Collaborative buyer supplier relations: implications for organization change management

Ronan McIvor and Marie McHughSchool of Management, University of Ulster,Shore Road, Newtownabbey, Co Antrim,Northern Ireland BT37 0QB

Collaborativebuyer supplierrelations:implications fororganizationchangemanagement

The objective of this paper is to highlightthe challenges experienced by companiesthat are attempting to developcollaborative relationships with theirsuppliers.

. It is argued that this developmentconstitutes major change fororganizations, necessitating aholistic and integrated approach tothe required modi®cation oforganizational culture, structure andbehaviour.

. A case study is presented whichoutlines how a company pursued acore competency strategy which ledto extensive outsourcing and theadoption of more collaborativerelations with suppliers. The pursuitof this strategy has acted as astimulus for change within theorganization. To date it wouldappear that the change that hastaken place has been at a rathersuper®cial level, with individuals

responding to demands being placedupon them as and when requested.

. It is argued that for organizations toderive the bene®ts associated with

Strategic Change

Copyright # 2000 John Wiley & Sons, Ltd. Strategic Change, June±July 2000

Strat. Change, 9, 221±236 (2000)

partnership, it is essential that aholistic and integrated approach beadopted towards the planning andimplementation of organizational

change in relation to establishingcollaborative buyer supplierrelations. Copyright # 2000 JohnWiley & Sons, Ltd.

Introduction

For some time companies have been adoptingstrategies of identifying and focusing on corecompetencies, the skills, knowledge andtechnologies that a company must own inorder to compete effectively (Hamel andPrahalad, 1994). One result of such strategieshas been the extensive outsourcing of thoseareas in which companies have no distinctivecompetence, and for which there are morecompetent suppliers. The potential for out-sourcing has moved on from those activitiesthat are considered as of peripheral concernto the business, such as cleaning and security,to include critical areas of activity, such asdesign, manufacturing and marketing(Jennings, 1997). Outsourcing is now recog-nized as an area of strategic importance for

organizations and one which can contributeto the achievement of competitive advantage.

It has been argued that outsourcing has anumber of advantages including access toeconomies of scale, ¯exibility, the ability tofocus on the remaining specialized activities,reduction in overhead costs and a ¯atter andmore responsive organization (Quinn andHilmer, 1994). In order to reduce the risksassociated with outsourcing, companies havebecome interested in `quasi-integration' strat-egies such as joint ventures, strategic alliances,technology licences, asset ownership, franchis-ing and long term partnership relationships(Hunter et al., 1996). With a company's

performance in major competitive dimensionssuch as price, quality, timeliness, ¯exibility, andinnovativeness largely determined by its sup-plier network, partnership commitments andeffective supplier management have becomevery important (Hyun, 1994).

Such developments have major implicationsfor the tasks of strategy formulation and imple-mentation within organizations. In particular,they necessitate a change in the way that buyerand supplier organizations manage their activi-ties and resources. One outcome of the trendtowards partnership sourcing has been areduction in the number of suppliers byorganizations. Simultaneously they have chan-ged the way in which they do business withtheir remaining suppliers (Womack et al.,1990; Lamming, 1993; Macbeth and Ferguson,1994). Companies are now pursuing moreintensive and interactive relationships withtheir suppliers, collaborating in areas such asnew product development, supplier develop-ment, and information sharing on a range ofissues (McIvor et al., 1997). As a consequence,purchasing is no longer a largely clericalfunction dealing with many suppliers on an

adversarial basis, but instead now manages arelatively small supply base with a great deal ofemphasis on each individual `obligation con-tractual relationship' (Lamming, 1993). Thiscollaborative or partnership arrangement be-tween buyer and supplier, requires a majorshift in the mindset or operational paradigm,from what Sako (1992) terms arm's-length

Outsourcing is an area ofstrategic importance

Purchasing is no longer alargely clerical function


222 Ronan McIvor and Marie McHugh

contractual relation to obligational contractualrelation.

The philosophy of partnership sourcingdiffers considerably from the traditional adver-sarial model of buyer supplier relations. Forexample, in the area of new product develop-ment there is a high level of collaborationbetween the customer and supplier with a longterm perspective. Companies such as Chryslerare selecting suppliers at the concept stage ofnew product development and giving thesupplier the supply contract for the life of theproduct (Dyer, 1996). The supplier becomes astrategic resource and an extension of thecustomer in the design process, thus enablingthe customer to capitalize upon the suppliers'design expertise and capacity for innovation(Sefton, 1992). Also, in contrast to the adver-sarial model, the focus in the relationshipmoves away from price to the customer andsupplier working jointly to reduce total supplychain costs (Dobler and Burt, 1996). Forexample, the partners operate open bookarrangements in which the customer requiresthe supplier to share component cost informa-tion, as part of the process of improvement andcost reduction. Also, the just-in-time (JIT)philosophy is closely linked to partnershipsourcing. The success factors of JIT are veryclosely related to the conditions that favourpartnership sourcing (Gelinas et al., 1996).Under such an arrangement the buying ®rmand the supplier are expected to work togetherto satisfy speci®c clients' needs and expecta-tions, to achieve better cost control and reduceinventory, reached by long term and exclusiveagreements.

A force for change

The changing nature of buyer supplierrelationships acts as a very powerful forcefor change within each component of thetrading partnership. The achievement of amutually bene®cial partnership necessitates aprocess of systemic inter and intra organiza-tional change for each of the constituentparties. This process necessitates a holisticapproach to the management of change whichis likely to encompass cultural, structural and

behavioural issues. To effect successfulchange, thus maximizing the bene®ts to bederived from the trading partnership, it isessential that the approach adopted by organ-izations involved exhibits features of integ-ration whereby the structures and processesrequired to support a speci®ed strategy willinform and enable organizations to moreeffectively address the challenges presentedby their operating environments. Thus, thedemands associated with collaborative activitytranscend organizational boundaries andtherefore the integrative and holistic approachto managing the change process must ensurethat complementary activities and behavioursare exhibited within each of the partneringorganisations. To illustrate, in adopting morecollaborative relations it is not suf®cient toonly change the attitudes of the purchasingprofessional. Rather, a fundamental require-ment is the achievement of attitudinal andbehavioural change amongst those involved inother functions within the partnership includ-ing quality and design; this is likely to enhancethe symbiotic potential of the relationship(Hunter et al., 1996). This implies the need fora multi-functional organizational changestrategy which has the support and com-mitment of top management. This is wellillustrated by focusing attention on the activi-ties and behaviour of the purchasing function.

