependency on performance. Our findings suggest that, for a buyer, the benefits of supplier flexibility and relationship dependency are better realized in partnership governance as opposed to arm's‐length governance. Further, our findings suggest that although buyers choose a specific governance approach consistent with their outsourcing motivation, the choice of governance is critical to leveraging the impact of supplier characteristics due to the moderation effects studied. We elaborate on these effects and discuss the implications of our findings.     

A Multi‐Supplier Sourcing Problem with a Preference Ordering of Suppliers

We study a sourcing problem faced by a firm that seeks to procure a product or a component from a pool of alternative suppliers. The firm has a preference ordering of the suppliers based on factors such as their past performance, quality, service, geographical location, and financial strength, which are commonly included in a supplier scorecard system. Thus, the firm first uses available inventory from supplier 1, if any, then supplier 2, if any, and so on. The suppliers differ in costs and prices. The buyer firm seeks to determine which suppliers to purchase from and in what quantities to maximize its total expected profit subject to the preference ordering constraint. We present the optimal solution to this problem, and show that it has a portfolio structure. It consists of a sub‐set of suppliers that are ordered by their underage and overage costs. This portfolio achieves a substantial profit gain compared to sourcing from a unique supplier. We present an efficient algorithm to compute the optimal solution. Our model applies to component sourcing problems in manufacturing, merchandizing problems in retailing, and capacity reservation problems in services.     

Managing Disruptions in Decentralized Supply Chains with Endogenous Supply Process Reliability

Supply disruptions are all too common in supply chains. To mitigate delivery risk, buyers may either source from multiple suppliers or offer incentives to their preferred supplier to improve its process reliability. These incentives can be either direct (investment subsidy) or indirect (inflated order quantity). In this study, we present a series of models to highlight buyers’ and suppliers’ optimal parameter choices. Our base‐case model has deterministic buyer demand and two possibilities for the supplier yield outcomes: all‐or‐nothing supply or partial disruption. For the all‐or‐nothing model, we show that the buyer prefers to only use the subsidy option, which obviates the need to inflate order quantity. However, in the partial disruption model, both incentives—subsidy and order inflation—may be used at the same time. Although single sourcing provides greater indirect incentive to the selected supplier because that avoids order splitting, we show that the buyer may prefer the diversification strategy under certain circumstances. We also quantify the amount by which the wholesale price needs to be discounted (if at all) to ensure that dual sourcing strategy dominates sole sourcing. Finally, we extend the model to the case of stochastic demand. Structural properties of ordering/subsidy decisions are derived for the all‐or‐nothing model, and in contrast to the deterministic demand case, we establish that the buyer may increase use of subsidy and order quantity at the same time.     

The Effect of Socialization Mechanisms and Performance Measurement on Supplier Integration in New Product Development

This article examines the effect of socialization mechanisms and supplier performance measurement on the level of supplier integration in new product development and subsequent firm performance outcomes. Prior research has found socialization mechanisms and performance measures to be effective in managing supplier relationships, though research examining their impact within a product development context has been limited. Socialization mechanisms, such as supplier conferences and on‐site visits, help establish communication and information‐sharing routines necessary to achieve supplier integration in the product development process. Using performance measures to evaluate a supplier helps focus managerial attention on areas such as innovation and communication that are important to integration success. A structural equation model, using a sample of 142 manufacturing firms based in the United Kingdom, indicates that the level of supplier integration in new product development is positively influenced by socialization mechanisms and innovation‐focused measures of supplier performance, but not significantly associated with the use of communication measures. In turn, increased levels of supplier integration led to improvements in both collaboration outcomes and business performance. Socialization mechanisms were also found to have a direct effect on collaboration outcomes achieved by the firm. Managerial implications and future research directions are discussed.     

