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The Role Of Carriers In Buyer-Supplier Partnerships

Author(s):

Julie J. Gentry
Julie J. Gentry, University of Arkansas, Fayetteville, AR 72701, 501/575-6137

79th Annual International Conference Proceedings - 1994 - Atlanta, GA

ABSTRACT. Research indicates an increasing incidence in strategic supplier partnering efforts for sourcing goods and services. The recent onslaught of articles evidenced in both practitioner and academic journals continues to support this trend. Additionally, the supply chain management concept is gaining more acceptance as a method of sustaining a competitive advantage in global markets.

While the underlying goals of strategic partnerships and the supply chain management approach are similar, there is little empirical evidence to provide a linkage between these concepts and existing strategy theory. Furthermore, although the literature explores partnerships within both the buyer and tangible goods supplier context and the shipper and logistics services provider context, there has been little attempt to link these two dyadic relationships together in order to research the multi-firm interactions.

In order to address the overall problem, three separate, related issues were explored in this research. The first issue was to identify the specific and testable "dimensions" of a buyer-supplier strategic partnership and determine to what extent these dimensions were extended to the carriers involved in these relationships. The second issue was to identify from buyers and suppliers the perceived strategic role that carriers have in meeting the operational goals of partnerships. Finally, case studies were performed in order to assess the carrier perspective on how these multi-firm relationships could be enhanced.

BACKGROUND. Research indicates that firms seek to form strategic partnerships with both suppliers of tangible goods and services (La Londe and Cooper, 1989; Hendrick and Ellram, 1993). A dimension of interorganizational behavior that is receiving increasing attention is the interfirm alliance between logistics function providers and the firms they service (Bowersox, 1990). The heightened emphasis on achieving customer satisfaction in a global environment has elevated logistics competency to a position of high priority within selected industry leaders.

The strategic advantages of "partnering" efforts with suppliers can be realized by developing partnerships with transportation and other logistics services providers. Furthermore, by increasing the involvement of carriers within existing buyer and supplier partnerships, additional opportunities for goal compatibility should emerge over time and increase the likelihood of a lasting successful partnership. By integrating the entire upstream supply channel, the existing benefits of strategic partnerships are enhanced as all parties in the inbound supply chain work together to improve quality and increase operating efficiencies.

The philosophy of "supply chain management" extends the concept of partnerships into a multi-firm effort to manage the total flow of inventory from the supplier to the ultimate customer (Ellram, 1990). The chain is viewed as a whole- a single entity, rather than fragmented groups who each perform their own function.

The goal of a successful supply chain is to exchange information for inventory wherever possible, holding inventory in the location, quantity, and form that is optimal for the entire supply chain (Steven, 1989). This interfirm approach requires accurate information from all channel members regarding the quantity, quality, and timing of inventory needs. Suppliers, customers, and other third-party providers share information and plans required to maximize the efficiency and competitiveness of the overall supply chain (Ellram and Cooper, 1990).

The concepts of strategic partnerships and supply chain management share common goals of minimizing costs and meeting customer service objectives. A strategic partnership between any two firms, whether it be a buyer-supplier or a manufacturer-carrier, can be viewed as a segment of an extended supply chain. While each of the dyadic linkages within the supply chain may not necessarily embrace a strategic partnership philosophy, the objectives of the supply chain management approach will be enhanced as more firms within the supply chain develop partnership relations.

THE ROLE OF CARRIERS. The transportation linkage between a supplier and a purchasing partner can be critical. Firms involved in buyer-supplier partnerships stress continuous quality improvements, joint cost reduction programs, ongoing and open communications, and heightened customer service levels. This increases the criticality of the transportation service linkage between the buyer and goods supplier.

The quality efforts that constitute a strategic partnership do not stop at meeting specifications of purchased products. The quality emphasis is a company philosophy reflected by the attitudes of upper management. Long-term partnership agreements are likely to stress continuous quality improvements and have goals of defect-free products and 100 percent on-time delivery of products. Superior quality products lose their competitive advantage if they are not delivered at the right time or in the same condition as they left the supplier's facility.

The emphasis on cost reduction programs should encompass transportation decision-making and various logistics alternatives available in today's global transportation industry. A goal of a buyer-supplier strategic partnership will be the minimization of overall supply system cost in an effort to increase profits in the long run. This means assuring the lowest overall cost of transporting the goods to meet desired service levels, regardless of which party actually owns the goods in transit or makes the transportation arrangements.