As a result of the increased collaborationbetween buyers and suppliers, the purchasingfunction within organizations has undergonetremendous change over the last two decades(Macbeth and Ferguson, 1994). Previously,purchasing was regarded as a clerical functionwith the purchasing professional acting as atransaction accountant between the customerand the supplier. However, the purchasingprofessional has now become a manager of theinter-®rm exchanges with responsibility for theselection and maintenance of the entiresupplier value chain. Such change has elevatedthe visibility and strategic importance ofpurchasing, and has altered the ways inwhich the purchasing task is accomplished.Within purchasing there is a growing focus onstrategic supplier management. A signi®cantnumber of ®rms are reducing the pool of


Collaborative buyer supplier relations 223

suppliers on which they rely and, at the sametime are placing more emphasis on long-termcooperative relationships. Consequently, anew view of purchasing has emerged, from

that of being operational/tactical in nature, tobeing considered as of major strategic import-ance. In essence, purchasing must now beregarded as an area which is critical in theachievement of competitive advantage. Thechanging status of purchasing is just one factorwhich has contributed to the need for a holisticand integrative approach to multi-functionalorganizational change.

Fostering multi-functional change

A new focus on quality and customer relation-ships, which have been the driving forcebehind the changing role of the purchasingprofessional, necessitates changes in policies,cultural values, work procedures and pro-cesses, relationships between departmentsand interactions with buyers and suppliers.However, often these concomitants ofstrategic change are not addressed bytraditional strategic planning which simplyconcerns itself with whether some actionmakes ®nancial and strategic sense (Worleyet al., 1996).

It is acknowledged that dif®culties often arisein effecting major change because relativelyfew organizations make a link between realisticobjectives and resource strategies, for example,operations, technology and people (Abrahamand Pekar, 1995). Equally well, it would seemfair to argue that in their approach to managingchange, a number of organizations have tendedto ignore the fact that performance is heavilydependent upon the attitudes and commit-ment of its unique asset, i.e. its workforce(Beaver and Stewart, 1996). Regardless of thenature of the change, the perspectives and

responses of employees at all levels andpositions have a signi®cant impact on thesuccessful implementation of strategic changeprocesses.

Often it is the case that individual employeeson whom the performance of the organizationis highly dependent are largely ignored inplanning major change programmes which aremulti-functional in nature. Furthermore, itwould appear that the often disintegratedapproach to strategic change is re¯ected in arigid adherence to outmoded cultural values,management styles and practices (McHugh,1997).

Given the change which has occurred in therelationships between buyers and suppliers, itwould seem fair to argue that, in the ®rstinstance, culture change is vital for the

achievement of the required strategic change.However, frequently it is the case that organiza-tions fail to engage in a process whereby directtime, money and efforts are invested in bring-ing about a change to culture, structure andreward systems, each of which is critical tosupport a programme geared towards theachievement of enhanced organizational per-formance through changing buyer supplierrelationships. For example, Cox (1996) hasexpressed serious concerns over the purchas-ing and supply profession becoming con-cerned with `fashionable concepts or ideas(fads)' such as partnership sourcing, withouttaking into account the required strategicchange. The strategies of organizations oftenexhibit disintegration in the sense that theytend to focus on content issues such as theachievement of ef®ciencies, while simul-taneously they ignore the process of how toachieve ef®ciencies.

It is recognized that effecting culture changeis a mammoth task, which is made even more

A new view of purchasinghas emerged

Culture change is vitalfor the achievement of

strategic change



dif®cult by the deeply embedded culturewhich exists within organizations (Brooksand Bate, 1994). Nonetheless, the challengespresented by the task are not suf®cientreason for excluding the issue of culturechange when considering the multi-functionalchange strategy required for organizations tocope with the turbulence within theiroperating environments which require theestablishment of effective buyer supplier part-nerships.

The dif®culties posed by cultural factors arefurther acknowledged by Johnson (1995) whosuggests that it is inherently dif®cult to effectstrategic change given that, in organizations,there is likely to exist at some level, a core set ofbeliefs and assumptions held relatively com-monly by managers. This is the mindset orinterpretative scheme which is essentiallycultural in nature. Having evolved over time,it is likely to embrace assumptions of theorganizational environment, the managerialstyle in the organization, the nature of itsleaders, and the operational routines seen asimportant to ensure the success of theorganization. This raises dif®culties whenmanaging strategic change for it may be thatthe action required is trapped by the con-straints of the cultural web. It must beremembered that, for the most part, the`changed' organizations are staffed by thesame people, whose interpretative scheme, infostering integrated strategic change, must bethe focus of attention in the ®rst instance.Desirable as this may be, the evidence suggeststhat this does not occur easily (Balogun andHope Hailey, 1999).

It is acknowledged that fostering a morecollaborative approach to buyer supplierrelationships is one area which can helpcompanies achieve competitive advantage.This necessitates major change in the culture,strategy, structure and behaviour of organiza-tions involved in trading partnerships. Using acase study approach, this paper aims to high-light the nature of the required organizationalchange; the challenges which are presented tothose involved in the purchasing function; andthe implications of the change for the manage-ment of organizations.

Methodology

The research focuses on a strategic businessunit (SBU) of a global telecommunicationsequipment manufacturer and its key suppliers.A single case design was chosen because ofthe explanatory nature of the study and thelevel of detail in the data required. Using asingle case design allows an increase in thequality and quantity of data obtained (Yin,1994). Although a single case study approachcannot offer generalizability in the statisticalsense, it can represent a signi®cant contri-bution to knowledge by permitting theorybuilding in the area of research. An in-depthcase study can make up for the lack ofgenerality by revealing a greater depth ofunderstanding of the set of events underanalysis.

