Research

Supplier integration: making the most of business partnerships

Supplier integration is an increasingly studied area of supply chain management. In a nutshell, it is a process whereby a buyer and a supplier synchronize their firm’s processes for mutual benefit. Research Professor Thomas Kull looks to explain the process in his latest research.

2017-05-10

If you’ve ever hired a contractor to work on your home — perhaps to remodel your kitchen or update a bath — you most likely interviewed a few first. What influenced your final decision? Of course, economics would be at the top of the list. Which estimate best suited your budget? How much would materials cost? Which contractor offered the best plan for your investment, one that would increase the value of your home? In addition to dollars and cents, you would have likely taken other things into account, too. For example, maybe the contractor you chose stood out because he seemed especially trustworthy or has a strong work ethic. Or perhaps he was a good communicator who would keep you informed when the project was underway. You would have also considered other factors like scheduling and the likelihood that the project would be done on time.

On a very small scale, the way you might choose and work with a contractor in your home provides a tiny snapshot of how large businesses select and work with outside vendors and the types of factors that influence their attitudes toward these partnerships. Such influences — like the contractor’s work ethic or the project schedule — and how they vary culturally, is the subject of the paper, “Attitudes toward supplier integration: the U.S. vs. China,” co-authored by Professor Thomas J. Kull; Yang Yang, PhD, assistant professor at the University of Texas, El Paso; Abraham Y. Nahm, PhD, University of Wisconsin; and Benbo Li, PhD, Chongqing University. Publication of the paper is forthcoming in the International Journal of Operations and Production Management.

Win-win partnerships

Supplier integration is an increasingly studied area of supply chain management. In a nutshell, it is a process whereby a buyer and a supplier synchronize their firm’s processes for mutual benefit. The buyer gains a partner that provides a needed product or service and the supplier enjoys a profitable client relationship.

"One example would be a hotel chain that contracts with a cleaning service,” Kull says. “Both businesses need to coordinate their processes and scheduling so rooms are clean by the time guests are ready to check in, and a lot goes into that when there are multiple hotels."

Businesses tend to stick with the same suppliers, “not just because they’re really good, but because it helps them get the job done,” Kull explains. However, although many companies couldn’t operate without suppliers, “it’s not always peaches and cream.” Obstacles such as the lack of trust or the lack of performance data integration could hinder supply chain integration. “Suppliers might raise their prices over time or might be privy to sensitive information that could compromise the buyer competitively,” Kull says.

Collaborating and synchronizing

So Kull, Yang, and their co-authors set out to study what factors influence managerial attitudes toward supplier integration. This research is valuable to businesses because it can help pinpoint ways to avoid employees’ resistance and ultimately build stronger and more productive supplier relationships — the ideal scenario for all involved. “It turns out that economic factors are only part of what forms managerial attitudes toward supply chain practices,” Yang says. There are two other factors that play key roles: collaborative organizational culture and synchronicity, which this study examined within both U.S. and Chinese organizations. In the same way a contractor might stand out for his honesty, work ethic, and communication skills, companies that value those characteristics within their own internal culture tend to view supplier integration more favorably. Likewise, when firms emphasize synchronous manufacturing practices — like the contractor’s ability to schedule and coordinate resources — internally, managerial attitudes toward those practices are also positive.

Cultural values

The study found that managerial attitudes are also affected by the country context. Interestingly, it revealed a considerable cultural difference between the U.S. and China: Having a collaborative organizational culture is more predictive of positive supplier integration attitudes in the U.S., while synchronicity is more predictive in China. Why? Because Chinese society’s centuries-old history of traditions that emphasize collectivism, family, and self-sacrifice, are more predisposed to collective action than U.S. managers, according to Yang. So, emphasizing and demonstrating the benefits of synchronous, firm-to-firm coordination is important in “influencing managerial attitudes toward supplier integration in China,” Kull explains. The United States, on the other hand, “has a long history of synchronized manufacturing processes,” he adds. Think of Francis Lowell’s textile mill that led to low-cost textile production or the Ford motor company, which gained fame for its high-precision assembly lines. This history suggests that unified, synchronized firm-to-firm processes are considered a norm that is woven into the fabric of the U.S. business culture.

Yin and Yang

Not surprisingly, it turns out that in the same way people tend to gravitate toward others with similar values, businesses feel positively about working with like-minded partners.

"How you work with each other already within your company will be a good predictor of how you’ll work with external suppliers,” Kull says. “You’re used to working that way, and it’s much better off."

Moreover, businesses in both countries respond favorably to characteristics other than those embedded in the country’s historical culture, suggesting an openness to new ideas. So, based on the findings of this research, the hotel chain in the U.S. will appreciate its partner cleaning service’s ability to coordinate processes, but the hotel staff will respond even more favorably to its relationship attributes — like its commitment to customer service. Conversely, the staff at that same hotel in China will appreciate a supplier relationship that emphasizes synchronous processes, such as advanced technology that ensures precise scheduling and efficiency. The effect is a symbiotic partnership between buyer and supplier.

"This research is unique because we don’t separate inter-firm management from intra-firm management in the minds of managers,” says Yang, who worked on the paper with Professor Kull while working toward her doctorate. “One is related to the other."

The bottom line:

Here’s how to apply the research, recommends Kull and Yang.

• For managers: Be mindful of your own predispositions and past experiences when considering business partnerships. Are they truly relevant to the partnership, or driven by something else? U.S. managers might be quick to assume their collaborative culture translates to business partnership, while Chinese managers might be quick to assume their technically synchronized processes translate to business partnerships.
• For contractors: Be aware that your customer's leadership and your customer's employees have independent attitudes toward a partnership, leading to better or worse integration. When dealing with a U.S. customer, looking at how customer's employees act with each other will predict attitudes toward how they will act with you. When dealing with a Chinese customer, looking at how the customer's production is arranged and connected will predict attitudes toward how they will work with you.
• For organizations: How prepared a workforce is for developing inter-organizational partnerships can be assessed by the intra-organizational characteristics. Do not expect U.S. organizations to smoothly partner unless you see their organizational culture matching such behavior. Do not expect Chinese organizations to smoothly partner unless you see their workflow processes matching the intended operational arrangements.

Supply Chain