The main aim of this research is to test the influence of a Supply Management Orientation (SMO) on the suppliers’ operational performance and buyers’ competitive priorities cost, quality, delivery, flexibility. SMO will be explored thoroughly in this research to describe the efforts which the management has deemed necessary in the creation an operating environment where the buyer and supplier interact in a synchronized manner.
Practitioners as well as researchers have supported the advantages of supply chain management. This research identified four key characteristics of supply management that assisted in the creation of an SMO. The impact of the characteristics on the performance of both suppliers and buyers is tested using a positive structured equation modeling approach. The common research outcome is that an improvement in SMO improves both suppliers’ and buyer’s performance, particularly when the buyer stresses on quality and delivery as its viable priorities.
Below are the four performance characteristics of an SMO, and they are major contributors to improved performance of the supply chain process. They are: (a) An established and long-term relationship with suppliers; (b) Supplier involvement in the product development process; (c) A decreased number of suppliers; and (d) A quality focus. Manufacturing firm’s buyer with a higher level of SMO resulted in improved performance of both the supplier and buyer.
a)Established and Long-term relationship or partnership with suppliers Each participant assumes that the relationship will continue for a significant amount of time. Hence, a comprehensive planning approach is an integral feature of the SMO to sustain relationships. A close relationship translates into participants of that channel share the risks and rewards. In addition, participants are willing to maintain the relationship over a prolong period of time.
b)Supplier involvement in product development The next important aspect of supplier management orientation is supplier involvement. It is important that suppliers are involved in the product development from the initial stages of the project. For example, Toyota invites its suppliers to their product design meetings. The suppliers played an important role in not only the designing of the components but also the development of the concept of the new vehicle. It is crucial to involve suppliers in the product development process in order to reduce the time taken to introduce the new product into the market.
c)Decreased number of suppliers A decrease in the number of suppliers is a distinctive characteristic of present buyer-supplier relationship. There are a few crucial factors which have caused the existing shift to single sourcing or a decreased supplier base. First of all, economies of scale based on order volume and learning curve effect would be very difficult to achieve when sourcing is done through many suppliers.
Also, the cost for the multiple supplier system might be higher than single supplier system. For example, an item’s cost would significantly increase if the company deals with many suppliers, reason being the company would require more cost and resources to manage the suppliers, in terms of labour and order processing cost, tracking of inventories. Hence, a reduced base of suppliers would aid in removing mistrust due to the lack of communication between buyers and suppliers.
d)Quality performance is the number one priority in selecting suppliers One of the most important criteria in evaluating performance is quality. This criteria is also crucial in the traditional purchasing strategy. It is vital that the suppliers are able to meet quality standards and ensure timely delivery. In additional, the history of the supplier’s performance is also one of the important factors in the selection process of suppliers. This research highlighted four main characteristics of supply management which has enabled the creation of an SMO.
The common research result gathered is that an improvement in SMO will in turn, enhance the performance of both suppliers and buyers, particularly when the buyer stresses on quality and delivery as its competitive priorities. Most of the findings in the research correspond to the assumptions and plans of practitioners and researchers. I agree with the points presented in this research. The four key points: (1) An established and long-term relationship with suppliers; (2) Supplier involvement in the product development process; (3) A decreased number of suppliers; and (4) A quality focus are important factors to enhance the relationships and performance for both buyers and suppliers. As mentioned above, when the factors are fulfilled, it would be able to benefit both buyers and suppliers.