The research focused on a number of keyareas in order to deal with the subtleties andintricacies of complex social situations. Inparticular, it analysed the relationships andsocial processes in a way that would have notbeen possible using a survey approach alone.Also, to effectively achieve the primary objec-tives of the research required a variety of datacollection methods such as direct observation,access to documentation and interview. Aparticular strength of the case study methodis that it allows the combination of these typesof data collection methods which enables theresearcher to capture the complex realityunder scrutiny (Saunders et al., 1997). Forexample, direct observation of meetingsbetween the organization and its supplierswas required in order to collect data on boththe business strategy process and assess thenature of customer supplier relations.

By observing meetings in the chosen com-pany it was possible to gain an understandingof the factors that in¯uenced companydecision making with regard to increasedoutsourcing and the management andorganization of its supply base. It enabled adeeper understanding of the issues involvedand offered the potential to obtain sensitivedata which may have not been forthcoming inan answer to a questionnaire. It is argued thatquestionnaire-based methods are inadequate in



analysing the complexities of buyer supplierrelations in areas such as power relations(Thomas and Oliver, 1991).

Gathering data from the organization and itssuppliers was facilitated through direct obser-vation of meetings involving company person-nel and supplier representatives. This provideddetailed and intricate descriptions of theimportant issues and behaviour patterns ofthe people involved in these meetings which inturn enabled an understanding of the meaningsand behaviour of the people involved bothinternally in the company and the representa-tives of its key suppliers. For example, it waspossible to directly observe the interactions ofthe purchasing personnel and supplier repre-sentatives in areas such as cost reduction andorder management in order to gain an insightinto the nature of buyer supplier relations. Italso enabled observations to be made of otherfunctions in the company such as design and®nance interacting with suppliers. Structuredand unstructured interviews with personnelfrom both the company and its key supplierswere also carried out. Interviews were used toallow people to develop and speak morewidely on issues raised by the research. A keybene®t of using interviews was to follow up onand develop issues that were raised in meet-ings. The research also focused on all keysecondary data pertaining to the objectives ofthe research. This included design speci®ca-tions, business function objectives, minutes ofmeetings, corporate supply managementspeci®cations, and general external companyreports.

Background to the company

The company had experienced considerablechange over the last ten years having beentaken over by a multi-national telecommunica-tions company. The take-over had resulted inan increasing emphasis on the adoption ofworld class practices such as a total qualityculture, integrated product development andcontinuous improvement. The company isquite small in comparison to other sisterplants within the corporate fold with annual

sales revenue in 1996 accounting for only 2%of the total revenue of the global company.

In 1991 the company set up a design facilityclose to the manufacturing plant for newproduct development and the re-design ofcurrent products. The design facility supportsthe manufacturing facility and adapts standardcompany products to customer requirements.The co-location between the manufacturingfacility and the design centre enables design towork closely with the product manufacturingoperation. The products and systems devel-oped in the design centre are technicallycomplex requiring, at various stages duringthe development cycle, the involvement of thedisciplines of mechanical and thermal design,electrical and electronic design, software,systems design, printed circuit board (PCB)design, manufacturing interface, manufac-turing support, component and supplymanagement.

An important ingredient in enhancing thecompetitive position of the company iscultivating the relationship between the manu-facturing plant and the design centre. In themanufacturing site the role of design affects thewhole spectrum of product development andmanufacturing activities, impacting on thesuccess of projects that range from the re-design of existing products to the developmentof new products. Therefore, with design beinga high value adding activity it is seen asincreasing the technological capability of thesite as a whole.

The company de®nes its core business ascomprising the skills and technologies thatcontribute to minimizing the time between anorder being received and ful®lment of thatorder. The achievement of excellence in itscore business depends upon the managementand integration of the activities involved in theorder ful®lment process including manufactur-ing velocity, delivery to customer requireddate, inventory management and suppliermanagement. The ability to manage and co-ordinate the linkages has been central to thecompany achieving its core business, outsour-cing is an important facilitator of this strategy.

The company approaches outsourcing fromthe perspective of the best available source



(internal or external) being chosen to carry outthe activity or group of activities. By accessingthe most competent provider of an activity orgroup of activities, the company believes it israising standards in the activities that contrib-ute to its core business. By outsourcing thoseactivities where it has no performanceadvantage and is much weaker than potentialexternal sources the company will morereadily achieve excellence in its core businessof order ful®lment by using that source. Acontributing factor in the outsourcing decisionis the impact the decision will have uponthe business strategy objectives of the siteincluding:

. Lead time reduction to the end customer;

. Improving delivery to the customer'srequired date;

. Cost reduction activities;

. Reducing inventory days;

. Reduction of lead times between its sisterplants.

In the pursuit of a core competency strategythe company has outsourced more and moreactivities to suppliers including assemblyoperations, piece part manufacture and insome cases design. The company has becomeless and less involved in the assembly andproduction of its products. Referring to theprimary activities of the value chain, the onlyactivity performed in-house exclusively is ®nalassembly. The majority of activities beingperformed internally are the support activitiesof the value chain such as design, engineering,procurement and customer service. The co-location between the manufacturing site andthe design centre is viewed as a group offunctions with a broad range of skills managingand integrating a myriad of activities and sub-activities. By their very nature the managementand integration of these activities are predomi-nantly people and skill based tasks. The skillsand experience of the `people' have becomethe key element that create competitiveadvantage for the company. It is the skillsassociated with integrating the services andoutputs of activities that have become moreimportant as the company has moved from a

strategy based on tangible assets to a strategybased on intangible assets and capabilities.

Supply management impacts

As a result of pursuing such policies thepurchasing function has been undergoingconsiderable change in the way it is organizedand the way in which it deals with suppliers.The trend towards outsourcing is supportedthrough the development of more collabora-tive relations with its key suppliers. Approxi-mately 80% of their purchases (by value) areobtained from 40 suppliers and the companyde®nes these as key suppliers. Consequently,the company has been attempting to developpartnership arrangements with these keysuppliers.

