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RESEARCH NOTE

An empirical investigation
into supply chain management
A perspective on partnerships
Robert E. Spekman
Darden Graduate School of Business, University of Virginia,
Charlottesville, Virginia, USA

John W. Kamauff Jr
Ernst & Young Consulting, Baltimore, USA, and

Niklas Myhr
Darden Graduate School of Business, University of Virginia,
Charlottesville, Virginia, USA
Introduction
We have entered a new era in understanding the dynamics of competitive
advantage and the role played by procurement. We no longer talk about suppliers
and customers as though they are managed in isolation, each treated as an
independent entity. More and more, we are witnessing a transformation in which
suppliers and customers are inextricably linked throughout the entire sequence of
events that bring raw material from its source of supply, through different valueadding activities to the ultimate customer. Success is no longer measured by a
single transaction; competition is, in many instances, evaluated as a network of
co-operating companies competing with other firms along the entire supply chain
(Spekman et al., 1994). Simply, Ford Motors is as successful as its ability to coordinate the efforts of its key suppliers (and its suppliers suppliers) as steel, glass,
plastic, and sophisticated electronic systems are transformed into an automobile
that is intended to compete in world markets against the Japanese, the Germans,
and other US manufacturers. World class companies are now accelerating their
efforts to align processes and information flows throughout their entire valueadded network to meet the rising expectations of a demanding marketplace
(Quinn, 1993). We hear from enlightened managers worldwide that success is now
measured by cost, speed, innovation, and customer satisfaction.

International Journal of Physical

Distribution & Logistics
Management, Vol. 28 No. 8, 1998,
pp. 630-650. MCB University
Press, 0960-0035

This paper was first published in Supply Chain Management, Vol. 3 No. 2, 1998.
This study was funded in part by a research grant provided by Ernst & Young LLP Center for
Business Knowledge, which was administered by Jeffrey Pratt and LeAnne Gershkowitz. The
authors appreciate and acknowledge the help and support of Ernst & Young LLP Global Supply
Chain Network and especially the guidance and assistance of Christopher Gopal and Gene Tyndall.

This new view of the world is echoed by Porter (1985), who advocates that the
co-ordination of complex global networks of company activities is becoming a
prime source of competitive advantage. The secret is to achieve breakthrough
changes and improvements so that the expertise of members of the value-added
network is shared throughout the system. Now, we see that fill-the-order
component makers are being asked to participate in the customer satisfaction
delivery process as design partners, risk-sharers, and engines of greater efficiency.
These attempts at integrating this value-added network to achieve both customer
value and competitive advantage are referred to as supply chain management.
The purposes of this paper are to understand better some of the complexities
of supply chain management and to offer insights into improving the level of
practice. Although we believe a number of advantages accrue to firms that
implement integrated supply chain practices and processes, a number of
hurdles block the path. Our goal is to highlight the challenges that exist in
implementing supply chain management concepts. We will reveal important
obstacles that exist for managers who sing the virtues of engaging in
collaborative supply chain practices. We will present preliminary results from a
supply chain study that sheds light on problem areas across a range of relevant
supply chain management processes and practices. We begin with a brief
discussion of supply chain management. Next, we discuss the principles on
which successful implementation of supply chain management are based.
Then, we discuss our preliminary findings taken from supply chain buyers and
sellers. Finally, we suggest the conclusions of our exploratory study.
Supply chain management
The traditional view of supply chain management is to leverage the supply
chain to achieve the lowest initial purchase prices while assuring supply.
Typical characteristics include: multiple partners; partner evaluations based on
purchase price; cost-based information bases; arms-length negotiations; formal
short-term contracts; and centralized purchasing. Operating under these
conditions encourages fierce competition among suppliers, often requiring
playing one supplier against the others, and uses rewards or punishment based
on performance. The fundamental assumption in this environment is that
trading partners are interchangeable and that they will take advantage if they
become too important. In addition, there is a belief that maximum competition,
under the discipline of a free market, promotes a healthy and vigorous supply
base which is predicated on the survival of the fittest.
Under the new paradigm (adapted by such leading US companies as Boeing,
Black & Decker, Hewlett Packard, and 3M), supply chain management is
redefined as a process for designing, developing, optimizing, and managing the
internal and external components of the supply system, including material
supply, transforming materials and distributing finished products or services to
customers, that is consistent with overall objectives and strategies. Analytically,
a supply chain is simply a network of material processing cells with the
following characteristics: supply, transformation, and demand (Davis, 1993).
Figure 1 shows a typical manufacturers supply chain. The essence of supply

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chain management is as a strategic weapon to develop a sustainable