Information and technology sharing between two partners can involve the transportation linkage in numerous ways. Many carriers now have the ability to offer computerized tracking and tracing of shipments. This information can be used to help buying firms further narrow delivery windows or make adjustments to existing schedules as more timely information becomes available. Furthermore, information exchanged between purchasers and suppliers may alter the specifications of the transportation function. Again, carriers must be involved in this information exchange to ensure the goals of the partnership are met.

THE STATEMENT OF THE PROBLEM. There is a general lack of consensus regarding the definition of a strategic partnership. While industry and academia have loosely used the term to prescribe a "long-term" relationship between two firms, the ambiguity of the concept makes empirical testing and theory building extremely difficult. Therefore, it was necessary to review the existing literature on strategic partnerships and identify specific "dimensions" evidenced in strategic partnerships.

The identification of these dimensions was also necessary in order to provide the linkage of this research to supply chain management theory. If these identifiable dimensions were extended to the carriers involved within the buyer-supplier relationships, then one could ascertain that the otherwise dyadic partnership was actually a part of an inbound supply chain involving a triad of firms working together to achieve a specific strategic goal.

A second goal was to research the perceived role that carriers have in meeting the operational goals of a buyer-supplier strategic alliance. Recent research suggests that many partnerships have failed due to the perceived lack of parity by one of the firms involved (Hendrick and Ellram, 1993). An underlying foundation for the concept of a strategic partnership is the sharing of risks and rewards and the "win-win" philosophy (Ellram, 1990). Conflicting opinions exist with respect to the role that carriers and third-parties have in buyer-supplier relationships (La Londe and Cooper, 1989).

In summary, much of the existing empirical research on strategic partnerships and supply chain management deals specifically with one dyadic relationship, such as a buyer and a supplier, or a shipper and a carrier. This research was aimed at coupling the concepts of strategic partnerships with both goods and services suppliers through empirical research, and to provide a linkage between existing research in strategic partnerships and the supply chain management concept.

OBJECTIVES OF THE RESEARCH. The primary objective of this research was to assess the role that transportation providers have within the scope of a buyer-supplier strategic partnership. Further, this research investigated the operational role that carriers have in meeting the goals of the buyer-supplier strategic partnership.

The specific research questions which this study addressed are as follows:

  1. Who provides the transportation linkage within the buyer- supplier strategic partnership?
    1. Is it a single carrier or many carriers?
    2. What mode of carriage is used?
    3. Who is responsible for the carrier selection process?
  2. Are carriers considered strategic partners within the buyer- supplier partnership?
    1. To what extent are carriers involved in long-term planning and long-term commitments within the scope of the buyer-supplier partnership?
    2. To what extent do carriers have open communications and share information with the buyers and suppliers?
    3. To what extent are carriers involved in cooperative continuous improvement and cost reduction programs with buyers and suppliers involved in partnerships?
    4. To what extent do carriers share the risks and rewards of the long-term relationship with buyers and suppliers in partnerships?
  3. What factors affect the degree to which carriers are viewed as strategic partners within the buyer-supplier relationship?
    1. Does the overall strategic goal of the partnership affect the extent to which carriers are involved in the relationship?
    2. Does the proximity of the buyer and supplier affect the extent to which carriers are involved in the relationship?
    3. Does the type of product being supplied to the buyer affect the extent to which carriers are involved in the relationship?
  4. How is the buyer-supplier partnership impacted by involvement of carriers in the relationship?
    1. Are any operating improvements linked to the degree of the carriers' involvement within the partnership?
    2. Which specific goals of the buyer-supplier partnership are dependent on carrier cooperation?
    3. Do buyers and suppliers feel that carriers have a critical role in the operational success of the partnership?
    4. Do perceptions of buyers, suppliers, and carriers differ with respect to the importance of carriers in the success of the strategic partnership?

SCOPE OF THE RESEARCH. An empirical study addressing the entire supply chain would be extremely difficult due to the numerous parties involved and its infancy stage in practice. However, incremental extensions of the existing body of knowledge are critical in fostering a better understanding of supply chain management relationships.

