The role of geographical distance and its efficacy on global purchasing practices

Managing from a distance in international purchasing and supply

International purchasing and supply management (PSM) teams have long faced the visibility and understandability challenges of managing geographically dispersed and culturally distant suppliers. Problems arising from inadequate monitoring and control over suppliers can be attributed to geographical and cultural distance, capability gaps, weak institutions, and supply market dynamism. With transaction costs theory as our lens, we examine how international geographically and culturally distant purchasing and supply management (PSM) teams control emerging economy suppliers with formal management controls. We use interview survey data on 339 international customer-Chinese supplier relationships using supplier perceptions of the extent to which performance measurement and monitoring practices are used by their primary customer in the purchase reorder decision and control. The results demonstrate that the cultural and, to a lesser extent, geographical distance between the customer and the supplier is associated with more extensive use of formal management controls. Also, we find the relationship between geographical or cultural distance and the importance of performance measurement is strengthened for suppliers of complex components.

Embracing supply base complexity: the contingency role of strategic purchasing

Purpose

This paper aims to empirically examine the moderating role of strategic purchasing on the relationship between supply base complexity (SBC) and purchasing performance.

Design/methodology/approach

Survey data were collected from 209 firms listed in the Capital Top 500 Firms of Turkey. Measurement properties were assessed via confirmatory factor analysis, and the conceptual model was tested via hierarchical regression analysis. A supplementary analysis based on 14 semi-structured interviews was conducted to provide further insights on the survey findings.

Findings

Regarding structural SBC, the results suggest that horizontal complexity and supplier interaction improve purchasing performance, but only in firms with high strategic purchasing. By contrast, spatial complexity reduces purchasing performance in firms with high strategic purchasing, while supplier differentiation does not have any effect. Regarding dynamic SBC, the results show that both delivery complexity and supplier instability reduce purchasing performance when firms have low strategic purchasing. Interviews further suggest that firms with high strategic purchasing leverage the positive effects and mitigate the negative effects of SBC by having a long-term focus, considering multiple performance criteria and adopting advanced purchasing practices.

Practical implications

In contrast to what is widely posited in the existing literature, the nuanced findings of this study reveal that complexity is not always detrimental. The results suggest that practitioners should aim for high levels of strategic purchasing to suppress the negative effects of SBC while leveraging its benefits.

Originality/value

By investigating the contingency role of strategic purchasing, this study provides novel insights into the under-investigated issue of how to best “manage” SBC.

Product recall strategy in the supply chain: utility and culture

Purpose

Product recalls have the potential to damage firm and consumer quality reputation. While globalization has brought about various economic benefits, expanding supply chain networks have also made it more difficult for downstream organizations to manage product recall strategy. This study aims to examine the role of culture on a manufacturer's initiation of a recall and the severity of the remedy chosen for the product recall.

Design/methodology/approach

Utilizing the culture-specific argument, this study uses an exploratory approach to assess how cultural variables impact recall strategy utilizing a large-scale data analysis with a cross-sectional time-series panel of 898 firms.

Findings

The results provide support for the expected utility hypothesis that the more severe the consequence, the more likely a manufacturer will decide to recall the product. Moreover, the more likely the manufacturer will provide greater returns to the consumer. However, these relationships are impacted to differing degrees by the manufacturer's cultural origin.

Originality/value

These results provide evidence to researchers about how culture impacts the expected utility hypothesis in the decision theory. The study examines how deeply embedded cultural variables impact the relationship between the foreseeable consequence of the product recall and the recall facilitator and remedy.

Archetypes of sourcing decision-making

Purpose

The purpose of this paper is to develop taxonomy of sourcing decision-making (SDM) archetypes and explore how different contextual factors influence these archetypes when global sourcing of complex components is considered a viable option.

Design/methodology/approach

A multiple case study approach with five in-depth cases is employed. In total, 19 interviews as well as publicly available and internal data from large buying firms headquartered in Austria and Germany were collected and analyzed.

Findings

The results reveal three different SDM archetypes which are described in detail (i.e. “consensus,” “argumentation” and “cabal”). Furthermore, it is found that these archetypes are mainly influenced by three contextual factors: sourcing maturity, product complexity and leadership style. The final model comprises six propositions which illustrate how these contextual factors determine companies’ SDM archetypes.

Research limitations/implications

The study contributes to theory development at the intersection of organizational buying behavior and the (global) SDM literature. Thereby, it answers the call for more rigorous investigation of the influence of contextual factors on SDM processes.

Practical implications

The findings enable practitioners to better understand and consequently manage SDM processes and their outcomes. By supporting decision-makers in identifying SDM archetypes, this study allows sourcing managers and teams to make better decisions by avoiding problems that occur in situations in which the preferred decision-making type would result in suboptimal decisions.

Originality/value

The study provides a first step toward taxonomy of SDM archetypes and is among the first that explores their underlying contextual factors.

Supply chain disruptions: the influence of industry and geography on firm reaction speed

Purpose

Responding in a timely manner to product recalls emanating from the supply chain presents tremendous challenges for most firms. The source might be a supplier from the same industry located next door, or one from a completely different sector of the economy situated thousands of miles away. Yet the speed of the firm’s response is crucial to mitigating the consequences of the recall both for the firm, and consumer health and well-being. The purpose of this paper is to investigate the effects of geographic distance, industry relatedness and clustering on firm response time to a supplier-initiated product recall.

Design/methodology/approach

The authors test the theoretical framework via an examination of food recall announcements registered with the US Food and Drug Administration over a ten-year period. The authors develop a data set comprising 407 pairs of supplier and affected downstream manufacturing firms, and utilize cross-classified hierarchical linear modeling to understand the drivers of organizational responsiveness.

Findings

The results suggest that firm response time is lengthened by geographic distance but reduced when the supplier and affected firm operate in related industry sectors. The authors further find that as more firms in a given industry are affected by the same recall, response time deteriorates.

Originality/value

Product recalls in the agri-food industry are significant events initiated to protect consumer health and ensure the safety of the farm-to-fork food chain. The findings highlight how both geographic- and industry-related factors determine the speed of firm responsiveness to these events.

Achieving supply chain excellence through supplier management

Purpose

The purpose of this paper is to develop a supplier selection and management program to improve overall supplier performance.

Design/methodology/approach

Supplier performance is measured in terms of quality and delivery within a fast moving consumer goods (FMCG) business of a multinational company based in Thailand using a case study methodology. The quality and delivery related data were collected from daily deliveries at the manufacturing plant both before and after implementing the supplier management program.

Findings

Findings of the study suggest that the selection of suppliers based on their performance is important for manufacturing firms. Moreover, the supplier selection and management program can contribute effectively to improving suppliers’ performance.

Research limitations/implications

This case study has been conducted based on a single company within the FMCG industry. Hence, it limits the generalizability of the findings across industries.

Practical implications

The study provides a real-life tool for practitioners to learn about the importance of strategic decision-making process pertaining to the supplier selection and management program.

Social implications

This study demonstrates that through a transparent supplier evaluation process, the firms can develop trust and long-term relationship with their suppliers for pursuing the goals of product development and innovation.

Originality/value

Implementing a supplier management system is a critical step in enhancing an organization’s overall competitiveness. To develop an effective supplier management system firms must have objective measures and share those with their suppliers. Developing metrics for suppliers’ evaluation is the key to achieving continuous improvement as evidenced in this case.