PERFORMANCEINCHINESECOMPANIES
ChenZhixiang SchoolofBusiness,Zhongshan(SunYat-Sen)University,
Guangzhou,510275,P.R.ofChina e-mail:mnsczx@zsu.edu.cn
Receivedon11/3/2004 Acceptedon17/11/2004
Abstract
Thispaperdiscussestheperformanceofsupplier/buyercoordinationinsupplychainsystemsinChinabasedon datafromasurveyofthatcountry’sbusinesssector.Thesurveyindicatesthattherapidlyexpandingeconomyhasrai-sedtheawarenessofanincreasingnumberofChinesefirmstotheimportanceofcooperatingandcoordinatingwith partnersinsupplychainmanagement.However,althoughcoordinateddelivery,qualityandresponsivenessshowan upwardtrend,suchisnotthecaseininformationsharingandincooperativeeffortstoreduceinventoryandcosts.Hen-ce,manycompanieshaveyettoformclosecooperativerelationshipswithpartners.Thisstudymaybeusefulforboth Chineseandforeigncompanies,servingtounderpinthedevelopmentofnewstrategiesforoperatingsupplychainsin thechangingglobaleconomy.
Keywords:supplier/buyerrelationships,coordination,agilesupplychain. v.11,n.3,p.289-298,set.-dez.2004
1.Introduction
Supplychainmanagementrepresentsanewcompeti- tivestrategyforthenewcentury.Inrecentyears,anin- creasingnumberofpeoplehavebeenattentivetotheper-formance of supply chain management (Gunasekarn et al.,2001;VanHoeketal.,2001;RamdasandSpekman, 2000;AgarwalandShankar,2002;ChanandQi,2002; Beamon,1999).Unlikeotherstudiesreportedinthelit-eraturethatfocusontheoveralloperationalperformance ofsupplychains,thispaperinvestigatestheperformance ofsupplier/buyercoordinationbasedondatafromasur-veyofChina’sbusinesssector,exploringsupplier/buyer relationshipsandproposingsolutionsaimedatimprov-ingsupplychainmanagement.
2.Keyperformanceindicesforbuyer-suppliercoordinationinsupplychain
systems
A number of articles on supply chain management
performance have been published in academic journals inrecentyears.Inourvision,themostperfectframework formeasuringtheperformanceofsupplychainmanage-ment was proposed by Gunasekaran et al. (2001), who establishedaframeworkconsistingofthreelevelindices: (1)Strategicperformance;(2)Tacticalperformance;and (3) Operational performance. Unfortunately, however, theirpaperlacksempiricaldata.
Van Hoek et al. (2001) measured supply chain agil-itybasedonfourfactors:(1)Sensitivitytothecustomer; (2)Virtualintegration;(3)Processintegration;(4)Net-workintegration.Theirresearchcomprisedasystematic theoreticalanalysisandanempiricalinvestigationbased onquestionnaires,butdidnotincludeindicestoquantity performance.
ancefortwotypesofsupplychains,i.e.,innovativesup-plychainsandfunctionalsupplychains.
Beamon(1999)statedthatmosttraditionalmodelsfor measuringperformanceusedpredominantlytwodistinct performance measurements: (1) cost; and (2) a combi-nationofcostandcustomerresponsiveness.Thisauthor proposed a new framework for selecting performance measurementsystemsformanufacturingsupplychains: (1) Resource indices; (2) Output indices; and (3) Flex-ibilityindices.Resourceindicesincludecost,inventory, returnoninvestment(ROI);outputindicesincludesales, profit, fill rate, on-time deliveries, and backorder/stock out, customer response time, manufacturing lead-time, customercomplaintsandshippingerrors;andflexibility indices include volume flexibility, delivery flexibility, mixflexibility,andnewproductflexibility.
Althoughtheliteraturecontainsanumberofresearch-esonsupplychainperformance,mostofthemarebased on the entire supply chain management system rather thanonspecialsupplychainstrategy.Supplier/buyerco- ordinationisacrucialoperationalstrategy;however,al-thoughmuchattentionhasfocusedonitstechnologyand method,performancemeasurementshavenotbeenstud-iedempirically.Table1showssomecriticalperformance dimensionsforbuyer-suppliercoordinationsummarized fromdifferentauthors’viewpoints.
Referring to other researchers’ viewpoints combined with our own investigation into business practices in China, this paper establishes a set of key performance indicesforbuyer-suppliercoordinationinsupplychains, asindicatedinTable2.
