Performance of the supply management function can be viewed in two contexts

Although the purchasing function, like any other business function, can adopt a variety of strategies (Krause et al., 2001), two main strategic objectives stand out: cost and innovation (Blome et al., 2013, Carey et al., 2011). The importance of the purchasing function in generating cost savings and increasing efficiencies for organizations is well-documented (Ellram, 1995, Trent and Monczka, 1998, Zsidisin et al., 2003). In addition to this traditional focus on cost, the purchasing function’s role in contributing to innovation has become quite prominent in the past decade, both in practice as well as in research (Baier et al., 2008, Blome et al., 2013, Schiele, 2010, Wynstra et al., 2003).

Whether or not these strategies translate into functional and business performance depends on several factors. Some studies have investigated the performance effect of alignment; i.e. the extent to which purchasing strategies are aligned with other functional strategies and business strategies (Baier et al., 2008, González-Benito, 2007, Narasimhan and Das, 2001). When there is a greater fit between purchasing strategies and business strategies, firms achieve higher performance (Baier et al., 2008, González-Benito, 2007).

Another factor that may significantly impact performance is the fit between purchasing strategy and the organizational structure within the purchasing function (Schneider and Wallenburg, 2013), but so far only a few studies investigated this link between purchasing strategy and purchasing structure. Among those, Tate and Ellram (2012) examine how a services offshore outsourcing strategy leads to adaptations in purchasing structure, and Trautmann et al. (2009) examine the different types of purchasing structures that are more likely to be implemented when pursuing a global sourcing strategy. Both studies increase our understanding about the link between purchasing strategy and structure, but further insights can be gained by investigating other types of purchasing strategies (than offshoring and global sourcing) and by specifically adopting a “fit” perspective to examine this phenomenon.

There have been several studies in the strategy literature that build on the contingency notion of “structure follows strategy” (Chandler, 1962), and examine the fit between strategy and structure, and the effect of (mis)fit on firm performance (Galunic and Eisenhardt, 1994, Miller, 1987, Porter, 1985). The common finding of those studies is that the organizational design characteristics of a firm should match the firm’s strategy in order to achieve sustainable superior performance (Burns and Stalker, 1961, Govindarajan, 1986, Wasserman, 2008). Translating this line of argument to the purchasing context, one would argue that organizational design characteristics of purchasing need to be in line with the purchasing strategy to have high purchasing performance, and deviations from this ideal situation would result in lower purchasing performance. Currently, however, there is a lack of empirical evidence about this claim. In response to this gap, the objective of this study is to examine the impact of the (mis)fit between purchasing strategy and purchasing structure on purchasing performance. In doing so, we aim to contribute to the literature in three ways.

First of all, we investigate purchasing structure in a holistic way by considering its multiple dimensions. Research on organizational design in purchasing has been dominated by the centralization-decentralization debate (Trautmann et al., 2009). However, there are several other organizational design dimensions, in particular formalization and cross-functionality (Burns and Stalker, 1961, Damanpour, 1991, Tate and Ellram, 2012, Trautmann et al., 2009). Although there have been some studies that investigate formalization and cross-functionality in purchasing individually (e.g. Cousins et al., 2006a; Moses and Åhlström, 2008; Trent and Monczka, 1994), these dimensions of purchasing structure have seldom been examined as part of an overarching purchasing structure concept, and they have not been studied in relation to specific purchasing strategies. In this study, we therefore examine the relationship between purchasing strategy and three elements of purchasing structure: centralization, formalization, and cross-functionality.

Second, we examine purchasing strategy and purchasing structure at the level of the purchase category. Studies examining purchasing organization design mostly focus on the overall purchasing function level (e.g. David et al., 2002; Foerstl et al., 2013; Johnson et al., 2002; Rozemeijer et al., 2003). However, recent research acknowledges that purchasing structure is defined at a more specific level where firms have different purchasing structures for their various purchase categories managed with different purchasing strategies (Karjalainen, 2011, Trautmann et al., 2009). Increasingly, organizations adopt more hybrid structures, which can for instance accommodate varying degrees of centralization. In that context, it is of crucial importance to distinguish between organizational structure requirements for different types of purchase categories (Trautmann et al., 2009).

Third, we not only test whether a (mis)fit between strategy and structure results in (lower) higher purchasing performance, but we also aim to shed light on the mechanism for this effect. Specifically, we investigate the mediating role of purchasing proficiency on the relationship between strategy-structure misfit and purchasing performance. Purchasing proficiency can be defined as the quality of managing the purchasing processes due to the advancement of skills and knowledge (Feisel et al., 2011, Millson and Wilemon, 2002). In line with what has been termed the ‘extended contingency model’, namely the strategy-structure-process-performance link (Rodrigues et al., 2004, Zheng et al., 2010), we argue that a (mis)fit between purchasing strategy and structure (negatively) positively impacts purchasing proficiency, thereby resulting in (lower) higher purchasing performance.