Sourcing from Multiple Suppliers for Price‐Dependent Demands

We analyze a model that integrates demand shaping via dynamic pricing and risk mitigation via supply diversification. The firm under consideration replenishes a certain product from a set of capacitated suppliers for a price‐dependent demand in each period. Under deterministic capacities, we derive a multilevel base stock list price policy and establish the optimality of cost‐based supplier selection, that is, ordering from a cheaper source before more expensive ones. With general random capacities, however, neither result holds. While it is optimal to price low for a high inventory level, the optimal order quantities are not monotone with respect to the inventory level. In general, a near reorder‐point policy should be followed. Specifically, there is a reorder point for each supplier such that no order is issued to him when the inventory level is above this point and a positive order is placed almost everywhere when the inventory level is below this point. Under this policy, it may be profitable to order exclusively from the most expensive source. We characterize conditions under which a strict reorder‐point policy and a cost‐based supplier‐selection criterion become optimal. Moreover, we quantify the benefit from dynamic pricing, as opposed to static pricing, and the benefit from multiple sourcing, as opposed to single sourcing. We show that these two strategies exhibit a substitutable relationship. Dynamic pricing is less effective under multiple sourcing than under single sourcing, and supplier diversification is less valuable with price adjustments than without. Under limited supply, dynamic pricing yields a robust, long‐term profit improvement. The value of supply diversification, in contrast, mainly comes from added capacities and is most significant in the short run.     

Coopetitive Buyer–Supplier Relationship: An Investigation of Bargaining Power,Relational Context,and Investment Strategies

This study proposes an analytical approach combined with a behavioral experiment for a joint examination of the competitive and cooperative (i.e., coopetitive) relationship between a buyer and a supplier. Specifically, the article considers the scenario in which the buyer and the supplier invest in strategic capabilities to increase their relative bargaining power. The article examines how dynamic investments in strategic assets are influenced by the locus of bargaining power and by the underlying context (synergistic vs. adversarial) of the interfirm relationship. The dynamic evolution of bargaining power is also examined. A dynamic game model is considered to examine the evolution of investment strategies in critical resources and to investigate the issues of bargaining power in a buyer–supplier dyad. Equilibrium expressions for the investment strategies of the buyer and the supplier are presented and their implications for buyer–supplier relationships are examined. The behavioral experiment complements the analytical model and examines the correspondence between optimal behavior suggested by the analytical model and the boundedly rational behavior of decision makers in an experimental context. The results from the model and behavioral experiments suggest that the strategies are a function of the risk‐adjusted returns obtained from investments. The experiment shows that, in a synergistic relational context when the buyer maintains bargaining power, the investment shifts of the buyer and the supplier accord well with theoretical predictions. In an adversarial relational context, the results of the experimental study do not correspond well with that predicted by the theoretical model. The implications of the results are discussed and directions for future research are presented.     

Mitigating Supply Uncertainty: The Interplay Between Diversification and Pricing

We consider a firm's sourcing problem from one reliable supplier and one unreliable supplier in two price‐setting scenarios. In the committed pricing scenario, the firm makes the pricing decision before the supply uncertainty is resolved. In the responsive pricing scenario, the firm's pricing decision is made after the supply uncertainty is resolved. For the committed pricing scenario, we develop a condition on supply uncertainty that guarantees the unimodality of the firm's objective function. By comparing the firm's optimal diversification decisions in the two pricing scenarios, we examine the interplay of supply diversification strategy and responsive pricing strategy in mitigating supply uncertainty. While both strategies are effective in mitigating supply uncertainty, we show that they are not necessarily substitutes. The relationship between these two strategies depends on two adverse effects caused by supply uncertainty: the lost‐revenue effect and the lost‐goodwill effect. More specifically, when the lost‐revenue effect dominates the lost‐goodwill effect, these two strategies are complements; otherwise, they are substitutes. Furthermore, we examine the impact of market size, price sensitivity, supplier reliability, and failure rebate on the interplay between these two strategies, and discuss the implications of our results. Finally, we extend our analysis to the case of two unreliable suppliers and show that the insights regarding the interplay between diversification and pricing continue to hold.     

