Academic journal article Journal of Supply Chain Management

International Supply Management Systems -- the Impact of Price vs. Non-Price Driven Motives in the United States and Germany

Academic journal article Journal of Supply Chain Management

International Supply Management Systems -- the Impact of Price vs. Non-Price Driven Motives in the United States and Germany

Article excerpt

INTRODUCTION

International sourcing can represent a significant amount of an organization's costs, particularly for manufacturing concerns. A study by Monczka and Trent (1995) showed that about 14 percent of U.S. manufacturing companies' purchasing volume is sourced internationally. These costs appear to be even greater for manufacturing firms in other developed countries. For example, the most recent study by the German sister organization of the Institute for Supply Management[TM] (ISM) (formerly the National Association of Purchasing Management (NAPM)) found this percentage to be 23 percent (BME 1998). Taking into account that the purchasing volume in some manufacturing industries accounts for more than 60 percent of the cost of goods sold, it seems likely that international supply management may act as an important lever on an organization's financial success (Dobler and Burt 1996; Leenders and Fearon 1997; Monczka et al. 1998). In addition, outsourcing may further increase the importance of international supply mana gement (Quinn 1999).

The results from the above studies suggest that international supply management may be relatively more important to German companies than it currently is to their U.S. counterparts, and indicate that a cross-national study may lead to important insights as to why this difference might exist. For example, cultural differences between the United States and Germany may lead to different management approaches (Hofstede 1984; Schwartz 1994). Practitioners can often learn valuable lessons by examining these differences and comparing the activities of managers in their country with those of another. Thus, the objective of this study is to compare the international supply management systems of U.S. organizations with those of their German counterparts, and examine the factors that drive and help to shape an organization's international supply management system.

Monczka and Trent (1992) distinguished between international purchasing and global sourcing. They suggested that international purchasing is simply buying from foreign suppliers. In contrast, global sourcing is a much more progressive strategy that requires purchasing to integrate and coordinate procurement requirements across worldwide business units by examining common items, processes, technologies, and suppliers. The research in this study acknowledges that international purchasing activities may be coordinated to different degrees in different companies, and that there is a complete spectrum of activities with loosely coordinated international purchasing activities at one end and highly integrated global sourcing processes at the other end. As the strategies, structures, systems, and skills used to enhance competitive sourcing advantages through international activities are investigated here, the term "international supply management system" (ISMS) seems appropriate as an umbrella term: If the level of an organization's ISMS is low, it is engaged in international purchasing in the sense of Monczka and Trent (19 92); if the level of the ISMS is high, the organization has reached the plateau of global sourcing.

In the next section of the article, the empirical literature in the international purchasing arena is reviewed. This review also includes literature from the field of strategic management, which is combined with the international purchasing literature to describe the components of an organization's ISMS. Afterward, the study's propositions are introduced. Propositions rather than hypotheses are stated because this area of international supply management has not been extensively researched, so the research here is exploratory in nature. Next, the methodology used to test the study's propositions is described, which includes the use of a large-scale mall survey sent to purchasing managers in Germany and the United States, and case studies conducted with firms in these countries. Then the analyses used to test the study's propositions are described and the results from the analyses are presented. …

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