competitive advantage by reducing investment without sacrificing customer
satisfaction (Lee and Billington, 1992). Since each level of the supply chain
focuses on a compatible set of objectives, redundant activities and duplicated
effort can be reduced. In addition, supply chain partners openly share
information that facilitates their ability to jointly meet end-users needs.
While reduced cost is typically a result, supply chain management should
emphasize leveraging the skills, expertise, and capabilities of the firms who
comprise this competitive network referred to. Managers have long
acknowledged the importance of getting close to their key customers. Now that
this logic has extended upstream as well, it is also important to forge close ties
to ones key suppliers (Helper, 1991). A sustainable supply chain strategy
extends these linkages upstream and down (Biemans and Brand, 1995; Killen
and Kamauff, 1995; Leenders and Blenkhorn, 1988). Supply chain strategy
development should be part of the business unit planning process which
includes efforts aimed at developing and maintaining global information
systems, addressing strategic aspects of make-or-buy issues, and accessing and
managing innovation with the purpose of protecting and enhancing core
technologies (Prahalad and Hamel, 1990). Developing a supply chain strategy is
predicated on understanding the elements of sourcing strategy, information
flows (internal and external), new product co-ordination, concurrent
procurement, teaming arrangements, commodity/component strategies, longterm requirements planning, industry collaboration, and staff development.
The new competition
Supply chain management represents a paradigm shift that extends ones
appreciation for the concepts of co-operation and competition. Co-operation is
no longer seen as a process between one set of trading partners.
Co-operation now exists along the entire supply chain. GMs Saturn division
no longer co-operates with a few select parts suppliers, it finds itself partnering
with many different suppliers; its in-bound logistics carrier, its out-bound
carrier, and its retail dealer network, some of whom are in Japan. They all must
be synchronized to deliver product that permits Saturn to compete favorably
against Toyota and Honda. This paradigm shift has been caused by the realities
of the new competition (Best, 1990).
The basic premise of the new competition is that firms will no longer compete
as they have previously. The new competition embodies global networks at the
information flow

Figure 1.
An illustration of a
manufacturing
companys supply chain

S
U
P
P
L
I
E
R

Planning & Procurement

Forecasting

Manufacturing Distribution
& Logistics

Customer
Service

Performance
Measurement

material flow
cash flow

C
U
S
T
O
M
E
R

core of which are nimble firms whose managers proactively seek alternative
interpretations of events, are eager to think differently about their business, and
respond quickly to marketplace changes. No longer is the firm conceptualized as
a hierarchy in which independent functional silos compete for scarce resources.
Co-operation emphasizes the need to integrate functional silos and views these
units as interdependent parts charged with meeting the end-user customers
needs. Equally important are the co-operative ties that extend to external buyers
and suppliers who work together to maximize the overall effectiveness of the
supply chain. What evolves is a network of interrelated firms whose primary
objective is to gain strategic advantage for the whole supply chain.
We are beyond the debate of whether such close ties between buyers and
suppliers carry inherent risks (Newman, 1989). Rather, the more relevant question
is how does one effectively manage and leverage the skills and talents of ones
supply chain partners (Lewis, 1995). The procurement manager, as a broker of
information rather than a transaction manager, becomes a critical participant in
the process, guiding both the formation and implementation of longer-term
relationships and inter-firm supply networks. Thus, the purchasing professional in
the new competition must add breadth while becoming, to a certain extent, a
manager of external manufacturing whose responsibility is throughout the supply
chain. He/she must gather and filter relevant procurement-related information
about products, processes, competition, and macro/micro economic issues that can
affect the firms competitive posture. Table I summarizes the revolutionary
transformations that the new competition demands and the changes faced by the
procurement manager. This perspective is shared by Farmer (1997) in his recent
review of the evolution of strategic procurement thinking.

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From co-operation to collaboration

Within the requirements of the new competition, a shift in the level of intensity
among trading partners emerges. Co-operation, whereby firms exchange bits of
Evolving role

Revolutionary role

Transaction accountant
Administers inter-firm contracts

Information exchange broker

Guides the information and implementation
of partnerships and inter-firm networks
Primary point of contact with suppliers
Manager of external manufacturing
Interface with first-tier suppliers
Responsibilities throughout the supply chain
Minimizes risks (e.g. supply disruption,
Manages and leverages the skills of the
incoming defects) to the buying organization
supply chain
Reacting to external stimuli (reactionary change) Proactively assessing external information
Safeguarding proprietary/critical information Enhancing information sharing through the
transaction driven
value chain early supplier involvement
Unidirectional communication
Simultaneous two-way communication
Cross-functional co-ordination
Functional integration
Cause and effect problem solving
Systems thinking
Purchasing mentality
World view

Table I.
An illustration of
purchasings new role

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Figure 2.
The key transition from
open-market
negotiations to
collaboration

essential information and engage some suppliers/customers in longer-term

contracts, has become the threshold level of interaction. That is, co-operation is
the starting point for supply chain management and has become a necessary
but not sufficient condition. The next level of intensity is co-ordination whereby
both specified workflow and information are exchanged in a manner that
permits JIT systems, EDI, and other mechanisms that attempt to make
seamless many of the traditional linkages between and among trading parties.
Trading parties can co-operate and co-ordinate certain activities but still not
behave as true partners. Again, this evolution is a necessary, but not sufficient,
condition for total supply chain management.
Supply chain management is built on a foundation of trust and commitment
(Lee and Billington, 1992). The consensus is that trust can contribute significantly
to the long-term stability of an organization (Heide and John, 1990). Trust is
conveyed through faith, reliance, belief, or confidence in the supply partner and is
viewed as a willingness to forego opportunistic behavior. Trust is simply ones
belief that ones supply chain partner will act in a consistent manner and do what
he/she says he/she will do. It is this sense of performance in accordance with
intentions and expectations that hold in check ones fear of self-serving behavior
on the part of the other members of the supply chain (Nooteboom et al., 1997).
Commitment is the belief that the trading partners are willing to devote energy to
sustaining this relationship (Dion et al., 1992). That is, through commitment
partners dedicate resources to sustain and further the goals of the supply chain.
To a large degree, commitment ups the ante and makes it more difficult for
partners to act in ways that might adversely affect overall supply chain
performance. Trading partners throughout the supply chain become integrated
into their major customers processes and more tied to their overarching goals.
For instance, supply chain partners willingly share information about future
plans and designs, competitive forces, and R&D. Partners recognize that their
long-term success is as strong as their weakest supply chain partner. For
example, Boeing competes for global market share with its engine manufacturer,
its landing gear supplier, and the host of firms who supply components,
expertise, and knowledge that ultimately are incorporated in the 777 or 7X7.
Boeing is successful because its supply chain partners are focused on winning
bids from Airbus and its set of European supply chain partners.
Figure 2 summarizes the requisite transition from being an important supplier
to becoming a supply chain partner. The transformation is depicted as linear