3.Methodology
Our investigation into the performance of supplier/ buyercoordinationinChinesecompanieswasbasedona surveyweconductedfromAugust2002toOctober2003. Basedonaquestionnaireandonstatisticaldata,weana-lyzed the performance of buyer-supplier coordination. The following section describes the questionnaire, the samplingmethodandouranalysisofthecollecteddata.
3.1Questionnairedesign
Thequestionnaireconsistedofthreesections:
(1)Basiccompanyinformation,includingownership,type ofindustry,geographicaldistribution,varietyandscale ofpurchasedmaterials,organizationalstructure,etc;
(2)Measurementofbuyer-suppliercoordinationperform-ance.Allthequestionsofferedmultiplechoiceanswers, some of them qualitative, using descriptive words suchas“good”,“high”,andothersquantitative,using numbersorpercentagessuchas“99%”or“morethan 3years”;and
(3)Buyer-suppliercoordinationstrategies.Similartothe performancemeasurement,questionsregardingbuyer-suppliercoordinationstrategiesalsoinvolvedmultiple choicereplies.
3.2Samplinganddataanalysis
The first sampling began in August 2002, when 1420questionnairesweremailedtocompaniesindiffer-ent geographical locations in China.At the same time, 100questionnairesweredispatcheddirectlytoMBAstu-dentsatouruniversity(spotsampling).Thefirstroundof samplingyieldedaverylowresponserate,sowereduced sampling by mail and increased spot sampling in the secondround.Toimprovetherepresentativenessofthe spotsampling,weincreasedourspotsamplingfrom1to 6universitieslocatedindifferentpartsofChina.Thein-stitutionsinvolvedwereBeijingUniversity,auniversity inthenorth,FudanUniversityintheeast,HuazhongUni-versityofScience&Technology,auniversityincentral China,andZhongshanUniversityinthesouth.Because thesefourregionsarethefastestgrowinginChinaand becausetheaforementioneduniversitiesarewellknown andtheirMBAstudentsareconnectedtocompaniesin different regions of China, the spot sampling from the universitiesinthesefourregionsbasicallyreflectsChi-na’ssupplychainmanagementtrends.Table3showsthe samplesizesresultingfromthetwosamplingrounds.
Ananalysisofthedataindicatesthatnon-responsebias
Table1.Buyer-suppliercoordinationperformancedimensions.
Performancedimension Researcherandtime
Levelanddegreeofinformationsharing Tonietal.(1994)
Mason-JonesandTowill(1999) Gunasekaranetal.(2001)
Buyer-suppliercostsavinginitiatives ThomasandGriffin(1996)
Gunasekaranetal.(2001)
Extentofmutualcooperationleadingtoimprovedquality Grahametal.(1994)
Gunasekaranetal.(2001) Fabrizioetal.(2001)
Theextentandstageatwhichsuppliersareinvolved Tonietal.(1994)
Gunasekaranetal.(2001)
Extentofmutualassistanceinproblemsolvingefforts MaloniandBenton(1997)
isinsignificantbetweenthetwosamplingrounds.Among thequestionnairesreturned,companyownershipwasdis- tributedasfollows:79state-ownedcompanies(account- ingfor37.4%),45privatelyownedcompanies(account-ingfor21.3%),40Sino-foreignjointventurecompanies (accountingfor19.0%),42foreigncompanies(19.9%), and5companieswithothertypesofownership.Thedis-tributionofcompaniesbytypewas:domesticappliances: 10%, chemicals: 3%, mechanical products: 18%, auto-motive:8%,food:5%,telecommunicationsandIT:8%, pharmaceuticals:5%,metallurgy:4%.
4.Analysisofoverallresults
Thissectionbrieflydiscussesourfindingsaccording to the supplier/buyer coordination performance indices listedinTable2.
4.1Operationalperformance
AccordingtoTable2,operationalperformanceindices
are divided into four dimensions: materials flow, infor-mationflow,cashflowandworkflowperformance.
4.1.1Materialsflowcoordinationperfor-mance
Several indices can be used to measure the perform-anceofmaterialsflowinsupplychains.Inoursurvey,we usedfivematerialsflowindices:(1)inventoryturnover;(2) safetystock;(3)ontimedelivery;(4)leadtimeandrelated purchasingtendency;and(5)qualityofmaterials.
