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.     

Critical Success Factors for Strategic Alliances in the Information Technology Industry: An Empirical Study*

Intense competition in the marketplace is forcing organizations to examine different ways by which they could enhance or retain their competitive edge. Strategic alliance is one such option through which an organization can leverage its resources to emerge as an effective competitor. Such alliances are burgeoning in the information technology industry, which is characterized by rapid change and short innovation cycles. Successful management of alliances has proved to be very elusive for the most part, and there is a lack of theoretical and empirical work in this area. Literature on critical factors was synthesized, and then a parsimonious set of critical factors was identified using a combination of interview and survey methodologies. Our study has implications for both practice and future research.     

Interorganizational Determinants of Environmental Purchasing: Initial Evidence from the Consumer Products Industries*

Environmental purchasing consists of the purchasing function's involvement in activities that include reduction, recycling, reuse, and substitution of materials. Despite the potentially important role that the purchasing function can play in a firm's environmental activities, little research has been performed to date that examines the factors that impact environmental purchasing. The authors develop and empirically test a theoretical model that examines how interorganizational factors both drive and constrain purchasing's involvement in environmental activities. The empirical findings suggest that environmental purchasing activities will be facilitated through increased coordination with suppliers as well as downstream members of the supply chain, including retailers. The results also suggest the need for increased coordination within the firm, particularly between the purchasing function on the inbound side and marketing and distribution functions on the outbound side.     

On Extending Russell and Krajewski's Algorithm for Economic Purchase Order Quantities*

Russell and Krajewski presented an optimal purchase order quantity algorithm that considered the effect of the transportation rate structure for less-than-truckload (LTL) shipments. The authors applied the Russell and Krajewski algorithm to a variety of freight classes and lengths-of-haul. Anomalous cases were found in which the freight rate schedule, when used with the suggested algorithm, resulted in incorrect order size decisions. In this comment, the authors consider the impact of these anomalies on the optimal order quantity and associated total costs. A procedure is presented to adjust the Russell and Krajewski algorithm to arrive at the optimal purchase order quantity and the lowest total annual cost.     

Managing the International Strategic Sourcing Process as a Market-Driven Organizational Learning System*

This study examines the effects of market-driven organizational learning on a select set of strategic sourcing outcomes involving the sourcing function of a Fortune 500 multinational corporation. The focus is on the dyadic activities and relationships between the domestic and international strategic business units (SBUs) and the corporate buying center. The hypothesized relationships are tested on the overall sample and based on a two-by-two matrix framework defined by international versus domestic settings and frequent versus infrequent sourcing scenarios. Based on a sample of 179 domestic and 167 international SBUs, the results suggest that market-driven organizational learning in the strategic sourcing units influences customer satisfaction, relationship commitment, and cycle time of the sourcing process. However, while the set of learning orientations appears to be strategically robust across the four quadrant scenarios (moderator settings), the sourcing situations differ somewhat in the specific tactical learning orientations preferred.     

Special Research Focus on Supply Chain Linkages: Challenges for Design and Management in the 21st Century*

Supply chain management is a central and important area for academic research due to its impact on firms competing in today's global economy. Managing the flow of materials from supply sources to the ultimate customer represents a major challenge for today's managers. To assist managers, the concept of supply chain management has been adopted by many business leaders as an important way to assist in designing, planning, and controlling the network of facilities and tasks that comprise the many stages of the supply chain. In turn, the flow of academic research in the area has increased to provide a better set of guidelines for effective implementation and execution. This article sets the stage for recently completed research concentrating on supply chain management issues. First, a definition of supply chain management is provided and compared to recent usage in this area and logistics management. Also, a framework is provided that structures this dynamic and complex management task. Second, a review of past research is presented to illustrate the many paths supply chain management has traveled, and important contributions to supply management understanding and decision making. Third, recently completed research articles are introduced that have been selected to be part of this special issue of Decision Sciences. And fourth, future research directions for supply chain management that need to be pursued by interested investigators are discussed.     

An Efficient Heuristic Procedure for Practical-Sized Capacitated Warehouse Design and Management*

The purpose of this paper is to refine and test a distribution system design model and evaluate its performance with respect to solution quality, model validation, and algorithm performance. The paper reports on the development of a multiproduct warehouse logistics model. The logistics model is used to predict the performance of distribution companies that typically have to deal with product costs, the cost to distribute the products from a set of warehouses to customer outlets, the level of service provided to its customers, and flexibility for each product group and market segment.     