Open Market
Negotiations

Price-based discussions
Adversarial relationships

Co-operation

Fewer supplies
Longer-term contracts

Co-ordination

Information linkages
WIP linkages
EDI exchange

Collaboration

Supply chain integration

Joint planning
Technology sharing

although we envision it as a step function since the changes required to move

from one level to another require changes in mind set and strategic orientation
among supply chain partners. In most instances, firms have already achieved cooperation and co-ordination with key segments of their suppliers and customers.
Nonetheless, the movement from co-ordination to collaboration requires levels of
trust and commitment that are beyond those typically found in both JIT and EDI
relationships. For instance, firms can co-ordinate production and logistics
activities to ensure JIT delivery but never reach that next step of integration
whereby future design and product performance, and long-term strategic
intentions are shared. In one case, Bose and its JIT II partners are further along
this continuum and have dedicated unique and non-fungible resources to ensure
that Bose not only serves its major customers better but is more successful than
its US and foreign competitors in world markets. Simply, one can co-operate and
be co-ordinated in a supply chain but not collaborate. Collaboration requires high
levels of trust, commitment, and information sharing among supply chain
partners. In addition, partners also share a common vision of the future.
Collaboration (Anderson and Narus, 1990; Bhote, 1987; Ellram, 1990; Kapoor,
1988; Spekman and Sawhney, 1995) has become a popular topic as an integral facet
of supply chain management sourcing strategies. Advocates (Landeros and
Monczka, 1989; Womack et al., 1990) argue that the tasks of the buying and selling
firms are interdependent and become conduits of information between the
manufacturing firm and its preferred suppliers and that collaborative buyer/seller
relationships allow purchasing managers to manage these tasks better than
before. Collaborative behavior engages partners in joint planning and processes
beyond levels reached in less intense trading relationships. A particularly
interesting aspect of this belief in relation to the present research is that it suggests
that the procurement function can transcend its traditional role of contributing to
cost leadership (which remains important but probably not the key driver in
supply chain management) and can support other revenue-enhancing strategic
initiatives a manufacturing firm might choose such as new product development.
Effective supply chain management in the new competition suggests seeking
close, long-term working relationships with one or two partners (both suppliers
and customers) who depend on one another for much of their business; developing
interactive relationships with partners who share information freely, work
together when trying to solve common problems when designing new products,
who jointly plan for the future, and who make their success interdependent. This
notion is supported by Krause and Ellram (1997) who present a review of supplier
development efforts. Over the long term, the supply chain that forges virtual
firm relationships in those situations where uncertainty is highest and where the
cost of success (or failure) is greatest will prevail.
The study
The fundamental purpose of this study was to examine supply chain
management as it applied to developing and sustaining a competitive advantage
for the firm. We sought to investigate best practices from the perspective of the

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operations/procurement managers and marketing managers across a set of firms

that comprise a supply chain. A key objective was to understand better how to
develop and sustain collaborative supply chain relationships. By focusing on
buyers and sellers we felt that we would gain insight into how each viewed a
range of supply chain processes and practices. Implicit in our analysis is the
belief that collaboration within a supply chain can be achieved to the extent the
trading partners share a common world view of supply chain management
(Spekman et al., 1997). Admittedly, this goal is rather broad; however, we believe
that much can be gained from this rather high level approach.
The sample
This study is part of a larger project and represents the responses of 22
aggregate supply chains from North America, South America, and Europe
across five broad industry groupings (life sciences, oil and gas, consumer
products, utilities and manufacturing high-tech electronics and automotive). It
should be noted that, while the sample represents a wide array of industries, the
sample was not generated randomly. Rather, the sample was generated from a
list of client firms associated with the studys sponsor. The majority of the
sample was taken from North America with strong representation from South
American firms. In addition, there was a small degree of European participation.
The South American questionnaire was translated into Spanish and then back
into English to ensure that the translation matched the original English version
of the questionnaire. An aggregate supply chain reflects the response of different
levels (e.g. upstream and downstream) within the supply chain relative to a focal
company. As Figure 3 suggests, this study extends traditional empirical studies
that either asked questions of only buyers (or sellers) and only inferred
information about the other trading partner, or attempted to make comparisons
between trading partners. The sample is comprised of respondents from
different functions in the firm (operations or procurement or materials
management and marketing) and from different levels of the supply chain
(suppliers and customers). Questions were asked of each respondent relative to
their perceptions of their upstream and downstream counterpart. For example,
marketers responded to questions about their internal suppliers (i.e. operations)
and their external customers, while operations/procurement managers[1]
Sellers