4.1.1.1Inventoryturnover
Asageneralruleofthumb,thehigherthelevelofin-ventory turnover the better the inAsageneralruleofthumb,thehigherthelevelofin-ventory management. Toimprovetheperformanceofinventoryturnover,sup-plierandbuyershouldcooperatetoreduceinventoryand optimize distribution channels, adopting new inventory management strategies such as postponement and joint replenishment strategies. Comparisons cannot be made
betweentheabsoluteturnoverratesofdifferentcompa-Table2.Performanceindicesofbuyer-suppliercoordination.
Type Dimension Indices Note
Operationallevelperformance
Materialsflow Inventoryturnoverlevel
Safetystocklevel Ontimedeliverylevel
Leadtimeandpurchasingtendencies Qualityofmaterials
Cashflow Ratiooftimelyclearingpayment
Informationflow Frequencyofinformationexchanges
Timelinessofinformationtransfer *
Rateofaccuracyoftransferredinformation *
Costofcommunicatinginformation *
Workflow Averagenumberofbuyer/supplierconflictsperyear
Agilityinchangingsupplyplans Speedinsolvingfeedbackproblems
Degreeofjointparticipationinqualityimprovement Effectofcooperationinreducingcost
Strategiclevelperformance Degreeoftrust Supplier’strustinbuyer
Buyer’strustinsupplier
Degreeofsatisfaction Supplier’ssatisfactionwithbuyer
Buyer’ssatisfactionwithsupplier
*Theseindicesarenotanalyzedherebecausemostoftherespondentswereunabletoprovideaccuratedataonthem.
Table3.Statisticalresultsofsampling.
Samplingtime Questionnairesentout Repliesreceived Responserate
Total Mail Spot Total Mail Spot Effective Total Effective
First 1520 1420 100 89 40 49 80 5.80% 5.2%
Second 575 275 300 162 13 149 131 28.10% 22.8%
niesbecausetheyusedifferentmaterials.Therefore,we usedacomparisonindexforouranalysis–thetendency ofinventoryturnoverrate,asindicatedinTable4.
From Table 4, one can see that the performance of inventory turnover level is not very good, because the inventory turnover rate shows a “downward” and “no change”tendency(totalabout70%)thatexceedsthe“up-ward”trend(only29.2%).Althoughmanymarketfactors caninfluencetheperformanceofinventoryturnover,the datashownhereindicatesthatcompanieswoulddowell toincreasetheircooperationandcoordinationininven-torymanagement.
4.1.1.2Safetystock
Most companies need to maintain a safety stock to mitigatetheimpactofdemandorsupplyuncertaintieson productionoperations.However,safetystocksshouldbe keptatsuitablelevels.Inourstudy,weusedthesafety stock proportion (percentage that safety stock materi-alsrepresentinthetotalamountofmaterials)andsafety stock tendencies as the two coordination performance indices.
Figure1showsthat,inthelastthreeyears,thepropor-tionofsafetystockofabouthalfthecompanieswason a“downward”trend(42.4%),22%showedan“upward” trend, and 35.6% of companies showed basically “no change”. In other words, there is an overall downward trendofsafetystocklevels,whichisagoodsignofim-provement.
Another index “safety stock proportion trend” also shows a similar pattern, with 20.9% companies show-ingan“upward”trend,41.4%a“downward”trend,and 37.7%showingbasically“nochange”.
Accordingtoinventorytheory,twofactorsaffectthe safetystocklevel,i.e.,demanddeviationandsupplylead
time.Therelationshipofthesetwofactorscanbeformu-latedas:
(1)
Toreducethesafetystock,supplierandbuyershould worktogethertoshortenleadtimesandreducethedemand uncertaintyfactor.Tothisend,somefirmsandtheirsup-pliers have cooperation initiatives to improve inventory management, such asTCL (a major ChineseTV manu-facturer),whichhasusedVendorManagementInventory (VMI)asanewinventorymanagementtechnology.
4.1.1.3Ontimedelivery
Timeisnowgenerallyrecognizedasthemostimportant competitiveelement;hence,improvingthelevelofontime delivery is essential for most companies. Table5 shows oursurvey’sfindingsontheontimedeliverylevel.
Table5showsthatdeliveryperformanceisbasically satisfactory. Furthermore, the on time delivery trend (Figure2)revealsthatperformanceofontimedelivery hasimproved,indicatingthatmanyChinesecompanies haveimprovedtheirresponsetomarketdemands.