Assessing Antecedents of Socially Responsible Supplier Selection in Three Global Supply Chain Contexts

A number of highly publicized, controversial lapses in social responsibility within global supply chains have forced managers and scholars to reexamine long‐held perspectives on supplier selection. Extending Carter and Jennings’ department‐level study of purchasing social responsibility, our research assesses the role of supply managers’ ethical intentions and three key antecedents that drive socially responsible supplier selection. Comparing evidence from firms operating in China, the United States, and the United Arab Emirates, we identify three key drivers of supply managers’ ethical intentions and examine both their direct and indirect impacts on socially responsible supplier selection. We find differential support for the predictor relationships on supply manager ethical intentions across national contexts and mediated versus nonmediated models. These observations bear important implications for firms conducting global supply management.     

An Empirical Investigation of the Contribution of Strategic Sourcing to Manufacturing Flexibilities and Performance*

Empirical studies for achieving manufacturing flexibility goals have centered around the uses and advantages of advanced technology. Few studies have examined alternative ways of attaining flexibility objectives. Strategic sourcing finds mention in the literature as a potential route to manufacturing flexibility. However, little empirical evidence exists to validate this view. Literature also describes manufacturing flexibility as a multidimensional concept but fails to adequately examine the synergies among the different dimensions. This research investigates the influence of strategic sourcing and advanced manufacturing technologies on specific manufacturing flexibilities, and examines relationships among different flexibilities. The results are tied to manufacturing cost reduction. The findings suggest that strategic sourcing can assist in the achievement of modification flexibilities. Volume and modification flexibility are found to influence new product flexibility. Modification flexibility is found to influence manufacturing cost reduction. The results show that strategic sourcing can be used to target specific manufacturing flexibilities and that interflexibility synergies need to be considered while formulating flexibility-based manufacturing strategies.     

Modeling Supply Chain Dynamics: A Multiagent Approach*

A global economy and increase in customer expectations in terms of cost and services have put a premium on effective supply chain reengineering. It is essential to perform risk-benefit analysis of reengineering alternatives before making a final decision. Simulation provides an effective pragmatic approach to detailed analysis and evaluation of supply chain design and management alternatives. However, the utility of this methodology is hampered by the time and effort required to develop models with sufficient fidelity to the actual supply chain of interest. In this paper, we describe a supply chain modeling framework designed to overcome this difficulty. Using our approach, supply chain models are composed from software components that represent types of supply chain agents (e.g., retailers, manufacturers, transporters), their constituent control elements (e.g., inventory policy), and their interaction protocols (e.g., message types). The underlying library of supply chain modeling components has been derived from analysis of several different supply chains. It provides a reusable base of domain-specific primitives that enables rapid development of customized decision support tools.     

Leveraging Supply Chain Integration through Planning Comprehensiveness: An Organizational Information Processing Theory Perspective

This study extends prior research on supply chain planning and integration by examining the underlying capabilities by which firms exploit the information they gain from integration activities. We use organizational information processing theory (OIPT) to develop hypotheses that identify the comprehensiveness of an organization's supply chain planning capabilities as an important mediator in the relationship between its supply chain integration activities and its operational performance. Further, our interpretation of OIPT suggests that an organization's usage of technology‐enabled supply chain management systems (SCMS) moderates these effects. Using survey data from 445 global firms, we estimate the corresponding moderated‐mediation structural model. The results indicate that usage of SCMS enables organizations to better utilize the information they gain from external integration efforts (relationships with customers and suppliers), thus improving the comprehensiveness of their supply chain planning capabilities. In contrast, the use of SCMS appears to be a partial substitute for internal integration as a driver of planning comprehensiveness. Most importantly, the results suggest that planning comprehensiveness is a significant generative means by which integration and technology investments produce superior operational performance. These findings provide a richer and more theoretically grounded explanation of relationships between supply chain integration, supply chain planning, and operational performance.     