Buyers

Focal
Company

Supplier

Figure 3.
An illustration of
supply chain data
acquisition process

Sellers

Upstream

Buyers

Customer

Downstream

responded to questions about their external suppliers and their internal

customers (i.e. marketing). From these different perspectives we are able to
reflect a supply chain view of certain key dimensions of supply chain
management processes and practices, as well as show differences in perspectives
across different levels of the supply chain. Our sample consists of 161 (71 per
cent response rate) respondents from supplier and customer firms and from
operations and marketing personnel within the focal company. A focal firm
represents the point of entry for the researchers and it is the upstream and
downstream trading partners of the focal firm that comprise the aggregate
supply chain. That is, focal firm A might have selected three suppliers that make
parts/sub-assemblies for a product that is then sold to three customers. In this
analysis, all supply/customer partners identified would become part of firm As
aggregate supply chain. Within the focal firm it is very likely that different
operations/procurement and marketing/salespeople would be responsible for
each different supplier/customer. Thus, we collected data on an aggregate level,
depicting the overall supply chain and important factors across a number of
supply chain management processes and practices. Our analysis examines mean
differences between buyers and sellers across levels of the supply chain.
The questionnaire
The research instrument focused on a number of factors related to supply chain
management. These factors reflect the range of supply chain management
issues, running the gamut from gaining insight into issues affecting workflow
and information flow among levels of the supply chain, to gaining an
appreciation for measures of supply chain performance. Sections of the
questionnaire also reflect the continuum of activities from co-operation to
collaboration. These different factors help us examine in greater detail aspects
of supply chain management that address the transition from co-operation, to
co-ordination, to collaboration. For each section of the questionnaire items were
generated from past research studies[2] as well as from conversations with
practising managers. We approached the supply chain management problem by
examining a broad base of literature that encompassed elements of logistics,
distribution, marketing, operations, and procurement. Throughout the study,
our primary goal was to understand better the factors, processes, motivations,
and behaviors that support and encourage supply chain management practices.
Rather than present the full set of data for each major section of the
questionnaire, we present only the top ten and the bottom five responses from
the aggregate data based on mean scores. That is, from each section of the
questionnaire, mean scores for each item were generated allowing a rank
ordering of items by degree of importance on a scale of 1-7. From this ranking,
the top ten items (and the bottom five) are presented for each section. In
addition, rather than present tests of mean differences (t-tests) for an exhaustive
set of data, we have selected to constrain our analysis to the ten most (and the
five least important) salient items across each section. Results were adjusted to

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reflect mean difference scores taken from a wide range of individual items as we
computed the t-tests for buyer and seller responses to each item.
The findings
Supply chain factors
To begin, it is important to understand the flows of interaction among supply
chain partners. Table II reflects the ranking of information flows along the supply
chain and reflects both traditional workflow metrics related to inventory, delivery,
and other forms of materials tracking. In addition, the section attempts to capture
those information flows that relate to customer satisfaction and the degree to
which suppliers and customers are linked. At the bare minimum, we believe that
technology is an enabler that facilitates a firms ability to partner with its
suppliers and its customers. Table II summarizes the extent to which firms apply
an array of practices in their supply chains. It can be seen that the data show
somewhat inconsistent results. Three of the top ten items relate to tracking
linkages between customers and suppliers (e.g. tight linkages between customers
and suppliers, measures of satisfaction, and individual customers managed as
accounts). Although measures of customer/supplier satisfaction scored relatively
high, most of the informational considerations addressed were purchase orderdriven. All but one of the remaining items relate to information tied to tracking
Seller mean
(N = 73)

Buyer mean
(N = 59)

Top ten
To what extent do you apply the following practices?
Tight linkages between customers and suppliers
5.20
Purchase order information tracking
5.20
Raw material cost, quality, and delivery tracking
4.99
Supplier/customer satisfaction measures
4.63
Finished goods visibility
4.56
Order entry and order-taking technology
4.51
Shipment tracking
4.46
Individual customers managed as accounts
4.45
Process control
4.44
Integrated quality information
4.44

5.26
5.46
5.07
4.75
4.76
4.87
4.93
5.01
5.01
4.71

5.12
4.91a
4.95
4.40
4.21
4.02a
3.76
3.71b
3.81b
3.97b

Bottom five
Robotics
CAD/CAM/CAE
Flexible manufacturing cells
Electronic data interchange (EDI) customer links
Automatic storage and retrieval systems (ASRS)

2.07
2.86
2.94
3.08
3.23

1.53b
2.02b
3.34a
2.19b
2.49b

Item description

Table II.
Information supply
chain factors

Sample + mean
(N = 132)

1.92
2.56
2.74
2.79
2.94

Notes:
a = p 0.05;
b = p 0.1;
+1 connotes not at all; 7 connotes to a very great extent

the flow of product as it moves from raw material, to work-in-process, to finished