Toimprovetheirontimedeliveryperformance,some Chinese firms have implemented the JIT philosophy in purchasing,suchasDongfengCitroenAutomobileCom-pany (DCAC), a Sino-French joint venture in Wuhan. By establishing close relationships with several impor-tant suppliers and through JIT purchasing, DCAC has improvedthetimelinessofitsdeliveriesandreducedits inventorycosts.
4.1.1.4Leadtimesandrelatedpurchasing
tendencies
Liketheindexofontimedelivery,leadtimeisalsoa
Table4.InventoryTurnoverlevel.
Tendencyofinventoryturnoverrate
Downward Upward
Basically nochange
Respondentrate 34.4% 29.2% 36.4%
Table5.Ontimedeliverylevel. Rateofontimedelivery Below
90% 90to94% 95to99%
Over 99%
Respondent 11.3% 28.1% 41.4% 19.2%
52.7
13.4
33.8
0 10 20 30 40 50 60
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sp
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(p
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up down no change
Fig02
Figure2.Ontimedeliverytrendinthelastthreeyears. 22
42.4
35.6
0 10 20 30 40 50
re
sp
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(p
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ag
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up down no change
FIG01
time-basedcompetitiveelement.However,absolutelead time values cannot be compared because different ma-terialshavedifferentleadtimerequirements.Therefore, ouranalysiswasbasedonleadtimetendencies.Figure3 illustratesthesurvey’sfindingsonleadtimetendencies overthelastthreeyears,indicatingthatmorethan50%of thecompaniessurveyedareawareoftheimportanceof reducingpurchasingleadtimesinordertobetime-based competitive.
Longerleadtimesnotonlycauseinventorybuildups but also produce the “Bullwhip Effect” across supply chains; therefore, supplier and buyer should cooperate to optimize the business process, e.g., by adopting the E-purchasingmode,andimprovetheefficiencyoftheir logistics systems. DongguanArk-Les is a Sino-foreign joint venture located in Guangdong province, China. Becausethemajorityofmaterialswerepurchasedfrom NorthAmericainthepast,theaverageleadtimewasvery longandmaterialsinventorytieduptoomanyfunds.To-day, however, the local supplier development program hasnotonlycutdownlogisticscostsbutalsoshortened
materialsprocurementleadtimes(fromtheoriginalsix weekstotwoweeks).
4.1.1.5Qualityofmaterials
From the standpoint of supply chain management, supplier and buyer should help each other to improve quality.Thequalityofmaterialsoftenindicatescoordi- natedsupplier/buyerstrategiestoimprovequality.Mate-rialsqualitytrendsinthepastthreeyearsareillustrated inFigure4.
Thisfindingindicatesthat,overthelastthreeyears,a largeproportionofthesurveyedcompaniesfocusedin-creasingattentionontheproblemofquality.Inthelast decade,manyChinesecompanieshaveadoptedadvanced management systems and methods to improve quality, includingTotalQualityManagement(TQM),ISO9000 systemsandSixSigma,whichshouldhelpimprovethe qualityoftheirmaterials.
4.1.2Cashflowcoordinationperformance
Althoughcashflowisoneofthefouractivitiesinthe supply chain, it has failed to attract enough attention fromacademics.Fewerresearcheshavefocusedoncash flowperformancethanonmaterialsorinformationflows. Inoursurvey,weusedtheontimeclearingpaymentrate astheindextomeasuresupplier/buyercoordinationper-formance,whichisshowninTable6andFigure5.
Table 6 shows that almost 70% of companies make theirpaymentsinatimelymanner.Furtheranalysisre-veals that companies with different types of ownership display dissimilar cash flow coordination performance. Foreigncompaniesshowthebestperformance,whilepri- vatelyownedandstate-ownedcompaniesdisplayarela-tivelypoorerperformance.
4.1.3Informationflowcoordinationper-formance
Informationflowcoordinationisoneofthemostex-haustivelystudiedtopicsinsupplychainresearch(Sahin and Robinson, 2002; Thonemann, 2002). Information sharingandcommunicationreduceuncertaintiesandin-creasethesynchronismofbuyer/supplieroperations. Theindicesweusedheretomeasuretheperformance of information coordination were: (1) frequency of
in-63.5
10.8 25.6
0 10 20 30 40 50 60 70
re
sp
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(p
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ag
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shortening lengthening no change
FIG03
48.8
20.5
30.7
0 10 20 30 40 50
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(p
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ag
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up down no change
FIG04
Table6.Ratioofontimeclearingpayment.
