Relationship Management and Supply Chain Integration

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Relationship Management and Supply Chain
Integration

• Baofeng Huo
• 14 Dec. 2005
• The Chinese University of Hong Kong

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Supply Chain Performance
Trust with customer
Trust with Supplier
Relationship Commitmentto Supplier
Relationship Commitmentto Customer
Customer Integration
Supplier Integration
Internal Integration
Supplier-oriented Performance
Customer-oriented Performance
Dependence on Customer
Dependence on Supplier
Financial Performance
Suppliers Use of Power
Customers Use of Power
Pair - T test
Our Studies on Supply Chain Integration
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Introduction

• Importance of supply chain integration (SCI)
• Achieving competitive advantages
• Enhancing operational/financial performance
• Factors influencing SCI (Relationship Management)
• Trust
• Relationship Commitment
• Use of Power
• Dependence

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Supply Chain Integration

• SCI could be defined as the degree to which
• the firm can strategically collaborate with their
  SC partners and collaboratively manage the intra-
  and inter-organization processes
• to achieve the effective and efficient flows of
  product and services, information, money and
  decisions
• with the objective of providing the maximum value
  to the customer at low cost and high speed
  (Bowersox, Closs Stank, 1999 Towill
  McCullen, 1999 Frohlich Westbrook 2001 Vaart
  Donk, 2003).

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Three main types of SCI

• Internal integration is defined as the degree to
  which a firm can structure its organizational
  practices, procedures and behaviors into
  collaborative, synchronized, and manageable
  processes to fulfill its customers requirements
  (Cespedes, 1996 Chen and Paulraj, 2004a Kahn
  and Mentzer, 1996 Kingman-Brundage et al., 1995)
  
• Customer integration is defined as the core
  competence derived from better coordination of
  all the critical customers in a company's SC to
  jointly achieve improved service capabilities at
  lower total SC cost (Bowersox, et al., 1999).
• Supplier integration is defined as the core
  competence derived from better coordination of
  all the critical suppliers in a company's SC to
  jointly achieve improved service capabilities at
  lower total SC cost (Bowersox, et al., 1999).

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SCI Structure (SCIS)
Suppliers
Customers
Manufacturer
Customer Integration
Supplier Integration
Internal Integration
Supply Chain Integration and Performance
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Relationship Commitment

• Relationship commitment can be defined as the
  willingness of a party to invest resources into a
  relationship (Dion et al. 1992 Morgan Hunt,
  1994).
• Relationship commitments can be classified into
  two types
• Normative relationship commitment can be defined
  as willingness to secure the relationship due to
  its identification with and emotional attachment
  to the goals and values of another party (Morgan
  and Hunt, 1994 Wetzels, et al., 1998). This type
  of commitment is intrinsic as it is based on
  identification and internalization of common
  norms and values with another member (Brown, et
  al, 1995).
• Instrumental relationship commitment is based on
  compliance and distinct from normative commitment
  (Brown, et al, 1995). Instrumental relationship
  commitment is driven by extrinsic rewards or
  punishment.

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Research Methodology

• Data Collection_ Mail Survey
• Target samples Chongqing, Tianjin, Guangzhou,
  Shanghai, and HK.
• Pilot test using a sample of 15 companies.
• Key informant knowledgeable about SCM within the
  manufacturers
• 617 usable questionnaires from contacted 4569
  companies (13.5) or 1356 questionnaires (45.5 )
  sent out.

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Results and Discussion

• Company Profile

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Internal Integration
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Customer Integration
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Customer-oriented Performance

• a. Our company can quickly modify products to
  meet our major customers requirements
• b. Our company can quickly introduce new products
  into the markets
• c. Our company can quickly respond to changes in
  market demand
• d. Our company has an outstanding on-time
  delivery record to our major customer
• e. The lead time for fulfilling customers orders
  (the time which elapses between the receipt of
  customer's order and the delivery of the goods)
  is short
• f. Our company provides high level of customer
  service to our major customer
• g. Our companys inventory level is low

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Supplier Integration
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Supplier-oriented Performance

• a. Our major supplier can quickly modify products
  to meet our companys requirements
• b. Our major supplier can quickly introduce new
  products into the markets
• c. Our major supplier can quickly respond to
  changes in market demand
• d. Our supplier has an outstanding on-time
  delivery record to our company
• e. The suppliers lead time for fulfilling our
  companys orders (the time which elapses between
  the receipt of our order and the delivery of the
  goods) is short
• f. Our major supplier provide high level of
  customer service to our company
• g. Our major supplier has low level of inventory

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Industry SCI
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Industry Type

• F1. Food, Beverage, Alcohol Cigarettes
  
• C2. Chemicals Petrochemicals
• W3. Wood Furniture
• P4. Pharmaceutical Medicals
• B5. Building Materials
• R6. Rubber Plastics
• M7. Metal, Mechanical Engineering
• E8. Electronics Electrical
• T9. Textiles Apparel
• T10. Toys
• J11. Jewelry
• A12. Arts and Crafts
• P13. Publishing and Printing

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SC Integration Structure (SCIS)
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Industry SCIS
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SCIS Industry
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Financial Performance
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Financial Performance SCIS
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SC Performance
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SC Performance SCIS
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Trust
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Trust SCIS
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Relationship Commitment
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Relationship Commitment SCIS
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Competitive Hostility
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Competitive Hostility SCIS
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Employee Number SCI
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Fixed Asset SCI
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Sales SCI
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Conclusions

• The companies with the highest degree of SCI
  achieve the best performance, and the level of
  trust, relationship commitment, are also the
  highest.
• The companies with the lowest degree of SCI
  achieve the worst performance, and the level of
  trust, relationship commitment, are also the
  lowest.
• Different type of SCIS is facing different level
  of competitive hostility.
• The big companies are much easier to do SCI.

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• Q A
• Thank you!!