goods. EDI and other more sophisticated processes for linking supply chain
members were used very little. Interestingly, we begin to sense a difference
between what managers say and what managers do. That is, respondents
espouse the importance of the customer and the need to be market-focused but
the results tend to reflect business as usual with a strong emphasis on measures
that relate to more traditional purchasing or transactional focus.
It should be noted that sellers, as would be expected, are more concerned
with informational factors that reflect customer considerations. However, in
each of the measures that track product flow, the buyers scores were lower than
the sellers. In particular, information tracking that converged on quality,
process control, and other more sophisticated tracking mechanisms such as
EDI and CAD/CAM/CAE buyers scores were significantly lower than sellers.
One can infer from the data that buyers appear to be less sensitive to
information that links levels of the supply chain, in general, and appear to be far
less concerned about information that is directly linked to end-customer
considerations, in particular. This could imply a silo mentality whereby a
concern for customers is someone elses problem.
Reasons to engage in supply chain management
Respondents were asked the reasons they engaged in supply chain management.
This list of questions was generated from conversations with practising
managers, trade publications, and academic publications (e.g. Schary and SkjottLarsen, 1995). Table III summarizes the results. The findings reflect many of the
common mantras evoked for explaining the virtues of supply chain management,
ranging from increased end-customer satisfaction, to gaining a strategic market
position, to reduced costs and improved productivity. It is encouraging to see that
the reasons reflect both the cost reduction and the revenue enhancement side of
supply chain management. Nonetheless, when one examines the differences
between buyers and sellers, one gains a better appreciation for the tension that
exists within many supply chains. While not statistically significant in every
case, the data suggest that buyers tend to focus more on the cost reduction
aspects of supply chain management, and view securing a reliable source of
supply, reduced lead time, and lower costs as key drivers of supply chain
management. Conversely, sellers tend to highlight revenue enhancement and see
profits, strategic market position, and customer satisfaction as prime drivers for
supply chain management. If we were to focus on the overall means scores alone,
we would not begin to develop an appreciation for what might be fundamental
differences in world views between buyers and sellers.
Criticality
Central to the notion of supply chain management is the degree to which each
member views the other as essential to the success of the venture and
recognizes that each supply chain partner is dependent on the other. Criticality
is based on the notion of high recognized interdependence in which one supply

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Table III.
Reasons to engage in
supply chain
management

Item description

Sample mean +
(N = 132)

Seller mean
(N = 73)

Buyer mean
(N = 59)

Top ten
To what extent do the following reflect your
reasons to engage in supply chain management?
Increased end-customer satisfaction
Improved profits
Secure reliable source/market for this item
Satisfy supplier/customer request
Reduce overall operating costs
Gain stategic market position
Reduce lead time
Price paid for item class
Improved productivity
Increase margins

5.78
5.60
5.59
5.56
5.51
5.49
5.40
5.37
5.33
5.30

5.78
5.74
5.56
5.60
5.58
5.71
5.29
5.30
5.34
5.29

5.71
5.29
5.54
5.44
5.32
5.19a
5.49
5.34
5.20
5.29

Bottom five
Political
Regulations and tax implications
Environmental
Reduce product development costs
Local economy

2.91
3.28
3.82
3.82
3.86

2.92
3.14
3.41
3.99
3.92

2.98
3.41
3.40
3.53
3.93

Notes:

a = p 0.05;
b = p 0.1;

+1 connotes not at all; 7 connotes reflects a very great deal

chain member will not act in his own best interest to the detriment of the supply
chain. The impetus for this thinking stems from research in transaction cost
analysis (e.g. Williamson, 1985) as well as from social exchange theory (e.g.
Emerson, 1962). Both streams of literature have been used to explain
interdependence between buyers and sellers. From the view of the overall
sample, it appears that respondents view both customers and suppliers as
important supply chain partners and view each ones participation and input as
important. From Table IV, one immediately senses a mutual dependence among
supply chain partners. However, the existence of various scores between buyers
and sellers tell a different story. Buyers are less likely to view the
customer/supplier as irreplaceable and essential to their future business. We
believe that this difference sheds insight into buyers traditional commodity
mentality if supply chain partners are easily interchangeable and matter little
in the future success of the buyers firm, it becomes readily apparent why price
paid looms as such a key differentiating factor. This interpretation begs the
question of how to educate buyers to appreciate the value and tenets of supply
chain management when there is a tendency to discount a potential partners
unique contribution. We wonder whether buyers are trained to be more
skeptical or whether they are reluctant to acknowledge a mutual dependence
for fear of the consequences one might pay, literally. Certainly, to focus on price

Item description

Sample + mean
(N = 132)

Full order
To what extent does this describe your relationship?
Items we provide to this firm are important
to our company
6.20
The items we provide to this customer are critical
to our success
5.61
The annual value of our supplies to this
customer is large
5.54
Compared to items we provide to other
customers, the value of items provided to
this customer is major
5.39
This customer is better than other customers
5.28
This customer is essential to our future success
in this business
5.21
This supply chain member can be easily
replaced (R)
4.99

Seller mean
(N = 73)

Buyer mean
(N = 59)

6.19

6.15

5.62

5.49

5.65

5.33

5.45
5.38

5.28
5.10

5.48

4.80b

5.32

4.58b

Notes:
a = p 0.05;
b = p 0.1;
+1 connotes not at all; 7 connotes to a very great extent

minimizes the leverage and loyalty engendered from ones supply base. Such
behavior ignores the contribution ones suppliers can make to a buyers
corporate strategy.
Supply chain partner selection
Table V summarizes the findings of what respondents value when they select a
supply chain partner. The overall sample seeks supply chain partners who are
trustworthy, have integrity, and who know our business characteristics that
imply fair dealing. Certainly, both trust and commitment serve to offset the
risks of opportunistic behavior in which one acts in ones own best interest to
the detriment of ones supply chain partners (Anderson and Narus, 1990; Lewis,
1995; Spekman and Sawhney, 1990). These attributes are quite consistent with
and support the notions of criticality as stated above. Reputation, improvement
in market position, and support of customer service are less important to
buyers than sellers. This finding is consistent with buyers implied focus on the
cost reduction aspects of supply chain management. Buyers desire partners
who know their business but are less concerned that partners offer both parties
economic benefit. Does this finding suggest that buyers are looking for
economic gain at the expense of their partner? Or does it suggest that buyers are
reluctant to pay for value-adding activities? While the answer to these
questions is somewhat beyond the data presented here, it is interesting to note
that buyers do appear to value trust, commitment, and reliability, and also
might seek economic gain at their partners expense.