Timelyclearingpaymentrate
Under70% Over80% Over90% 100%
Totalrespondents 13.9% 18.7% 40.7% 26.8%
State-ownedcompanies 9.3% 28.1% 40.5% 21.8%
Privatelyownedfirms 16.6% 27.7% 33.0% 22.0%
Jointventures 3.7% 12.9% 41.7% 41.7%
Foreigncompanies 0 11.1% 50.0% 38.8%
Figure3.Leadtimetendencyinthelastthreeyears.
formation communication; (2) on time of information transfers;(3)accuraterateofinformationtransfers;and (4)cost of information communication. In our analysis weusedonlytheindexoffrequencyofinformationcom-munication because most of the respondents could not giveprecisedataintheirresponseforotherindices(most ofthemdidnotanswerthosequestions).
Figure6,whichillustratesourfindingsoninformation performance,revealsthatmostcompaniescommunicate frequentlywiththeirpartners.However,ouranalysisof supplier/buyer coordination strategies revealed that in-formationwasexchangedmainlybytelephone,letterand fax,whiletheuseofadvancedcommunicationtechnolo-giessuchastheInternetandElectronicDataInterchange (EDI)wasnotcommon.Thisfactsuggestthattoimprove supplier/buyercoordination,companieswoulddowellto adoptup-to-dateITtechnologiestolinksupplychainsand speeduptheexchangeofinformationbetweenpartners.
4.1.4Workflowcoordinationperformance
The literature on supply chain management reveals thatmostresearchersconsideronlythreedimensionsof coordination–informationflow,materialsflowandcash flowcoordination.Inthispaper,weaddanotherdimen-sion – workflow coordination.We divide the workflow performanceintofiveindices:(1)averageannualnumber of buyer/supplier conflicts; (2) agility of supply plan changes;(3)speedoffeedbackproblemsolving;(4)de-gree of mutual participation in quality improvements; and(5)effectofcoordinationinreducingcost.
4.1.4.1Averageannualnumberofbuyer/
supplierconflicts
Supplier/buyer relationships may often be rife with conflicts, particularly if the two partners have different business goals and styles. However, such conflicts can beminimizedthrougheffectivebuyer/suppliercoordina-tion,thusreducingavoidablewasteoftimeandcost.We haveusedtheaverageannualnumberofbuyer/supplier conflicts to measure this performance, which is shown inTable7.
Table7showstheabsolutenumberofconflicts.How-ever,sincedifferentcompanieshavedifferentscalesand modesofoperation,thesefigurescannotbeusedforpur-poses of comparison. Our analysis of the improvement level of this index is based on the annual tendency for conflicts,showninFigure7.
Figure 7 indicates that almost 50% of the surveyed companiesreportedadecliningnumberofconflictsover the last three years, indicating that many of them have improvedtheirworkflowbyreducingthenumberofcon-flicts.
4.1.4.2Agilityofchangingsupplyplan
Marketdemandchangesconstantly.Ifthesuppliercan makerapidadjustmentstohissupplyplantomeetchang-
ingdemands,lossesincurredbyoverstockingorstock-0 10 20 30 40 50
re
sp
on
de
nt
(p
erce
nt
ag
e)
lower 70% more than
80% more than90% 100%
state-owned private-owned joint venture foreign enterprise
�����
21.4
66.7
10
1.9 0
10 20 30 40 50 60 70
re
sp
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nt
(p
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nt
ag
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very often often sometime seldom
FIG06
11.3
39 49.7
0 10 20 30 40 50
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up down no change
FIG07
Figure5.Ratiooftimelyclearingpaymentsamong differenttypesofcompanies.
Figure6.Frequencyofinformationexchanges.
Figure7.Tendencyofthenumberofconflictsinthe lastthreeyears.
Table7.Averagenumberofconflictaffairbetweenbuyerandsuppliereachyear. Averageannualnumberofbuyer/supplierconflicts
Over10 6to10 1to5 None
outscanbereducedtoaminimum.Therefore,agilityin responding to supply plan changes is a very important performancefactorintheworkflow.Figure8showsthat mostofthesurveyedcompaniesrespondrapidlytochang-ingsupplyplans,i.e.,inChina,manysuppliersareaware oftheimportanceofcooperatingwiththebuyer,enabling thelattertorespondquicklytomarketdemands.
