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To cite this document: Robert E. Spekman, John W. Kamauff Jr, Niklas Myhr, (1998),"An empirical investigation into supply chain
management: a perspective on partnerships", Supply Chain Management: An International Journal, Vol. 3 Iss: 2 pp. 53 - 67
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Introduction
Research paper
An empirical
investigation into
supply chain
management: a
perspective on
partnerships
Robert E. Spekman
John W. Kamauff Jr and
Niklas Myhr
The authors
Robert E. Spekman is Tayloe Murphy Professor at the
Darden Graduate School of Business, University of
Virginia, Charlottesville, Virginia, USA.
John W. Kamauff Jr is based at Ernst & Young Consulting,
Baltimore, USA.
Niklas Myhr is a doctoral candidate at the Darden
Graduate School of Business, University of Virginia,
Charlottesville, Virginia, USA.
Abstract
States that we have witnessed, over the last several years,
a profound change in understanding the dynamics of
competitive advantage. Managers now acknowledge that
a firms success is tied, in part, to the strength of its
weakest supply chain partner. This paper develops the
concept of supply chain management and argues that only
through close collaborative linkages through the entire
supply chain, can one fully achieve the benefits of cost
reduction and revenue enhancing behaviors. Data are
presented that look at a range of supply chain management practices and processes. By examining differences in
practices and processes between buyers and sellers, along
with the supply chain, attempts to understand better the
challenges facing managers who espouse supply chain
management. Also proposes a change in mind set for the
traditional procurement manager and present insights
for him/her to adapt to the requirements of the new
competition.
53
information flow
S
U
P
P
L
I
E
R
Manufacturing Distribution
& Logistics
Customer
Service
Performance
Measurement
material flow
C
U
S
T
O
M
E
R
cash flow
Evolving role
Revolutionary role
Transaction accountant
Administers inter-firm contracts
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 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
co-operation 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 coordinate 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 nonfungible 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
56
Open Market
Negotiations
Price-based discussions
Adversarial relationships
Cooperation
Fewer supplies
Longer-term contracts
Coordination
Information linkages
WIP linkages
EDI exchange
Collaboration
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 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
57
Buyers
Sellers
Focal
Company
Supplier
Upstream
Buyers
Customer
Downstream
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 account).
Table II Information supply chain factors
Item description
Top ten
To what extent do you apply the following practices?
Tight linkages between customers and suppliers
Purchase order information tracking
Raw material cost, quality and delivery tracking
Supplier/customer satisfaction measures
Finished goods visibility
Order entry and order-taking technology
Shipment tracking
Individual customers managed as accounts
Process control
Integrated quality information
5.20
5.20
4.99
4.63
4.56
4.51
4.46
4.45
4.44
4.44
5.26
5.46
5.07
4.75
4.76
4.87
4.93
5.01
5.01
4.71
5.12
4.91*
4.95
4.40
4.21
4.02*
3.76
3.71**
3.81**
3.97**
Bottom five
Robotics
CAD/CAM/CAE
Flexible manufacturing cells
Electronic data interchange (EDI) customer links
Automatic storage and retrieval systems (ASRS)
1.92
2.56
2.74
2.79
2.94
2.07
2.86
2.94
3.08
3.23
1.53**
2.02**
3.34*
2.19**
2.49**
Notes: *P 0.05; **P 0.1; +1 connotes not at all; 7 connotes to a very great extent
59
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 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.
Item description
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 strategic 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
5.19*
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: *P 0.05; **P 0.1; +1 connotes not at all; 7 connotes reflects a very great deal
60
Item description
Full order
To what extent does this describe your relationship?
Items we provide this to firm are important to our company
The items we provide to this customer are critical to our
success
The annual value of our supplies to this customer is large
Compared to items we provide to other customers, the
value of items provided to this customer is major
This customer is better than other customers
This customer is essential to our future success in
this business
This supply chain member can be easily replaced (R)
6.20
6.19
6.15
5.61
5.54
5.62
5.65
5.49
5.33
5.39
5.28
5.45
5.38
5.28
5.10
5.21
4.99
5.48
5.32
4.80**
4.58**
Notes: *P 0.05; **P 0.1; +1 connotes not at all; 7 connotes to a very great extent
61
Item description
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
5.66
5.60
5.43
5.29
5.26
5.96
5.78
5.62
5.66
5.89
5.84
5.74
5.21
5.44
5.48
6.05
5.95
5.95*
5.84
5.53*
5.40*
5.46
5.61
5.07
4.93**
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: *P 0.05; **P 0.1; +1 connotes not at all; 7 connotes reflects a very great deal
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 is 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.
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
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
6.04
6.04
5.98
5.84
5.84
6.18
6.11
6.28
6.08
5.81
5.78
5.86
5.97
5.78*
5.80
5.98
5.88
2.77
2.54
3.05*
3.43
4.14
3.13
4.08
3.77**
4.14
4.15
4.10
4.16
4.17
4.18
4.16
Notes: *P 0.05; **P 0.1; +1 connotes not at all; 7 connotes to a very great extent
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
Item description
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
5.30
5.18
5.37
5.40
5.21
5.05
5.18
5.11
5.18
5.43
4.93
4.91*
5.07
4.96
5.18
5.14
4.93
4.69
4.77
4.53
4.27
4.24
5.23
4.15
4.40
5.39
4.09**
4.91**
4.09
4.93
2.76
3.03
3.36
3.08
3.32
3.41
2.27**
2.60**
3.30
3.59
3.63
3.52
3.39
3.61
3.93
Notes: *P 0.05; **P 0.1; +1 connotes not at all; 7 connotes to a very great extent
element of co-ordination, 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
Table VIII Regression results showing factors contributing to types of procurement performance
Performance
cost reduction
Performance
customer satisfaction
0.532 (p < 0.00)
1.208 (p = 0.02)*
Note: * = 1.208
64
0.29
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
65
Low
Collaboration
Coordination
Cooperation
Open-Market
Negotiation
High
Strategic
Importance
Low
66
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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67