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Table IV.
Overall supply chain
relationships

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Table V.
Supply chain partner
selection

Item description

Sample mean +
(N = 132)

Seller mean
(N = 73)

Buyer mean
(N = 59)

Top ten
To what extent does this reflect your reasons
for selecting a supply chain partner?
Is trustworthy
Has a high degree of integrity
Knows our business
Is reliable and consistent in dealing with us
Has a strong reputation
Supports the importance we give to
customer service
Has potential synergy with us
Is committed to us
Improves our competitive market position
Offers us both economic benefit

6.01
5.85
5.78
5.75
5.71

5.96
5.78
5.62
5.66
5.89

6.05
5.95
5.95a
5.84
5.53a

5.66
5.60
5.43
5.29
5.26

5.84
5.74
5.21
5.44
5.48

5.40a
5.46
5.61
5.07
5.93b

Bottom five
Offers tax incentives
Offers environmental advantages
Provides political advantages
Reduces engineering changes
Helps us achieve workforce cost reductions

1.38
2.72
2.91
3.09
3.40

2.06
2.74
3.01
3.07
3.47

2.01
2.70
2.79
2.91
3.19

Notes:
a = p 0.05;
b = p 0.1;
+1 connotes not at all; 7 connotes reflects a very great deal

Supply chain management processes

Supply chain management processes explore what respondents say they do in
their supply chain interactions. These items explore how the respondents
describe their relationships with suppliers/customers and tend to reflect the range
of behaviors that support close relationships between buyers and sellers.
Interestingly, two major themes dominate this set of questions. Respondents tend
to take a more long-term view and state that they expect the relationship to last;
that sustaining the relationship is important; and that they have plans to continue
the relationship into the future. The respondents also highlight communications
processes as an important second theme. They report that communications
between the partner firms are frequent and that there is a high level of contact
between trading parties. Partners have faith in each other and report that they
share a sense of fair play. When we look at key differences between buyers and
sellers, it appears that buyers are less willing to devote extra effort to their supply
chain relationships. These results are summarized in Table VI.
Supply chain practices
Where the previous section examines what supply chain members say they do;
this section examines what they actually do. The difference in the two sections

Item description
Top ten
To what extent does the following describe
your relationship with this supply chain
partner?
We expect this relationship to last a long time
There is continuous contact between our
firm and this customer
Sustaining this relationship is important
Communication between our organization
and this customer is frequent
There is a high level of contact between
our firm and this customer
Frequent communication occurs between
the firms
We are willing to devote extra effort to this
relationship
We have plans to continue this relationship
We share a similar sense of fair play with
this customer
We have faith in this customer
Bottom five
We periodically evaluate the importance of
our relationship with this customer
We believe that this customer acts in his/her
own best interest
Risks are shared equitably between us and
this customer
Personnel from this customer are involved
in our product design
Rewards are shared equitably between us
and this customer

Sample mean +
(N = 132)

Seller mean
(N = 73)

Buyer meana
(N = 59)

6.21

6.27

6.12

6.14
6.08

6.28
6.15

6.00
5.93

6.06

6.10

6.00

6.05

6.18

5.86

6.04

6.11

5.97

6.04
5.98

6.28
6.08

5.78a
5.80

5.84
5.84

5.81
5.78

5.98
5.88

2.77

2.54

3.05a

3.43

3.13

3.77b

4.14

4.08

4.14

4.15

4.10

4.16

4.17

4.18

4.16

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Notes:

a = p 0.05;
b = p 0.1;

+1 connotes not at all; 7 connotes to a very great extent

is akin to talking the talk and walking the walk. Interesting differences
between the two sections exist in that, from the previous section, one gets the
strong impression that information is shared openly and that the boundary
between firms is quite permeable. However, these findings addressing specific
practices suggest that information sharing is less than open and that technical
information is shared only when necessary. In addition, mixed signals surface
about the importance of price in evaluating ones partner. From Table VII it
appears that price is important and there is some evidence that price is viewed
as the key attribute in ones evaluative decision calculus. As expected, buyers

Table VI.
Supply chain
management processes

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Item description

Sample mean +
(N = 132)

Top ten
To what extent does the following describe your
relationship with this supply chain partner?
We exchange technical information with
this customer when necessary
In picking this customer, we focused on
initial sales price (R)
In choosing this customer, we used criteria
in addition to initial sales price
When selecting this customer, our primary
criterion was sales price (R)
When initially evaluating this customer,
we made the selection based on measures
other than sales price
We willingly share technology information
with this customer
Customers to this customer (downstream
customers) are an indispensable part of
our overall value-added supply chain
We examine this customers competence
using multiple criteria
One area unilaterally evaluates this
customers capabilities
Training this customer is important
Bottom five
We have a strong relationship with this
customers customers
We provide training for this customer
We emphasize training with this customer
Our organization tends to make customer
decisions at higher levels in the firm
We consolidate decisions at high levels in
this firm

Seller mean
(N = 73)

Buyer mean
(N = 59)