Search for Alternatives and Collaboration with Incumbents: Two-Sided Sourcing Behavior in Business Markets*

Sourcing strategies in business markets have been considered separately and the practice of two-sided sourcing behavior—engaging in search for alternative suppliers and collaboration with an incumbent supplier—has not been examined. To fill that gap, we first identify boundary conditions under which the poor performance of an incumbent supplier intensifies an original equipment manufacturer's (OEM) search and collaboration. Then, we examine how an OEM's two-sided sourcing behavior influences one of the critical elements of sourcing performance: the responsiveness of the incumbent supplier. Our proposed hypotheses were tested with data from a national survey of 539 OEM purchasing managers in the Japanese electronics industry. The analysis results indicate three main findings. First, two environmental conditions—pace of technological change and volume uncertainty—have contrasting influences on the link between incumbent supplier performance and an OEM's search and collaboration. While uncertainty from the upstream channel (pace of technological change) enhances an OEM's search and collaboration, uncertainty from the downstream channel (volume uncertainty) lowers an OEM's search and collaboration. Second, an OEM's dependence on its incumbent supplier has differential effects: an OEM reduces search as its dependence on incumbent supplier increases, while it enhances collaboration as its dependence on incumbent supplier increases. Third, while search alone has a negative effect on responsiveness of an incumbent supplier, engaging in two-sided sourcing behavior (i.e., combining search with collaboration) has a positive effect on responsiveness of the incumbent supplier.     

Joint supplier selection and scheduling of customer orders under disruption risks: Single vs. dual sourcing

This paper presents a stochastic mixed integer programming approach to integrated supplier selection and customer order scheduling in the presence of supply chain disruption risks, for a single or dual sourcing strategy. The suppliers are assumed to be located in two different geographical regions: in the producer's region (domestic suppliers) and outside the producer's region (foreign suppliers). The supplies are subject to independent random local disruptions that are uniquely associated with a particular supplier and to random semi-global (regional) disruptions that may result in disruption of all suppliers in the same geographical region simultaneously. The domestic suppliers are relatively reliable but more expensive, while the foreign suppliers offer competitive prices, however material flows from these suppliers are more exposed to unexpected disruptions. Given a set of customer orders for products, the decision maker needs to decide which single supplier or which two different suppliers, one from each region, to select for purchasing parts required to complete the customer orders and how to schedule the orders over the planning horizon, to mitigate the impact of disruption risks. The problem objective is either to minimize total cost or to maximize customer service level. The obtained combinatorial stochastic optimization problem will be formulated as a mixed integer program with conditional value-at-risk as a risk measure. The risk-neutral and risk-averse solutions that optimize, respectively average and worst-case performance of a supply chain are compared for a single and dual sourcing strategy and for the two different objective functions. Numerical examples and computational results are presented and some managerial insights on the choice between the two sourcing strategies are reported.     

Cooperation and Knowledge Transfer within Buyer–Supplier Relationships: The Moderating Properties of Trust,Relationship Duration and Supplier Performance*

This paper examines the effect of relational factors on knowledge transfer within strategic buyer–supplier exchange. Prior research examining inter‐firm knowledge transfer has focused almost exclusively on horizontal forms of governance such as strategic alliances and joint ventures, whilst research on vertical forms, such as buyer–supplier relationships, is limited. We test the effect of four important relational properties: cooperation, trust, relationship duration and supplier performance. Quantitative data, gathered from 104 UK manufacturing firms in eight industry sectors, are used to analyse the hypothesized relationships through a moderated hierarchical regression model. Our study provides support for the importance of considering relational factors in the transfer of knowledge at the inter‐organizational level. In particular, the results indicate that knowledge transfer is positively influenced by the extent of cooperation, but that this relationship is moderated by the level of trust and the performance of the supplier firm. Managerial implications for these findings and future directions for research are then offered.     

