Academic journal article International Journal of Business and Management Science

The Effects of SRM Capability on Supply Management Performance

Academic journal article International Journal of Business and Management Science

The Effects of SRM Capability on Supply Management Performance

Article excerpt

INTRODUCTION

The multidimensionality of supply management is derived from the history of the Porter's value chain (1985) arguments, where supply management was defined to be a support activity with several interfaces with primary activities such as logistics, operations, marketing and service. However, present studies have shown that supply management has increasingly important and even strategic role enhancing firms' competitiveness (Carter and Narasimhan, 1996; Gonzalez-Benito, 2007; Nollet, Ponce and Cambell, 2005; Paulraj, Chen and Flynn, 2006). Furthermore, it is argued that supply management provides interface where the external commercial supply market relations meet the firm's internal functions and resources (Day and Lichtenstein, 2006). At this interface, the management of supplier relationships (SRM) connects the firm's supply organization to the firm's supply chain.

To be able to operate effectively with the suppliers specific capabilities SRM are required in a buying firm. Firms need to identify their strategically important suppliers, maintain and enhance good business relations with them, and increase firm competitiveness by exploiting the synergy of mutual business activities. To be able to measure performance and success of these management activities concerning supplier relations goals must be set. Previous studies have widely presented different ways how to define and measure the performance; however, it is not always clear what the effect of capability on performance is and what the drivers of performance are. Therefore, to integrate SRM into the firm's overall strategy and to increase SRM effectiveness, the drivers of performance need to be examined and regular monitoring of the success is required.

This study examines the effects of SRM capability on supply management performance. There is a strong consensus among the scholars and practitioners that in general, capability has effect on firm performance (e.g. Barney, 1991, Makadok, 2001; Teece, Pisano and Shuen, 1997). Based on these previous studies it is assumed that SRM capability has a positive effect on measuring and monitoring supply management performance. This argument is tested using survey data collected from 100 Finnish firms and analyzed using hierarchical multiple regression analysis.

SUPPLY MANAGEMENT PERFORMANCE

Cox and Lamming (1997: 62) have defined supply management to be "the strategic management of external and internal resources and relational competencies in the fulfilment of commitments to customers." Thus, it is a process which flows across the firm and aims to make the firm more competitive opposed to only being a detached function of the firm (Cousins, 2002; Cousins and Spekman, 2003). Moreover, Quintens, Pauwels and Matthyssens, (2006: 171) take a global view to the supply management and define it to be "an activity of searching and obtaining goods, services and other resources on a possible worldwide scale, to comply with the needs of the company and with a view to continuing and enhancing the current competitive position of the company." These authors emphasize the influence of supply management to the firm's competitiveness. Therefore, supply performance means supply managements overall contribution to the firm's business and competitiveness.

The evaluation of supply management performance is a formal and systematic approach to monitor how well the targets set by the firm's management are achieved inside the firm. However, it has been found that the development of a supply management performance measure can be a difficult task. Assessing the right balance between short-term price winnings and long-term reliable supplier relationships is the key problem of performance management. Therefore, performance evaluation systems generally contain a variety of measures (Monczka, Trent and Handfield, 2005).

The importance of measuring supply management performance stems from several factors: 1) Measurement directly supports the management's decision-making, 2) there is better communication across the supply chain, 3) it provides opportunity to give feedback and 4) it motivates and directs behavior toward the desired results (Monczka et al. …

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