5.30

5.37

5.21

5.18

5.40

5.05

5.18

5.18

4.93

5.11

5.43

4.91a

5.07

5.18

4.93

4.96

5.14

4.69

4.77

5.23

4.09b

4.53

4.15

4.91b

4.27
4.24

4.40
5.39

4.09
4.93

2.76
3.03
3.36

3.08
3.32
3.41

2.27b
2.60b
3.30

3.59

3.52

3.61

3.63

3.39

3.93

Notes:

Table VII.
Supply chain
management practices

a = p 0.05;
b = p 0.1;

+1 connotes not at all; 7 connotes to a very great extent

appear to be more purchase-price conscious than sellers, tend to be less willing

to share information, and are less likely to see training as an obligation.
We are intrigued by:
(1) the differences between these two sections; and
(2) the repeated differences that exist between buyers and sellers.
It appears that respondents do not do what they say they do and that buyers
appear to be reluctant supply chain partners. Across each of the sections,

buyers tend to embrace the notions of collaboration less than sellers and appear
to fear the close ties that are required for integrated supply chain management.
Effects of performance
In order to explore the effects of several of these variables on measures of
performance, a series of exploratory OLS regression analyses were performed.
Separate regression models were developed to explain the extent to which
different measures of performance cost reduction and revenue enhancement
(as measured by customer satisfaction) are affected by different supply chain
processes and practices. Simply, we examined the extent to which elements of
co-ordination, collaboration, and criticality affect two different measures of
supply chain management performance. Traditional performance measures
would reflect cost reduction while a more enlightened view should also deem
revenue-enhancing elements as very important. Two different measures of
performance were developed from the questionnaire. One measure focused on
the contribution made to cost reduction and the other on the contribution made
to customer satisfaction. These two measures, we believe, represent the two
extremes of supply chain management. That is, more traditional views of the
benefits gained from supply chain management focus on cost reduction and
more enlightened views see end-use customer satisfaction as the primary goal
of supply chain management activities. While both approaches place pressures
on ones supply base, cost reduction tends not to embody a win-win relationship
nor does it convey a recognition of the skill and expertise brought to the
relationship by ones suppliers. Certainly, it is only by focusing on measures of
customer satisfaction that it is possible to assemble a world class supply chain.
Burnes and New (1996) advocate a new model of supply chain improvement and
our findings are supportive of their third phase of improvement, whereby one
focuses on partnership quality and the selection processes chosen reflect the
buyers strategic goals and concerns.
Table VIII summarizes the findings from the two regression equations. Note
that both the sharing of information (a form of collaboration) and criticality
both contribute in a positive manner to cost reduction while an element of coordination, order entry, and tracking, negatively affects this measure of
performance. These results hold two implications. First, co-ordination, by itself,
does not ensure cost reduction. Second, elements of collaboration and criticality
contribute to cost reduction and do so with greater impact than any of the key
measures of co-ordination used in this study. This supports the notion that coordination is a necessary, but not sufficient, condition for buyers and sellers to
achieve a state of supply chain improvement. That is, a metric that focuses on
elements of co-ordination to achieve cost reduction is very likely to result in suboptimal outcomes.
The regression equation in which we attempt to better understand the factors
that explain performance as measured by customer satisfaction tells a similar
story. Shared order entry contributes to customer satisfaction while a measure of
close linkages between supplier and customer appears to have a negative impact.

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Table VIII.
Regression results
showing factors
contributing to
types of procurement
performance

Performance
cost reduction
Collaboration what is said
Sustaining the relationship
Joint planning
Frequent interaction
Sharing information
Collaboration what is done
Sharing technical information
Training is important
Co-ordination
Customer supplier linkages
Frequent monitoring
Order entry and tracking
Raw material tracking
Criticality
R2

Performance
customer satisfaction

0.532 (p < 0.00)

1.208 (p = 0.02)a

0.072 (p < 0.00)

0.13 (p < 0.00)
0.096 (p < 0.00)

1.209 (p < 0.00)

0.716 (p < 0.00)
0.27

0.331 (p < 0.00)

0.29

Note: = = 1.208
a

Sharing important information, the importance of sustaining the relationship and

the perceived value of training all contribute positively to customer satisfaction.
Again, elements of co-ordination appear important, but only as a threshold. That
is, workflow-related activities are useful but do not achieve the full benefits of an
integrated supply chain and must be accompanied by a richer depth and breadth
of shared information to achieve this important outcome. These findings imply
that both trust and commitment contribute to satisfaction as the elements of
collaboration reported here imply a willingness to share information without the
concern for it being used against either trading partner and a longer-term focus to
the trading relationship. While the results for sustaining the relationship are
counter-intuitive, co-ordination cannot substitute for closer ties between trading
partners. The data suggest that interdependence and information sharing become
key ingredients in an integrated supply chain whose goal is customer satisfaction.
Conclusions
A number of conclusions can be drawn from this study. It is apparent from these
findings that although we espouse the benefits of supply chain management
and sing the virtues of closer ties throughout levels of the supply chain, the
results suggest that business has not yet fully operationalized the concept of
supply chain management. It appears that buyers tend to be reluctant players
and are far more skeptical about the benefits afforded through such close
integration. One can infer that buyers consider less favorably the benefits
gained and are more likely to highlight the risks associated with heightened
dependence on a smaller number of suppliers. We can infer also that buyers
think about the gains afforded by an integrated supply chain and are more
easily swayed by more traditional purchasing metrics related to cost or initial