Developing more collaborative relationswith suppliers has led to the restructuring ofthe purchasing function into the followingsections:

i. Buying: involved with the day to daybuying and supplier management activi-ties.

ii. New product introduction: involved withthe organizational aspects of purchasingsuch as new product development, newproduct introduction, contract manage-ment, engineering and quality manage-ment

The pursuit of an extensive outsourcingstrategy has meant that the purchasing func-tion is now expected to be `managing externalmanufacturing' and therefore has had a keyrole to play in supporting the business strategyof the company. This has radically changed theway in which purchasing has traditionally dealtwith suppliers. For example, the purchasingprofessional has become involved in imple-menting supply base reduction programmes

The `people' have become thekey element that createcompetitive advantage



across a range of commodities. In the newproduct development and new product intro-duction activities of the company the purchas-ing professional has become a member of across-functional team.

These changes have presented an enormouschallenge for the purchasing function raisingits pro®le in the organization with the purchas-ing professional becoming a member of a cross-functional team collaborating with specialistsfrom different functions. Additionally, thechanging role of the purchasing function hasimpacted upon other parts of the organiza-tional system necessitating a fundamental shiftin perceptions of, and behaviour and attitudestowards, those involved in managing therelationships between buyers and suppliers.

The ®ndings presented here focus on fouraspects of organizational activity: joint costreduction; supplier involvement in new pro-duct development; delivery and logistics man-agement; and core business strategy. Withineach of these aspects of activity, the impact ofcloser collaborative relationships betweenbuyers and suppliers are discussed in relationto the purchasing function.

Findings

Joint cost reduction

The company pursues a strategy of year on yearformal cost reductions across its productportfolio. In the electronics and telecomm-unications industries OEMs place considerableemphasis on redesigning their existing pro-ducts in order to reduce costs and increaseproduct functionality. In the company this costreduction activity was team-based coordinatedby engineering involving the design, manufac-turing, ®nance, quality and purchasing func-tions. Although cost reduction may havefocused mainly on internal operations therewas signi®cant emphasis on attempting torealize cost reductions in the supply chain.Consequently, this had implications forsuppliers and the role of the purchasingfunction in managing the role of suppliers inthe cost reduction process. This represents a

signi®cant change in the way that cost reduc-tion was managed and there was evidence tosuggest a resistance to the new way of working.In particular it was clear that a change in thetraditional attitudes of the people involved inmanaging the relationship is required inrelation to cost reduction in the supply chainin the areas of supplier switching and jointbuyer supplier cost analysis.

Supplier switching

There were a number of instances to illustratea lack of understanding of the true meaning ofcollaborative buyer supplier relationships anda reluctance to acknowledge the change thathas taken place. For example, it was evidentthat buyers are still wedded to the belief thatthe threat of switching supply sources is anentirely justi®able method for achieving costreductions while at the same time expoundingthe virtues of collaborative buyer supplierrelationships; this is illustrated in the follow-ing instance.

The company approached one of its key sub-assemblers to determine whether there was anopportunity for a cost reduction on a highvolume sub-assembly. Discussions revealed noopportunity for such a reduction under thecurrent design. However, design and purchas-ing believed that it would be achieved bychanging the manufacturing process and usingan alternative sub-assembler. Outlining theseproposals to the current sub-assembler, thesub-assembler agreed to reconsider if there wasany scope for a cost reduction with the currentdesign. The sub-assembler came back withreduced costings of the current design whichwas only slightly more expensive than theproposed new design. Although the sub-assembler provided a breakdown of the costsassociated with the sub-assembly there was noevidence of the company working with thesub-assembler to identify any scope for costreductions in the manufacturing process. Itseemed to be more of a situation where thesub-assembler lowered its price for fear oflosing the business.

There were also instances of the buyer'sattitude to cost reduction in other areas ofsupplier management. For example, in



implementing supply base reduction strategiesacross a variety of commodities buyers werenot convinced of the bene®ts of movingtowards a reduced supply base believing it toincrease risk exposure and to provide lessopportunity to switch suppliers to achieve costreductions.

With electronic components undergoingconstant innovations in terms of both function-ality and cost, this provided problems andcon¯icts in the cost reduction team. Forexample, it is quite common for an existingcomponent being supplied to become uncom-petitive if another supplier introduces a muchmore advanced component to the market. Thisscenario leads to the design and cost functionsproposing switching suppliers. However, sucha move provides problems for purchasing as itcon¯icts with their objectives of developingmore collaborative relations with the samesuppliers.

The aforementioned ®ndings signal a lack ofunderstanding, trust and commitment withregard to the concept of true `partnership'between buyers and suppliers. It would seemfair to argue that the company may havedecided at a strategic level to pursue out-sourcing. The evidence presented wouldsuggest that this strategic decision is supportedby super®cial agreement amongst organiza-tional members that closer collaborationbetween buyers and suppliers is mutuallyadvantageous. However, the behaviour ofthose involved in cost reduction activitieswould indicate that little thought has beengiven to the task of identifying the necessarysystemic changes that must be effected in orderto achieve partnership. These changes arecultural in nature, necessitating a shift in themindset of buyers and suppliers with a con-comitant change in attitudes and behaviourswhich signify a commitment to collaborationand team working.

Limited level of joint buyer supplier

cost analysis

The company operated open book arrange-ments with its key suppliers having access tocost information such as material costs, packag-ing and delivery costs, overheads and pro®ts.

