The Impact of Cycle Time on Supplier Selection and Subsequent Performance Outcomes

Article excerpt

INTRODUCTION

Over the last decade, the supply function has begun to establish itself as a strategic contributor, often driving competitive advantage through improvements to cycle times, quality, service, price, and total cost (Porter 1999). As part of this evolutionary process, purchasers are committed to initiating and developing long-term business relationships. These long-term relationships deliver added value for buyers and suppliers in industrial markets (Larson and Kulchitsky 1998). Previous research has shown that companies can lower costs and achieve greater effectiveness in their purchasing, logistics, and production functions by developing long-term business relationships (Li and Dant 1999). Hence, buyers should be able to leverage strategic alliances and partnerships with suppliers, set up brainstorming sessions and joint workshops with the in-house technical function, and generate new ideas or creative solutions to specification problems, to shortening cycle time, and to speeding up the production process (Omare 2001).

As indicated above, cycle time is among the emerging performance criteria for purchasing and supply management. Cycle time derives its importance from the rapid pace of change and the need to keep suppliers' and final customers' demands in balance while maintaining inventories at reasonable levels. As an antidote to the plethora of changes and complexities in the economic, global, technological, and regulatory environments, cycle time offers considerable strategic promise. Thus, organizational changes that accelerate reductions in the cycle time of developing and introducing products and enhance the level of commitment and trust between suppliers and customers are needed (Arena 2002). More recently, several researchers have suggested that cycle time is a strategic criterion when evaluating long-term business relationships (Hrisak 1999; Sochocki and Kaminsky 1999). More specifically, previous research suggests that cycle time should be used as one criterion for making strategic relationships and selecting suppliers.

Hence, the purpose of the current study is to examine the role of cycle time in supplier selection, supplier performance, and its impact on subsequent long-term relationships. This study addresses briefly the cycle time literature, identifies the variables used in the empirical study, reports the results of the data analysis, and draws conclusions and describes some managerial implications for the study.

THEORETICAL BACKGROUND

Cycle Time

Competition has forced many industries, once known for their lengthy product development times, to become more sophisticated and to speed up product development time (Milligan 1999). Industry analysts contend that this trend has been partly fueled by an increasingly informed consumer base, where people are knowledgeable about various products and options and often even know what to request. Now, instead of developing and producing something in three to five years, manufacturers are under pressure to produce and get it to market much more quickly (Milligan 1999). Thus, cycle time is increasingly becoming a critical variable in many business decisions (Stalk 1998; Stalk and Hout 1990; Meyer 1993).

The impact of time (in general) has also been discussed in the marketing and purchasing literature (Handfield 1993; Hendrick, Carter, and Siferd 1996; Inman 1992; Kumar and Sharman 1992; Dholiakia, Johnson, Della Britta, and Dholiakia 1993). Hendrick, Carter, and Siferd (1996) suggested that from the late 1980s through the 1990s, time was the main focus of many leading organizations as a means to quality improvement. Handfield (1993) and Inman (1992) noted that from the customer's perspective, time is a critical factor in making purchasing decisions and that customers devote time and effort to reducing manufacturing cycle time, which accounts for nearly 50 percent of total cycle time. Traditionally, cycle time has been used as a variable in supplier selection decisions (Monczka, Trent, and Handfield 1998). …