Complexity and Adaptivity in Supply Networks: Building Supply Network Theory Using a Complex Adaptive Systems Perspective*

Supply networks are composed of large numbers of firms from multiple interrelated industries. Such networks are subject to shifting strategies and objectives within a dynamic environment. In recent years, when faced with a dynamic environment, several disciplines have adopted the Complex Adaptive System (CAS) perspective to gain insights into important issues within their domains of study. Research investigations in the field of supply networks have also begun examining the merits of complexity theory and the CAS perspective. In this article, we bring the applicability of complexity theory and CAS into sharper focus, highlighting its potential for integrating existing supply chain management (SCM) research into a structured body of knowledge while also providing a framework for generating, validating, and refining new theories relevant to real‐world supply networks. We suggest several potential research questions to emphasize how a CAS perspective can help in enriching the SCM discipline. We propose that the SCM research community adopt such a dynamic and systems‐level orientation that brings to the fore the adaptivity of firms and the complexity of their interrelations that are often inherent in supply networks.     

The Impact of Forecast Errors on Early Order Commitment in a Supply Chain*

Supply chain partnership involves mutual commitments among participating firms. One example is early order commitment, wherein a retailer commits to purchase a fixed‐order quantity and delivery time from a supplier before the real need takes place. This paper explores the value of practicing early order commitment in the supply chain. We investigate the complex interactions between early order commitment and forecast errors by simulating a supply chain with one capacitated supplier and multiple retailers under demand uncertainty. We found that practicing early order commitment can generate significant savings in the supply chain, but the benefits are only valid within a range of order commitment periods. Different components of forecast errors have different cost implications to the supplier and the retailers. The presence of trend in the demand increases the total supply chain cost, but makes early order commitment more appealing. The more retailers sharing the same supplier, the more valuable for the supply chain to practice early order commitment. Except in cases where little capacity cushion is available, our findings are relatively consistent in the environments where cost structure, number of retailers, capacity utilization, and capacity policy are varied.     

Drivers and Performance Outcomes of Supplier Innovation Generation in Customer–Supplier Relationships: The Role of Power‐Dependence

While innovations generated by supply channel relationships, as opposed to individual partners, play an increasingly important role in the success of all supply chain partners, there has been a dearth of research in the literature on how supply chain relationships cultivate the process of such innovation generation. We explore supplier market knowledge acquisition, relationship learning, systems collaboration, and technological uncertainty as antecedents of supplier innovation generation, which is in turn hypothesized to positively affect the relationship performance of the supplier. Furthermore, supplier dependence on the buyer is investigated as a moderator of the effects of such antecedents on supplier innovation generation. Empirical tests, which used a sample of 236 Taiwanese executives, supported most of the hypotheses, and some implications of the results are discussed.     

Optimal Quantity Discount Design with Limited Information Sharing*

In this article we address the optimal quantity discount design problem of a supplier in a two‐stage supply chain where the supplier and the buyer share annual demand information only. The supply chain faces a constant deterministic demand that is not price sensitive and operates with fixed setup costs in both stages. We show that the supplier can actually moderate a cost‐minimizing buyer to order in quantities different than the buyer's optimal order quantity in the traditional setting and develop a multi‐breakpoint quantity discount scheme that maximizes supplier's expected net savings. The proposed multi‐breakpoint discount scheme can be easily computed from the available information and, while also maximizing the supplier's net savings, is very effective in achieving high levels of supply chain coordination efficiency in the presence of limited information.     

The Severity of Supply Chain Disruptions: Design Characteristics and Mitigation Capabilities

Supply chain disruptions and the associated operational and financial risks represent the most pressing concern facing firms that compete in today's global marketplace. Extant research has not only confirmed the costly nature of supply chain disruptions but has also contributed relevant insights on such related issues as supply chain risks, vulnerability, resilience, and continuity. In this conceptual note, we focus on a relatively unexplored issue, asking and answering the question of how and why one supply chain disruption would be more severe than another. In doing so, we argue, de facto, that supply chain disruptions are unavoidable and, as a consequence, that all supply chains are inherently risky. Employing a multiple‐method, multiple‐source empirical research design, we derive novel insights, presented as six propositions that relate the severity of supply chain disruptions (i) to the three supply chain design characteristics of density, complexity, and node criticality and (ii) to the two supply chain mitigation capabilities of recovery and warning. These findings not only augment existing knowledge related to supply chain risk, vulnerability, resilience, and business continuity planning but also call into question the wisdom of pursuing such practices as supply base reduction, global sourcing, and sourcing from supply clusters.     