There was limited evidence of the companyworking jointly with suppliers to measure thetotal cost of ownershipÐcosts associated withthe acquisition, use and maintenance of a goodor service throughout the entire supply chain(Ellram, 1996). When interviewed the purchas-ing manager agreed that this was a majorimpediment to more collaborative supplierrelationships. For example, during price nego-tiations with key suppliers he was `verysceptical' of cost breakdowns provided bysuppliers to justify any component pricechanges. Also, this made it very dif®cult toconstructively negotiate prices with limitedinformation on supplier internal operationswithout being seen to be creating a win/losesituation. When asked why there was a lowlevel of joint customer supplier cost reductionactivity the purchasing manager identi®ed themajor problem to be that of limited resource inthe purchasing function. While the purchasingmanager had been successful in securingresource for recruiting engineers into thepurchasing function he had been less success-ful in convincing senior management of thebene®ts of recruiting a ®nancial analyst topursue joint cost analysis with suppliers.

Once again these ®nding are indicative of alack of understanding and commitment to thetrue meaning of collaborative activity betweenbuyers and suppliers. Furthermore they re¯ecta disintegrated approach to strategic changewhereby the elements required to effectivelyimplement the policy of outsourcing areabsent. In particular, the scepticism expressedby the purchasing manager signals a lack oftrust in the relationship which had a detri-mental effect on the critical task of pricenegotiation. The resourcing problem cited bythe purchasing manager is potentially veryserious and is one that at best adversely affectsthe effectiveness of the operation, and atworst, places the `partnership' in jeopardy.

Supplier involvement in newproduct development

Internally, the purchasing professional is partof a cross-functional team including design,engineering, manufacturing, component



management and quality. As part of theattempts to develop more collaborative suppli-er relations the company has been attemptingto increase the level of supplier involvement intheir new product development activities.However, there was evidence of the traditionalattitudes of members of the cross-functionalteam hindering the increased involvement ofkey suppliers in new product developmentactivities. For example, there were inconsis-tencies in the management of its key suppliersin new product development along thesedimensions.

Although there was a high level of collabora-tion between the company and its suppliers inthe design process in the areas of informationsharing, there was con¯icting evidence on thenature of involvement of suppliers in thedesign process. In some instances, the supplierwas heavily involved and selected at theconcept stage of the design processÐa keyelectronic component supplier. In otherinstances, the role of the key supplier waslimited to that of providing information onprices and lead times with the supplierselection decision being made at the develop-ment stage. There were a number of barriersidenti®ed to increasing supplier involvementin new product development including thefollowing:

. Attempting to increase the role of thesupplier in the design process led toresistance from designers perceiving it asa threat to their employment if thecompany outsources design activities.

. The purchasing professional was notaccustomed to involving suppliers at anearly stage of the design process. Thetraditional way of dealing with supplierswas that of requesting information, notleveraging the skills and knowledge of thesupplier into the design of the product.There was still a perception that supplierscould be played off against one another inorder to extract more favourable termssuch as price and lead times.

These ®ndings highlight signi®cant barriersto the change required. The barriers are

primarily associated with perceived threats toposition and security. Additionally the beha-viour of the purchasing professional indicates alack of awareness of the required change inattitudes to facilitate the achievement of behav-iours associated with partnership activity. Such®ndings suggest an absence of any form oforganizational activity designed to identify coreissues which must be addressed in order tomanage the process of organizational changerequired in order to engage in successfulstrategy implementation. This is further illus-trated in the area of delivery and logisticsmanagement.

Delivery and logistics management

The importance of delivery and logisticsmanagement was borne out by the fact thatthe following key objectives of the company'sbusiness strategy were directly related to theeffective management and integration of sup-plier materials into the manufacturing process:

. Achieve a 50% reduction in lead time tothe customer;

. Focus on improving delivery to thecustomer's required date;

. Reduce inventory days (including pre-process, work-in-progress and ®nishedgoods);

. Focus on inter-divisional lead times.

The policy the purchasing function had beenpursuing was to extract a higher level of servicefrom its suppliers in the form of shorter leadtimes and more responsive and ¯exible deliv-ery schedules. The major exposure of theresearch to the impact of the company's ordermanagement process on the supply chain wasthrough observing quarterly business reviewswith its key suppliers. Quarterly businessreviews dealt with issues such as quality,delivery, the order management process,packing, bar-coding, EDI and forward business.One of the key issues to have emerged duringthese meetings was the dissatisfaction of thesuppliers at the instability of the customer'sforecast. The instability of the forecast was feltmost starkly amongst the company's sub-assemblers who were managing the company's



indirect suppliers. A great deal of emphasis hasbeen placed on the organizational and logisticsskills of the sub-assemblers being responsiblefor coordinating the in-bound materials fromthe lower level suppliers that go into the sub-assembly processes. A number of representa-tives were interviewed from the company andits key suppliers to determine the key issuesinvolved from both the supplier and customersides:

. Supply sideÐon the supplier side, themost common concern was suddenupsurges in the customer's demandschedules leading to a safety stock beingheld on the supply side. Another relatedissue to arise was that the customer wasusing suppliers to hold inventory to allowfor poor forecasting on the customer side.Therefore, suppliers were suspicious ofthe motives of the customer when thecustomer outsourced assembly processeswhich led to suppliers being responsiblefor coordinating materials from suppliersat lower levels in the supply chain.Suppliers were wary of being responsiblefor `managing' suppliers. The supplierperception of delivery and logisticsmanagement was that of the customer`shifting' inventory responsibility to thesupplier and the supplier becoming liablefor any supplier failure at lower levels inthe supply chain if there were any suddenupsurges in demand from the customer.

. Customer sideÐon the customer side, thepurchasing manager agreed that `moreadequate forecasts of future requirementsand stable delivery requirements' shouldbe provided to suppliers. This would beimproved through better communicationwith marketing, materials management,purchasing and manufacturing. However,a considerable barrier identi®ed by thepurchasing manager was that of limitedresource allocation from the materialsmanagement function with the seniormaterials manager not displaying a greatdegree of urgency in alleviating theproblem of the safety stock on the supplyside. This was not surprising given that

the company had been extracting higherlevels of service from suppliers withoutproviding any additional remuneration.Such attitudes on the part of the seniormaterials manager reveal how the cust-omer is attempting to improve its ownef®ciency by shifting the problem of poorforecasting lower down the supply chain.