The remainder of the paper is structured as follows. In the Literature Review section we first briefly discuss two key types of purchasing strategies defined in terms of strategic objectives: cost and innovation. Then, we elaborate on how purchasing structure is examined at the functional and purchase category level, and subsequently discuss how purchasing strategy relates to purchasing structure. We complete the literature review by discussing the mediating role of purchasing proficiency. In the Research Design section, we explain our data collection and sample characteristics, measurement, and various checks for biases. After that, we present our findings in the Results section. Finally, the Discussion section elaborates on the most intriguing findings, reviews the theoretical and managerial implications, and discusses research limitations and suggestions for future research.

Cited by (31)

• Social cross-functional vendor selection in technologically uncertain sourcing situations

  2022, Journal of Engineering and Technology Management - JET-M

  Show abstractNavigate Down

  Based on an in-depth case study of an automotive manufacturer sourcing parts for high technology projects, this study investigates the intentions and structure of socialization within and between firms during the supplier selection process in technologically uncertain sourcing situations. Here, we aim to answer the question of how socialization can hedge against the high levels of uncertainty for manufacturers selecting suppliers of high technology resources. The case represents a major automotive manufacturer in Northern Europe, and is based on 38 semi-structured interviews with representatives of the different functions involved in the sourcing for the new development projects. Our data suggest that internal and external socialization during the supplier selection process can improve internal alignment and problem solving, and external familiarity towards the sourcing task. In this context, socialization took place on functional, cross-functional, and (inter)corporate levels, with higher functional autonomy during the assessment, and higher cross-functional integration during negotiations and decision making, adding to the debate on whether functions should be integrated or separated.

• Going beyond supplier diversity to economic Inclusion:Where are we now and where do we go from here?

  2022, Journal of Purchasing and Supply Management

  Show abstractNavigate Down

  Supplier diversity is not a new concept but has increased in urgency due to racial unrest and social polarization across the globe. As culture shifts globally, demanding more diversity and inclusion in businesses, companies are having to rethink their overarching values and strategies. Supplier diversity programs foster more inclusive relationships with diverse and underrepresented populations of suppliers to produce both economic and social impact. Researchers have shown if managed effectively, a diverse and inclusive supply base can help organizations reduce risk, enhance brand image, and increase innovation and flexibility. The intent of this Notes and Debates article is to introduce and define supplier diversity, showing how an economically inclusive supplier diversity program enhances organizational benefits and provides greater economic and social benefits. A secondary intent is to begin the dialogue on the benefits of transitioning from traditional supplier diversity programs to fully embedded economic inclusion models. What is the purpose behind the transition? Is more supplier diversity necessarily better? What enablers or capabilities may be needed to evolve from a traditional supplier diversity program to a strategically positioned economic inclusion mindset? Suggestions are made about embedding key enablers within an organizational structure so that companies can mature in supplier diversity efforts and drive stronger social and economic value. This Notes and Debates piece uses support from ongoing research efforts that include interviews with companies engaged in supplier diversity programs and several supplier diversity councils. Some initial observations and remarks are incorporated in the text to help illustrate how to move from supplier diversity to economic inclusion. The enablers that help move from traditional diversity programs to economic inclusivity appear to mature and develop over time. Some organizations remain in the early, more traditional phases while others have dynamic ecosystems that have developed to support this transition.

• Where we are heading and the research that can help us get there – Executive perspectives on the anniversary of the Journal of Purchasing and Supply Management

  2020, Journal of Purchasing and Supply Management

  Show abstractNavigate Down

  Procurement is a young field with much potential for further business impact in industry and insight generation through research. In this article four executives from different industries and continents offer their perspective on procurement, purchasing and supply management (PSM) capability development potential and research that can support this. These executives each addressed one of the following important themes and provided candid comment regarding the nexus between academia and practice. (1) Emerging industry 4.0 technologies that can enable new PSM capability development. These technologies should be evaluated in terms of what PSM challenges they can help resolve, not just in terms of how technically promising they may be. (2) PSM talent is key to the realization of new PSM capability and the development of this talent will require executive engagement in creating lifelong learning opportunities for PSM professionals to ensure new competencies and capabilities. (3) Sustainability efforts that are often housed in PSM organizations have much potential to expand these efforts more comprehensively throughout the supply chain and to expand the scope of the efforts. (4) Supplier enabled innovation (SEI) offers a pathway for PSM to meet current business needs with suppliers but also to collaborate with suppliers to create new revenue and customer value. The successful achievement of future PSM capability will require leadership in industry and research to help close the gap between known opportunity areas and actual real-world accomplishment. These executive perspective help us to realize that simplified roadmaps and maturity models underestimate interrelations between these four areas of opportunity and no “single path” currently exists.