4.1.4.3Speedoffeedbackproblemsolving
Inthecourseofcoordinatedsupplier/buyeroperations, suppliersshouldhandlecomplaintsfrombuyersspeedily andaddressthebuyer’scomplaintsinatimelymanner. Thus,thespeedwithwhichthesuppliertakescareofthe buyercomplaintsisanimportantindicatorofthesuppli-er’scoordinationability.Thisperformanceisillustrated inFigure9.
Ascanbeseen,manysupplierscanrespondquicklyto solvethebuyer’sfeedbackproblem.Thissituationissim-ilartothe“agilityinrespondingtosupplyplanchanges”, i.e.,thesupplierusuallyrespondsquicklytothebuyer’s demands.However,duringourinterviewsatmanufactur-ers,somemangersstatedthatmanyoftheirsuppliersdo nottakeproactivestepsinhelpingthemsolveproblems. Instead,thosesuppliersarereactive,attemptingtosolve problemsonlyaftertheyarise.
4.1.4.4Degreeofjointparticipationin
qualityimprovements
ItisawellknownfactthatJapanesecompanieswork inclosecooperationandcoordinationwiththeirsuppliers onissuesofqualitymanagement,andthattheyoftentake
consistentactionswithsuppliersinimplementingquality improvements.Today,anincreasingnumberofcompa- niesinChinaarelearningfromtheJapanesehowtoin-creasetheircooperationandcoordinationwithsuppliers in managing quality. Table 8 reveals that many buyers and their suppliers have participated jointly in quality improvements, particularly several Sino-Japanese joint ventures. For example, Honda Guangzhou, the largest automobilemanufacturerinsouthernChina,hasgonea longwaytowardcooperatingwithitssuppliersinquality managementissues.MostofHonda’ssuppliersareproud tosupplytoHondaGuangzhou.
4.1.4.5Effectofcoordinationinreducing
cost
Itiswellknownthatthebasiclawofbusinessopera-tionsisProfitisequalincomeminuscost.Basedonthis law,thegoalofsupplychainmanagementistoincrease customerserviceandreducesupplychainoperatingcosts. Therefore,theeffectofcoordinationinreducingcostis averyimportantperformanceindicatorinsupplier/buyer coordination.
Table9showsthattheeffectofsupplier/buyercoordi-nationinreducingcostisunremarkable.Whyisthisso? Anin-depthanalysisofsupplier/buyercoordinationstrat-egiesrevealedthat,althoughmanycompaniesengagein coordinatedactivitieswiththeirpartners,theseactivities arelimitedmostlytoshort-termandoperational,rather thanlong-termandstrategicactivities.Thissuggeststhat theyprioritizetransactioncostreductionsoverstrategic purchasingcostreductions.
Table8.Degreeofjointparticipationinqualityimprovement. Jointparticipationinqualityimprovements
Never Seldom Sometime Often Always
Respondent 1.0% 3.9% 19.9% 55.3% 19.9%
4.3 34.4
53.1
7.7
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not agile average agile very agile
FIG08
1.4
39 53.3
6.2 0
10 20 30 40 50 60
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low average high very high
Figure8.Agilityofsupplyplanchanges. Figure9.Speedinsolvingfeedbackproblems.
Table9.Effectofcoordinationinreducingcost.
Effectofcoordinationinreducingcosts
Noeffect Slighteffect Strongeffect Verystrongeffect
4.2Performanceofstrategiccoordination
Intheabovesection,wereportedourfindingsregard- ingtheoperationalperformanceofsupplier/buyercoor-dination.Inthissection,wewilldiscussperformanceat astrategiclevel.Oursurveyencompassestwoindicesfor thedimensionofstrategicperformance:degreeoftrust anddegreeofsatisfaction.
4.2.1Degreeoftrust
Trust is the cornerstone of market economies. The greaterthedegreeofmutualtrust,thecloserthesupplier/ buyer relationship. To evaluate the difference between buyerandsupplierintermsofdegreeoftrust,weusetwo indices,i.e.,thesupplier’strustinthebuyerandthebuy- er’strustinthesupplier.Table10showsthatmostsup-pliers’andbuyers’mutualtrustisintermediateorhigh; thisfindingcorrespondsto80%to90%ofthesurveyed companies.However,onlyafewcompaniesstatedtheir trustintheirpartnerwasveryhigh.Oursurvey,however, revealed that the degree of trust between supplier and buyerisasymmetric.Thesupplier’sdegreeoftrustinthe buyerwasfoundtobehigherthanthebuyer’sdegreeof trustinthesupplier.