The ®ndings presented here display a lack ofunderstanding regarding the activities andbehaviour required to reap the bene®ts ofpartnership activity. The behaviour of supplierssuggests a lack of trust and con®dence in thecustomer. Meanwhile, the comments of thepurchasing manager indicate that the customerhas in principle acknowledged the bene®ts tobe derived from partnership activity. However,in practice, the internal behaviour of theorganization and its people acts in contradic-tion to collaboration.

Core business strategy

It has already been illustrated that the purchas-ing professional has a key role to play insupporting the company's core competencystrategy. The success of such a strategydepends upon close cooperation and coordi-nation between the business functions andthe individuals within each function. Toillustrate, the company argued that the abilityto capture the requirements of their customersand translate them into detailed performancespeci®cations was based on a knowledge ofthe relationship between customer require-ments, product speci®cations, manufacturingand the supply chain which had been accumu-lated through innumerable interactionsbetween engineering, manufacturing, design-ers, purchasing, suppliers and marketing.

The research revealed a lack of understand-ing and misconceptions across the variousbusiness functions. An interview with a

The research revealedmisconceptions across the

business functions



number of engineers revealed that they stillconsidered the PCB manufacturing process tobe their core business rather than order ful®l-ment. This provides an insight into their`engineer centred' view believing the PCBassembly process to be the key determinantfor the existence of the company. Theengineers' perceptions of what constitutesthe company's core business is based upontheir single functional perspective rather thana cross-functional view of the company and theneeds of external customers. These divergentopinions and misconceptions were fuelled bythe fact that the company had no formalpolicy statement on core business and out-sourcing communicated to their employees.The single functional perspective was alsoevident in other areas where there was a lackof cooperation with some functions `defendingtheir territory'. For example, as noted pre-viously, there were con¯icts between membersof the new product development teamwith design attempting to make the supplierselection decision thus limiting the in¯uenceof purchasing.

Such behaviour suggests super®cial organ-izational commitment to partnership activitycoupled with a rigid adherence to an outmodedset of values and beliefs. The organizationalcommitment to partnership is not translatedinto behaviour which provides evidence of®rm support for close collaboration betweenthe partnering organizations, or indeed withinthe supplying organization. The territorialitydisplayed by the various functional specialistscoupled with inadequate coordination andcooperation act as impediments to the typeof inter and intra organizational relationshipsrequired for mutually advantageous relation-ships. To achieve the bene®ts associated withbuyer supplier partnerships it is essential thatall of those involved are committed to the stra-tegy. This must be supported by an organiz-ational programme which aims to enableindividuals to acquire and develop skills,behaviours and attitudes which facilitate theimplementation of strategy. As a pre-requisiteto programme development and delivery,it is essential that each of the partneringorganizations identi®es the range of skills,

behaviours and attitudes which are criticalto support effective partnering activities.The ®ndings presented here indicate thatpurchasing is one particular area whichmerits attention. Within this there is a needto develop a holistic perspective amongstorganizational members thus breaking awayfrom the single functional view.

Discussion

The ®ndings presented have shown how thecompany in this case study has become morefocused on value chain support activities suchas design and engineering in an attempt tofoster effective buyer supplier partnerships.This shift in focus necessitates major change inthe way in which the partnering organizationsand their people manage their activities andbehaviour. In particular, the ®ndings highlighthow the developments in buyer supplierpartnerships have raised the pro®le of thepurchasing professional in cross-functionalactivities such as new product developmentand cost reduction. While this may be regardedas a welcome development, the case study hasshown that many dif®culties exist in managingthe change process. For example, the ®ndingshave revealed that the purchasing professionalis still perceived by other functions such asdesign and engineering as a clerical typeactivity and not value adding. Furthermore,there were instances of the design functionmaking the supplier selection decision with-out consulting purchasing. This problem wasfurther exacerbated with designers and engin-eers being better quali®ed than the purchasingpersonnel. Such a situation leads to thepurchasing professional being perceived as apoor relation in a cross-functional team. Suchbehaviour is indicative of a need to change themindset of all those involved in inter and intraorganizational collaboration.

The creation of a ¯atter and more responsiveorganization is considered to be one ofthe advantages associated with outsourcing(Quinn and Hilmer, 1994). However, the®ndings have shown that this can be quitedif®cult to achieve due to the traditional



functional view of the organization held bypersonnel. In most organizations, there arenatural reasons for the reluctance of internalfunctions to collaborate. Also, managers are notusually trained or developed as collaborators.They usually progress across hierarchical levels

by performing duties for which they aredirectly accountable. The implications of the®ndings in this case are that the company isgoing to have considerable dif®culties adopt-ing `partnering' arrangements with externalsuppliers if it cannot develop a `partnering'mindset across internal functions. A culture inboth the customer and supplier organizationmust exist in order to facilitate and encouragejoint problem solving and decision makingacross intra-organizational boundaries. The®ndings have stressed the need for a culturethat breaks down the internal barriers amongthe traditional functional view of the ®rm.

It has been shown through the case studythat it is not enough to change the attitudes ofthe purchasing personnel but the attitudes ofthe other business functions and seniormanagement must also be changed. Effectiveimplementation of collaborative buyer supplierrelations requires a culture permeating theorganization hierarchy that encourages andvalues collaboration. However, such a require-ment presents organizations with an immensechallenge due to the embedded culture of boththe buyer and supplier who have traditionallyoperated on an arm's length basis. In a majorsurvey of UK senior managers, it was foundthat more collaborative relationships may notbe easily achieved. An atmosphere ofsuspicion, founded on previous behaviour,has caused many companies to hold backfrom trying to build closer relationships (A. T.Kearney, 1994).

The ®ndings here have shown that topmanagement are not yet convinced of theimportance of the purchasing function and

effective supplier management to the achieve-ment of business strategy. Cox and Lamming(1997) argue that the development of value forthe organization requires that the purchasingprofessional must be involved in all aspects ofcorporate decision making and customerinterfaces. However, in this case there is nomember of the purchasing function directlyinvolved in the annual formulation of businessstrategy for the company. This is contrary toCox and Lamming's requirement that thesupply management professional must beinvolved in all aspects of corporate decisionmaking. It also implies that the other functionsand top level management do not perceive therole of the purchasing function to be strategic.