purchase price. Buyers consistently view the cost-saving aspects of supply

chain management as more important than the revenue-enhancing benefits.
They seem to understand, on one level, the importance of customer-driven
supply chains; the need to focus on core competencies; and, the importance of
leveraging the skills and capabilities of their suppliers. On another level, such
rhetoric appears to make buyers uncomfortable, and they easily revert to their
cost-driven behaviors in which suppliers are viewed as substitutable and value
is determined by negotiation. Again, we hear the theme that a gap exists
between the goals and concerns of senior managers and the activities of the
procurement function buyers have not fully responded to the challenges of
managing suppliers with the intent of gaining the full complement of skills
afforded by an integrated supply chain.
Exacerbating this lack of strategic thinking on the part of buyers is the
finding that buyers and sellers do not share the same values and beliefs
regarding the advantages of supply chain management. In fact, the data suggest
that buyers and sellers have very little in common, and their world views tend
not to converge. While some differences are expected, the divergence in
motivations and beliefs relative to supply chain management is quite stark. This
suggests that it is not surprising that supply chain management practices are
difficult to implement. For buyers and sellers to achieve a common goal there
must exist a level of consensus (Spekman et al., 1996). At the very least, buyer
and seller must have a shared perspective of the merits of such close ties within
the supply chain. Thus, the challenge becomes one of forging a common view in
which both sides can accomplish compatible goals. This begs the question as to
who will orchestrate the roles and responsibilities of the supply chain members.
It would appear that buyers are less able to fill this leadership role as they appear
to lack both vision and commitment to the advantages of supply chain
management. Without such leadership skills, buyers firms suffer and their
potential competitive advantage is diminished.
We should note that, although we strongly advocate supply chain management,
we readily admit that not all trading relationships should be collaborative and that
it is perfectly acceptable (if not absolutely necessary) to engage in arms-length
transactions provided that such behavior is appropriate. The data imply that
criticality, to a large degree, drives the partnering strategy employed. We say this
with the full recognition that criticality affected performance only as it related to
cost reduction. It had no impact on performance as it related to customer
satisfaction. Nonetheless our findings do imply that trust and commitment do
affect customers satisfaction. The spirit of our findings does support other work
on supply chain management in which the purpose of such joint effort is to achieve
a competitive advantage across the set of supply chain partners.
Our findings suggest:
The road from open market negotiations to co-operation to co-ordination
and to collaboration is a long one and should not be traveled by each and
every buyer-seller relationship.

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One must select both partners and supply chain strategies carefully. Coordination and collaboration are different; require different levels of trust
and commitment; and, often lead to different outcomes.
We have shown also that information technology is an enabler and is key to the
development of an integrated supply chain. However, this information must be
shared by the partners. While the data seem to suggest that there is a reluctance
to share key information among partners, many of these fears subside if partners
share similar values and a common vision. Such information sharing heightens
the alignment between partners such that effective supply chains share learnings
among partners rather than worry about knowledge expropriation. The role of
the supply chain champion is to orchestrate this alignment and to ensure that the
total supply chain is, in fact, better than the sum of its parts. Adopting the
concepts and tenets of supply chain management requires a new mindset. Supply
chain management demands that one look at the complete set of linkages that tie
suppliers and customers throughout the value chain. True supply chain
management demands a business transformation in which managers attempt to
mitigate uncertainty and exploit opportunities through the creative use of ones
suppliers and customers by evaluating who best supplies value and then
leveraging that expertise/capability throughout the entire supply chain.
Cognitively, such an effort requires sharing what once might have been
considered proprietary information (although it is important to establish limits on
what can be shared); relinquishing control to others in the supply chain; and,
trusting that your supply chain partners will act in your best interest. Practically,
one must develop new capabilities ranging from supplier/customer management
to cross-functional integration. While information systems and technology
enable and facilitate such capabilities, success hinges on embracing the belief that
one cannot succeed acting in isolation and that competitive success depends on
the entire supply chain moving in unison, sharing similar goals and objectives.
In summary, we have implied that business has yet to crack the code; supply
chain partners still do not share a common vision or react to the same set of
metrics. If this is true, opportunities have been lost and many challenges remain.
For a number of firms, talk is cheap and supply chain management is still only
part of todays jargon. A number of firms are sacrificing cost effectiveness,
revenue enhancement, and customer satisfaction because they are unable to work
effectively across the firms that comprise their supply chains. Figure 4
summarizes the factors that tend to differentiate among levels of commitment and
intensity. Relationships that are both strategically important and complex to
manage should be treated collaboratively. Complexity can be financial (i.e. a
significant dollar commitment) or commercial (e.g. intertwined and/or
interdependent technology, joint production processes, shared development).
Both aspects of complexity suggest interdependence between trading partners.
It is clear from our findings that buyers and sellers do not share a common
voice and have moved slowly to bridge the gaps that separate them. We hope
that there exist a number of potential supply chain champions who will use our

Complexity
High

Low

Collaboration

Co-ordination

High

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Strategic
Importance
Co-operation

Open Market
Negotiation

Low

findings to find synergies among supply chain partners, and to build tighter
linkages between customers and suppliers.
Notes
1. The titles of these managers included both procurement and operations (i.e.
manufacturing) managers. Our contacts were typically general managers who directed
questionnaires to potential respondents who had working knowledge of both external
suppliers and internal customers. During the discussion of the results the term buyer
represented data taken from either procurement or operation managers.
2. For example, we examined work by Ellram (1990); Landeros and Monczka (1989); Heide
and John (1990); Schary and Skjott-Larsen (1995).
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