4.2.2Degreeofsatisfaction
Incompetitivemarkets,manycompaniesarefamiliar with the strategy of customer satisfaction (CS) to up-gradecompanyidentification(CI).Weusethedegreeof satisfactionhereasanotherimportantindexofstrategic performanceofsupplier/buyercoordination.Table11in- dicatesthatthedegreeofmutualsatisfactionisdistrib-utedfairlyequallybetweensupplierandbuyer,andthat the overall degree of satisfaction of both suppliers and buyersisonthelevelofintermediateorsatisfiedinmore than90%ofthesurveyedcompanies.Only4.7%ofsup- pliersand1.9%ofbuyersconsidertheyarehighlysatis-fied.Similarlytothedegreeoftrust,wefoundthedegree ofsatisfactionbetweensupplierandbuyerisasymmet-ric.Thesupplier’sdegreeofsatisfactionwiththebuyeris higherthanvice-versa.
5.Conclusionsandimplicationsforma-nagement
China’seconomyhasbeengrowingatatremendous rateforovertwodecades.Butwhataboutthestatusof supplychainmanagementinChina?Howshouldwest-ernfirmsproceedwiththeirstrategyinChina?Basedon thisempiricalinvestigationintothesupplier/buyercoor-dinationperformanceofChinesecompanies,anumberof conclusionsandmanagerialimplicationscanbedrawn.
5.1Conclusions
1. Based on a review of the literature and on a survey, thispaperindicatedfourdimensionsofsupplier/buyer coordinationperformancebasedonfoursupplychain flows, thus differing from the traditional standpoint whichconsidersonlythreeflows.Detailedindicesfor measuring supplier/buyer coordination performance weredescribed;
2.Overall,mostChinesecompaniesareawareoftheneed to increase their cooperation and coordination with partnersintheirsupplychain,butcoordinatedactivi-tiesarelimitedmostlytoashort-termoperationallevel anddonotusuallyextendtoalong-termstrategiclevel. Manyenterpriseshavenotyetformedclosecoopera-tiverelationshipswithpartners;and
3. The use of supply chain management has wrought profound changes in the supplier/buyer relationships betweenChinesecompanies.Accordingtotheevolu-tionofthelawofsupplier/buyerrelationships(DaVilla andPanizzolo,1996),thisrelationshipinmostChinese companies is still in the logistics phase. Only a few companieshavereachedthepartnershipphaseoftheir relations(seeFigure10).
5.2Managerialimplications
Basedontheseconclusions,weputforwardsomesug-gestions regarding managerial implications for Chinese companiesandforeignenterprisesinChina.
Table11.Degreeofsatisfactionbetweenbuyerandsupplier.
DegreeofSatisfactionbetweenbuyerandsupplier
Dissatisfied Intermediate Satisfied Verysatisfied
Supplier’sdegreeofsatisfactionwithbuyer 0.9% 30.3% 64.0% 4.7%
Buyer’sdegreeofsatisfactionwithsupplier 2.4% 34.3% 61.4% 1.9%
Table10.Mutualtrustbetweenbuyerandsupplier.
Degreeoftrustbetweenbuyerandsupplier
Low Intermediate High Veryhigh
Supplier’sdegreeoftrustinbuyer 1.4% 24.2% 60.2% 14.2%
Traditional relation
Logistics relation
Partnership relation Degree of cooperation
with supplier
High
Medium
Low
Pressures for change
Technical and management innovations
Product innovations and technological development
Content of coordination
Operational coordination
Strategic coordination Transaction
cost saving
FIG10
Figure10.Evolutionofsupplier/buyerrelationsandcoordinationcontent.
1.Improvetheperformanceofstrategiccooperationand coordination,particularlythedimensionofmutualtrust betweensupplierandbuyer;
2. Build a basic infrastructure for improving supplier/ buyer coordination, particularly Internet-based com-munication and an information exchange infrastruc-ture;and
3. State-owned and private companies should emulate foreignandSino-foreignjointventures,withaviewto
improving their supplier/buyer coordination perform-ance,particularlytheircashflowcoordination.
Acknowledgements
This research was funded by the National Natural Science Foundation of the People’s Republic of Chi-na (70271023) and by the ChiChi-na National HighTech-nology Research and Development Program (863) (2001AA414230).
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