Conclusions

The movement towards more collaborativerelationships between buyers and suppliersconstitutes a major change in the way thatorganizations operate. For many this representsa major shift in organizational strategy, theimplementation of which is highly dependentupon the activities and behaviour of all organ-izational members.

The case study ®ndings presented withinthis paper highlight a number of lessons forthose who are considering the pursuit ofcollaborative buyer supplier relationships. Inthe ®rst instance, the experiences of the caseorganization suggest that the changes effectedby partnership arrangements strike at the veryheart of the enterprise and they have implica-tions for the way in which the organization isstructured, individual roles, responsibilities,reward systems and reporting relationships. Itis important to acknowledge that the change issystemic in that modi®cation to structuralarrangements for example, automatically hasa knock-on effect upon individual roles,responsibilities, reward systems and reportingrelationships. In terms of managing the entireprocess, it is essential to ensure the adoption ofa holistic approach to change management.This is likely to demonstrate acknowledgementof the integration that exists between the

Managers are not usuallytrained as collaborators



different components of the organizationalsystem.

The ®ndings reported in this paper suggestthat individual employees on whom organiza-tional performance is highly dependent havebeen largely ignored in the process of strategyformulation and implementation. When manag-ing the process associated with the movementtowards more collaborative buyer supplier rela-tionships it is essential to assess the impact thatthis will have upon those who will be mostaffected by the impending change. This is likelyto reveal a need for training to permit skillacquisition and development in a variety ofareas including team working, problem sol-ving, negotiation and con¯ict management.

It has been shown that the case organizationhas failed to engage in a process wherebydirect time, money and efforts have beeninvested in bringing about change to itsculture, structure and behaviour, each ofwhich is necessary to support a programmegeared towards the achievement of competi-tive advantage through partnership relation-ships. It would appear that the strategy of theorganization exhibits disintegration in thesense that it has tended to focus on contentissues such as the achievement of ef®ciency inthe short term, while simultaneously it hasignored the process of how to manage this inan effective manner. It is argued that there isevidence of disintegration in the approach tostrategic change whereby the role of peopleand the culture change required to support theimplementation of strategy have been largelyignored. In fostering commitment to change,the experience of the case organization hasdemonstrated a need to enhance understand-ing among employees with regard to whatpartnership means for the organization ingeneral, and for the individual employee inparticular.

In essence the pursuit of collaborative buyersupplier relations requires a major shift in the`mindset or operational paradigm' of organiza-tional members (Johnson, 1995). In otherwords, it requires cultural change within thebuyer and supplier organization where there isenhanced understanding of the concept ofmutual dependency. It is acknowledged that

effecting culture change is often regarded asbeing a mammoth task, which is made evenmore dif®cult by the deeply embedded culturethat has evolved over a long period of time.This is further complicated when trying toachieve `cultural alignment' among businesspartners. Nonetheless, the challenges pre-sented by the task are not suf®cient reasonfor excluding the issue of culture change whenpursuing mutually bene®cial trading relation-ships. In many respects it can be argued thatthe senior management team as organizationalleaders have a critical role to play in bringingabout the required transformation (Koteen,1991; Vinzant and Vinzant, 1996; Beaver andStewart, 1996). Such an approach to themanagement of cultural change is crucial,given that the purchasing function has beenperceived as a `poor relation' and has not beeninvolved in the strategy process.

For many organizations, the turbulence andhostility characteristic of their operatingenvironments have led to the development ofpartnership relationships between buyers andsuppliers as a means of achieving competitiveadvantage. It has been noted that unlike manydevelopments within management, partner-ship is not a fad (Cox, 1996) While thedemands associated with effecting mutuallyadvantageous relations present new andchallenging territory, the ®ndings presentedwithin this paper show how an organizationcan easily ®nd itself caught in a tangled web ofstrategic concepts which inevitably lead to adisintegrated approach to change. As a con-sequence, organizational decision makers tendto chart logical and rational programmes aimedat achieving desired results in the short term.As is frequently the case, within the organiza-tion at the core of this paper, strategy has beenformulated by a small team of senior managers,more or less in isolation from those whosesupport is a vital ingredient for implementation(see for example, Beer et al., 1990; Miller andDess, 1996; Johnson and Scholes, 1997).Furthermore, it has been formulated by ateam who are often perceived to makedecisions which display a lack of knowledgeand understanding of working processes,practices and relationships throughout the



organization, or of the implications of theirdecisions in terms of support structures neces-sary to facilitate implementation. Thus, con-sidering the inter and intra organizationalimplications of `partnership', to effect success-ful collaborative relationships, it is essential thatorganizations pursue a much more participa-tive approach to the strategy making process.

Traditionally, strategic management has beenprimarily concerned with the relationshipbetween an organization and its environment.Worley et al. (1996) argue that this involvescrafting relationships between strategy, struc-ture and process to maintain the organization'sposition in its environment in order tomaximize performance. While it is acknow-ledged that these are important tasks, they tendto document a programme of events whichlead to a set of quanti®able outcomes. How-ever, they fall short of describing the processeswhich will be required in order to facilitate theachievement of those quanti®able results(Hart, 1992; Pettigrew, 1992). In other words,these approaches outline the content ofchange, but not the process. As a consequence,disintegration tends to be the outcome of suchproposed strategic change.

The nature of business today is such thatthere is likely to be an increase in the numberof organizations engaged in buyer supplierpartnerships. This paper has aimed to highlightthe fact that for many, this development repre-sents strategic change. This in turn necessitatescultural, structural and behavioural change. Inpursuing mutually bene®cial trading relation-ships, the experiences of the case organizationsuggest that there are a number of issues thatmust be addressed. These include the adoptionof an integrated approach to the managementof strategic change, the pivotal role of seniormanagers as facilitators of change, and theinvolvement of those most affected by themovement towards more collaborative buyersupplier relationships.