The Impact of E‐Replenishment Strategy on Make‐to‐Order Supply Chain Performance

This research investigates the impact of electronic replenishment strategy on the operational activities and performance of a two‐stage make‐to‐order supply chain. We develop simulation‐based rolling schedule procedures that link the replenishment processes of the channel members and apply them in an experimental analysis to study manual, semi‐automated, and fully automated e‐replenishment strategies in decentralized and coordinated decision‐making supply chain structures. The average operational cost reductions for moving from a manual‐based system to a fully automated system are 19.6, 29.5, and 12.5%, respectively, for traditional decentralized, decentralized with information sharing, and coordinated supply chain structures. The savings are neither equally distributed among participants, nor consistent across supply chain structures. As expected, for the fully coordinated system, total costs monotonically decrease with higher levels of automation. However, for the two decentralized structures, under which most firms operate today, counter‐intuitive findings reveal that the unilateral application of e‐procurement technology by the buyer may lower his purchasing costs, but increase the seller's and system's costs. The exact nature of the relationship is determined by the channel's operational flexibility. Broader results indicate that while the potential economic benefit of e‐replenishment in a decentralized system is substantial, greater operational improvements maybe possible through supply chain coordination.     

A Modeling Framework for Supply Chain Simulation: Opportunities for Improved Decision Making*

Owing to its inherent modeling flexibility, simulation is often regarded as the proper means for supporting decision making on supply chain design. The ultimate success of supply chain simulation, however, is determined by a combination of the analyst's skills, the chain members' involvement, and the modeling capabilities of the simulation tool. This combination should provide the basis for a realistic simulation model, which is both transparent and complete. The need for transparency is especially strong for supply chains as they involve (semi)autonomous parties each having their own objectives. Mutual trust and model effectiveness are strongly influenced by the degree of completeness of each party's insight into the key decision variables. Ideally, visual interactive simulation models present an important communicative means for realizing the required overview and insight. Unfortunately, most models strongly focus on physical transactions, leaving key decision variables implicit for some or all of the parties involved. This especially applies to control structures, that is, the managers or systems responsible for control, their activities and their mutual attuning of these activities. Control elements are, for example, dispersed over the model, are not visualized, or form part of the time‐indexed scheduling of events. In this article, we propose an alternative approach that explicitly addresses the modeling of control structures. First, we will conduct a literature survey with the aim of listing simulation model qualities essential for supporting successful decision making on supply chain design. Next, we use this insight to define an object‐oriented modeling framework that facilitates supply chain simulation in a more realistic manner. This framework is meant to contribute to improved decision making in terms of recognizing and understanding opportunities for improved supply chain design. Finally, the use of the framework is illustrated by a case example concerning a supply chain for chilled salads.     

Quantity Flexibility Contracts: Optimal Decisions with Information Updates*

We study single and multiperiod quantity flexibility contracts involving one demand forecast update in each period and a spot market. We obtain the optimal order quantity at the beginning of a period and order quantities on contract and from the spot market at the then prevailing price after the forecast revision and before the demand materialization. The amount that can be purchased on contract is bounded by a given flexibility limit. We discuss the impact of the forecast quality and the level of flexibility on the optimal decisions and managerial insights behind the results.     

A Transaction‐Efficiency Analysis of an Internet Retailing Supply Chain in the Music CD Industry*

The emergence of the Internet may have fundamentally altered the mechanisms underlying information exchanges between sellers and end consumers. However, little attention has been given to the impact these mechanisms have on the efficiency of supply chain operations. This paper begins to address this deficiency in the literature by evaluating supply chain transaction efficiency effects from Internet purchases by consumers. It develops and empirically tests a theoretical framework examining the role Internet purchases have in establishing transaction‐efficiency levels in product exchanges involving sellers, placed at different supply chain echelons, and consumers. The theoretical framework integrates the transaction‐cost and internet economics, inter‐organizational information systems, and supply chain management literatures. Empirical testing, via structural equation modeling, is based on archival data in the Internet music CD market. The results show that Internet‐mediated purchases by consumers allow for greater transaction efficiencies when inventory ownership is postponed farther upstream in the supply chain and supply chain echelons are disintermediated. The results also indicate that channel structure configuration, defined by the supply chains' Internet retailing echelon, moderates these transaction efficiency effects.