A Structural Analysis of the Effectiveness of Buying Firms' Strategies to Improve Supplier Performance

Many manufacturing firms have increased the amount of component parts and services they outsource, while refocusing on their core capabilities. Outsourcing parts and services to independent, external suppliers means that suppliers' performance is increasingly critical to the long‐term success of these buying firms. Buying firms are increasingly using disparate supplier development strategies to improve supplier performance including supplier assessment, providing incentives for improved performance, instigating competition among suppliers, and direct involvement of the buying firm's personnel with suppliers through activities such as training of suppliers' personnel. Using resource‐based theory, internalization theory, and structural equation modeling, we examine the impact of these supplier development strategies on performance. We conclude that direct involvement activities, where the buying firm internalizes a significant amount of the supplier development effort, play a critical role in performance improvement.     

Global Multisourcing Strategy: The Emergence of a Supplier Portfolio in Services Offshoring

In today's global services outsourcing arena, increasing numbers of companies adopt “multisourcing,” that is, they select and combine information technology (IT) and business services from multiple providers. The literature on IT outsourcing and supply chain management has identified critical tradeoffs involved in increasing the number of suppliers and has strongly recommended focusing on a handful of strategic partners to balance these tradeoffs. Committing to a few strategic partners, however, may prevent a firm from discovering new suppliers, or even supply regions. Such missed opportunities may be particularly limiting in the context of offshoring professional services, which has exhibited rapid changes in supplier markets in the last decade. Thus, firms may want to engage in a more intensive multisourcing in services. If they do so, their success will depend on a global sourcing process that effectively addresses the critical tradeoffs involved. To explore how a global sourcing process can support multisourcing, we conducted a qualitative longitudinal case study of a large financial services institution that developed a varied global supply base to obtain offshore professional services. Our analysis results in a theory that emphasizes (i) advantages of a multiple provider strategy in rapidly changing global supply markets; (ii) the critical role of middle managers in enabling continuous innovation in the supplier structure; and (iii) the importance of the global sourcing process combining top–down and bottom–up decision making in multisourcing.     

Supplier integration,operational capability and firm performance: an investigation in an emerging economy environment

Abstract

The literature on supplier integration’s (SI) impact on firm performance is intertwined with mixed findings in terms of definitional differences, study context, specific integration components, and the types of relationships examined. This study contributes to the supplier integration and firm performance (SI-FP) literature by investigating how and when supplier integration influences firm performance. Drawing on the relational view, the resource-based view, and the Dynamics Capability theories, we suggest that improvements in firm performance from the supplier integration perspective are dependent on gains in operational capabilities. We test this dependency with survey data from firms in Ghana, a developing economy. The results show positive significant relationships between supplier integration and competitive operational capabilities and between supplier integration and firm performance. Our results highlight the importance for managers in developing economies and elsewhere to improve their firms’ operational capabilities and competitiveness by investing in supplier integration. We also discuss implications of these findings for research.     

不同渠道权力结构下资金约束零售商的采购和融资策略

针对由供应商、3PL企业和资金约束零售商组成的供应链,研究了三种渠道权力结构（以供应商为主导的S权利结构、以3PL企业为主导的L权利结构、供应商和3PL企业同时主导的N权力结构）和两种融资模式（3PL企业融资服务和贸易信贷融资）下零售商的采购和融资策略。首先,分别构建了针对三种渠道权力结构和两种融资模式的以供应链成员利润最大化为目标的优化模型,并通过求解模型得到了供应商、3PL企业和零售商的最优定价策略;然后,通过比较不同情形下的供应链成员利润,分析了零售商的采购和融资策略。研究结果表明：在S权力结构下,零售商应选择直接向供应商订货并接受贸易信贷融资模式;在L权力结构下,零售商应选择接受3PL企业的代理采购和融资服务;在N权力结构下,零售商应选择融资利率更高的采购和融资模式。此外发现,供应商和3PL企业均应选择优先宣布定价策略,当二者在市场中权力相当时,其应该调高各自的融资利率。