Biographical notes

Ronan McIvor is a lecturer in operationsmanagement within the School of Management

at the University of Ulster. He holds a ®rstdegree in business studies, an MSc in comput-ing and information systems and his doctorateis in the area of supply chain management.

Marie McHugh is a senior lecturer in organ-izational behaviour within the School ofManagement at the University of Ulster. Sheholds a ®rst degree in psychology, an MSc inoccupational psychology and her doctorate isin the area of organizational health.

References

Abraham, S. and Pekar, P. (1995). Is strategic

management living up to its promise? Long

Range Planning, Vol. 28, October, pp. 32±44.

A. T. Kearney Ltd. (1994). Supply Chain Integra-

tion: Partnership or Powerplay?, A. T. Kearney,

London.

Balogun, J. and Hope Hailey, V. (1999). Exploring

Strategic Change, Prentice-Hall, London.

Beaver, G. and Stewart, J. (1996). HRM: the

essential ingredient for successful strategicchange, Strategic Change, Vol. 5 No. 6, pp.

307±308.

Beer, M., Eisenstat, R. and Spector, B. (1990). Why

change programs don't produce change, Har-

vard Business Review, Vol. 68 No. 5, Novem-

ber±December, pp. 158±66.

Brooks, I. and Bate, P. (1994). The problems of

effecting change within the British Civil Service:a cultural perspective, British Journal of Man-

agement, Vol. 5 No. 3, pp. 177±190.

Cox, A. and Lamming, R. (1997). Managing supply

in the ®rm of the future, European Journal of

Purchasing and Materials Management, Vol. 3No. 2, pp. 53±62.

Cox, A. W. (1996). Relational competence

and strategic procurement management:towards an entrepreneurial and contractual

theory of the ®rm, European Journal of

Purchasing and Supply Management, Vol. 2No. 1, pp. 57±70.

Dobler, D. W. and Burt, D. N. (1996). Purchasing

and Supply Management, McGraw-Hill, NewYork.

Dyer, J. H. (1996). How Chrysler created an

American Keiretsu, Harvard Business Review,

Vol. 74 No. 4, July-August, pp. 42±56.



Ellram, L. M. (1996). A structured method forapplying purchasing cost management tools,

International Journal of Purchasing and

Materials Management, Winter, pp. 11±19.

Gelinas, R., Jacob, R. and Drolet, J. (1996). Just-in-

Time purchasing and partnership strategy, Euro-

pean Journal of Purchasing and Supply

Management, Vol. 2 No. 1, pp. 39±45.Hamel, G. and Prahalad, C. K. (1994). Competing

for the Future, pp. 84±85, Harvard BusinessPress, Boston, Massachusetts.

Hart, S. (1992). An integrative framework forstrategy processes, Academy of Management

Review, Vol. 17 No. 2, pp. 253±276.Hunter, L., Beaumont, P. and Sinclair, D. (1996). A

`partnership' route to human resource manage-ment? Journal of Management Studies, Vol. 33No. 2, pp. 235±258.

Hyun, J. (1994). Buyer-supplier relations in the

European automobile component industry, Long

Range Planning, Vol. 27 No. 2, pp. 66±75.

Jennings, D. (1997). Strategic guidelines for out-sourcing decisions, The Journal of Strategic

Change, Vol. 6, April, pp. 85±96.Johnson, G. (1995). Managing strategic changeÐ

strategy, culture and action. In: P. Sadler (ed.),

Strategic Change: Building a High Perform-

ance Organization, The Best of Long Range

Planning, pp. 1±15, Pergamon, Oxford.Koteen, J. (1991). Strategic Management in

Public and Non-Pro®t Organizations, Praeger,New York.

Lamming, R. (1993). Beyond Partnership, Strat-

egies for Innovation and Lean Supply, Prentice-

Hall, Hemel Hempstead, UK.Macbeth, D. and Ferguson, N. (1994). Partner-

ship Sourcing: An Integrated Supply Chain

Approach, Pitman, London.

McHugh, M. (1997). The stress factor: another itemfor the change management agenda? Journal of

Organizational Change Management, Vol. 10No. 4, pp. 345±362.

McIvor, R. T., Humphreys, P. K. and McAleer,W. E. (1997). The implications of the trend

towards partnership sourcing on buyer-supplier

relations, The Journal of General Management,Vol. 23 No. 1, pp. 53±69.

Miller, A. and Dess, G. G. (1996). Strategic

Management, International Edition, McGraw-

Hill, New York.Pettigrew, A. (1992). The Character and Signi®-

cance of Strategy Process Research, Strategic

Management Journal, Vol. 13, Special Issue,

pp. 5±16.Quinn, J. B. and Hilmer, F. G. (1994). Strategic

outsourcing, Sloan Management Review,Summer, pp. 43±55.

Sako, M. (1992). Prices, Quality and Trust: Inter-

Firm Relations in Britain and Japan,

Cambridge University Press, Cambridge.Saunders, M., Lewis, P. and Thornhill, A. (1997).

Research Methods for Business Students,Pitman, London.

Sefton, T. (1992). Understanding Partnership

Sourcing, Partnership Sourcing Ltd., CBI,

London.

Thomas, R. and Oliver, N. (1991). Componentssupplier patterns in the UK motor industry,

Omega, Vol. 19 No. 6, pp. 609±616.Vinzant, J. and Vinzant, D. (1996). Strategic

management and total quality management:challenges and choices, Public Administration

Quarterly, Summer, pp. 201±219.Womack, J., Jones, D. T. and Roos, D. (1990). The

Machine that Changed the World, RawsonAssociates, New York, NY.

Worley, C., Hitchin, D. and Ross, W. Integrated

Strategic Change: How OD Builds Competitive

Advantage, Addison-Wesley, MA.Yin, R. K. (1994). Case Study Research: Design

and Methods, Sage, London.



Documents

Collaborative buyer supplier relations: implications for organization change management