A successful buyer-supplier partnership is critical in establishing the supply chain management concept since it is the starting point of the total supply pipeline. Although empirical research is beginning to appear exploring the nature of these relationships and how they are formed over time, limited research addresses the role of the transportation provider between suppliers and purchasing firms engaged in these partnership agreements.

The first part of this research focused on the involvement and role of carriers within buyer-supplier partnerships as assessed by buyers and suppliers. This involved collecting data through mirrored survey instruments from buyers and their strategic suppliers sets. These dyadic sets were known to be buyers and their chosen supplier partners for a specific product or product class.

It was necessary to limit the investigation to individual and identifiable partnership relations as opposed to researching partnering relations in general in order to assess the involvement of carriers within these particular relationships. It was assumed that carriers functioning within buyer-supplier partnerships would also be involved in the transport of goods between non-partnering firms. This research was specifically aimed at investigating the scope of involvement and role that carriers play within buyer-supplier partnership relations.

Carriers were not surveyed in the first stage of the research for two primary reasons. First, it was not known how many carriers were actually involved within the buyer-supplier partnerships. It was not possible to identify them without first gathering information from the buyer-supplier pairs. Secondly, it was necessary to first assess their overall degree of involvement and importance in the relationship as perceived by the buyers and suppliers. This allowed for more specific and focused research in stage two of the study.

The second stage of the study was specifically aimed at exploring ways that the benefits of buyer-supplier relationships could be enhanced by further involving carriers within the "information loop" and strategic planning process of the partnerships. This research involved a small group of companies, using an in-depth case study methodology. The combination of these two stages- a broad overview of carrier involvement within the partnerships, coupled with an in-depth analysis of specific firms engaged in three-way alliances, provides for both general partnership development and more focused prescriptive insight into the supply chain management concept.

This research links the advantages of shipper-carrier partnerships and buyer-supplier partnerships to justify the inclusion of carriers within the existing relationships in practice. It offers empirical evidence that the dimensions of the buyer-supplier partnership can be extended to carriers in order to maximize efficiencies and minimize total supply costs.

FINDINGS AND CONCLUSIONS. A misconception currently exists regarding the strategic role carriers have in making buyer-supplier partnerships successful. While the advantages of shipper-carrier partnerships have been frequently cited and documented, these advantages had not been specifically linked to the buyer-supplier partnership effort.

This research provides conclusive evidence that both buyers and suppliers feel that the role of carriers is more important in partnering relationships than in non-partnering relationships. Further, the general conclusion made from the case studies is that carriers feel that the benefits of existing buyer-supplier partnerships could be enhanced by increasing the degree of carrier involvement in the strategic planning process and the information exchange between buyers and suppliers. These findings should increase the level of managerial priority in developing better relationships with carriers involved in these otherwise dyadic relationships.

A better understanding of the relationships between buyers, suppliers, and carriers enhances the existing framework for successful implementation of strategic buyer-supplier partnerships. This is critical if firms wish to ensure successful long-term partnerships and develop a supply chain management approach. As supply chains continue to expand due to global sourcing, it becomes much more critical to develop long-term, successful relationships with logistics providers within buyer-supplier strategic partnerships.

REFERENCES

Bowersox, Donald J. "The Strategic Advantages of Logistics Alliances." Harvard Business Review. Vol. 68, No. 4 (1990): 36-45.

Ellram, Lisa M. "The Supplier Selection Decision in Strategic Partnerships." Journal of Purchasing and Materials Management. Vol. 26, No. 4 (1990): 8-14.
--- and Martha C. Cooper. "Supply Chain Management, Partnerships, and the Shipper-Third Party Relationship." The International Journal of Logistics Management. Vol. 1, No. 2 (1990): 1-10.

Hendrick, Thomas E. and Lisa M. Ellram. Strategic Supplier Partnering: An International Study. Tempe, Arizona: Center for Advanced Purchasing Studies/ National Association of Purchasing Management, 1993.

La Londe, Bernard J. and Martha C. Cooper. Partnerships in Providing Customer Service: A Third Party Perspective. Oak Brook, Illinois: Council of Logistics Management, 1989.

Steven, G.C. "Integrating the Supply Chains." International Journal of Physical Distribution & Materials Management. Vol. 8, No. 8 (1989): 3-8.


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