Academic journal article Journal of Supply Chain Management

Managing Buyer-Supplier Relationships: Empirical Patterns of Strategy Formulation in Industrial Purchasing

Academic journal article Journal of Supply Chain Management

Managing Buyer-Supplier Relationships: Empirical Patterns of Strategy Formulation in Industrial Purchasing

Article excerpt


The industrial purchasing process is complex and involves many interrelated decisions made in a complex environment. To help buyers (1) manage a high number of purchases in various environments, the field of purchasing has relied on classification schemes since the early 1980s, primarily purchasing portfolio models (e.g., Kraljic 1983). These models are prescriptive in nature and built on the premise that the context surrounding categories of similar purchases dictates a unique relationship strategy, and that adopting this strategy will improve performance. Since these models have not been empirically validated, it is difficult to evaluate the extent to which companies have implemented the strategies prescribed by the models, and the degree to which following these strategies leads to better performance. By extension, it raises questions about how buyers rationalize the high number of purchases they manage.

Given the lack of empirically based classifications, it has been assumed that portfolio models provided adequate direction for buyers in terms of how to make major types of purchases. However, building a taxonomy is helpful for determining whether the reality experienced by buyers is similar to that described in portfolio models. In general, a taxonomy examines the commonalities and differences across a large variety of units--in our case, purchases made by companies--and classifies them according to shared and unshared characteristics. From a practitioner standpoint, the development of a taxonomy of purchases may help buyers rationalize the purchases they currently manage, and determine whether important purchase types are missing from existing models. From a research standpoint a taxonomy provides clues about whether the dimensions articulated in existing portfolio models provide valid segregations among the various types of purchases.

Thus, the goal of this study is to uncover a taxonomy of purchases made by buyers, and to use this taxonomy to discover patterns of decisions made by buyers during the purchasing process. We believe researchers and practitioners alike can learn more about how buyers approach their relationships with suppliers in response to strategic goals of their firm and supply market conditions. The research question is: Are there patterns that emerge from buying firms' purchasing decisions that allow researchers to identify various families of purchases? If so, are there potential performance gains for firms that adopt the taxonomy?

To meet our objective, we collected data from a sample of large industrial U.S. firms and conducted a cluster analysis. Our taxons were selected to capture three domains relevant to the purchasing cycle: the strategic intent of the buying firm, the competitive market forces at work in the market in which the product or service is purchased, and buyer-supplier relationship factors. These factors manifest the purchasing strategy pursued by buyers for various types of purchases. We also consider the performance outcomes for each type of purchase.

This paper is organized as follows: first, we review the extant literature, including previous purchasing strategy-research and existing purchase classifications and introduce the general hypotheses that frame our work. Second, we introduce the various dimensions that underlie our taxonomy. Third, we describe the steps of our methodology and present results. Finally, we discuss our findings and their implications for future research and for practitioners.


This section provides an overview of the research literature used for the theoretical foundations of our study. The theoretical scope of this paper falls at the junction of two main streams of literature: (1) the purchasing strategy literature and, (2) the purchasing portfolio literature.

Purchasing Strategy

While the origin of operations strategy can be traced back as early as the 1960s (i. …

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