• How to achieve cost savings and strategic performance in purchasing simultaneously: A knowledge-based view

  2020, Journal of Purchasing and Supply Management

  Show abstractNavigate Down

  The competitive advantage purchasing provides has been debated for decades. For a novel perspective we derive a theoretical framework grounded in the knowledge-based view in order to examine how purchasing knowledge and purchasing integration impact cost and strategic performance. The derived hypotheses are tested based on extensive secondary data from a large European multinational utility company. The 179 studied ‘purchasing-internal client relationships’ contain real contracted savings data and internal client ratings of purchasing knowledge, purchasing integration and strategic purchasing performance. We show that purchasing knowledge is a major antecedent for both savings and strategic purchasing performance. This effect is further amplified by purchasing integration. With this study, we extend the understanding of the purchasing knowledge–performance link. We conclude that purchasing knowledge becomes particularly valuable when combined with other functions' processes through purchasing integration. This causal chain is also supported through general knowledge-based view theory. Moreover, we provide numerical evidence of the value of knowledge creation and integration processes to purchasing professionals in our managerial implications based on results obtained from actual purchasing savings data.

• U.S. chief procurement officers’ perspectives on public procurement

  2020, Journal of Purchasing and Supply Management

  Show abstractNavigate Down

  Each year public procurement officials in the United States spend trillions of dollars to purchase goods and services for public use. The volume of public procurement spending compels public administration and supply chain management scholars to examine these procurement practices. Based on a unique dataset composed of a series of qualitative and quantitative interviews with chief procurement officers (CPOs) and their team members from 45 states and 2 territories in the United States, this paper explores the key institutional factors affecting state-level public procurement in the U.S., explores variation in the definition of contract performance, and assess the importance of multiple factors in creating procurement contracts. We present an agenda for future research on state-level public procurement in the U.S that has important implications for the theory and practice of public procurement.

• Picking on the new kid: Firm newness and deception in buyer–supplier negotiations

  2020, Journal of Purchasing and Supply Management

  Citation Excerpt :

  As competition shifts from the firm level to the supply chain level, a firm's purchasing and supply management (PSM) function takes on a critical role in the quest for competitive advantage (Tchokogué et al., 2017). The PSM function manages the interactions between the firm and its suppliers (Lumineau and Henderson, 2012), ensuring the timely delivery of high-quality inputs at competitive prices (Akın Ateş et al., 2018). Over time, its tasks have expanded to include identifying and gaining access to supplier innovations (Mackelprang et al., 2018; Mazzola et al., 2015; Sjoerdsma and van Weele, 2015).

  Show abstractNavigate Down

  This study builds on liabilities of newness theory and moral disengagement theory to investigate deceptive behavior in buyer–supplier negotiations that involve new ventures. Using two purchasing negotiation experiments, it contrasts how negotiators treat employees of new ventures, mature firms, and firms of unknown age. The first experiment examined the behavior of participants in their role as salespeople toward buyers, whereas the second one examined the behavior of participants in their role as buyers toward salespeople. Across experiments, participants shared the belief that their negotiation counterparts were less experienced when these counterparts worked for new ventures than when they worked for mature firms. Moreover, both groups were more likely to deceive negotiation counterparts working at new ventures, although this effect was stronger in magnitude in the first experiment. These findings contribute to the field of behavioral supply management by identifying a new situational variable (firm newness) that promotes deception in purchasing negotiations. Moreover, they provide implications for buyers and suppliers on how to leverage preconceptions associated with their firm's age to gain advantages (or avoid disadvantages) in buyer–supplier negotiations. Finally, we add to liabilities of newness theory by identifying an additional liability that affects new ventures – namely, the increased risk of being deceived.

Recommended articles (6)

• Research article

  The impact of sourcing enterprise system use and work process interdependence on sourcing professionals’ job outcomes

  Journal of Operations Management, Volume 31, Issue 6, 2013, pp. 474-488

  Show abstractNavigate Down

  We examine sourcing professionals’ work context to conceptualize how they use sourcing enterprise systems (SESs) and to understand when SES use results in positive/negative job outcomes. We differentiate between SES use for supplier selection and supplier governance, identify sourcing professionals’ work process interdependence as a moderator for the impacts of SES use on job satisfaction, and suggest job satisfaction mediates the impacts of SES use on job performance. We conducted a field study of sourcing professionals’ SES use at one of the largest consumer product companies in the United States, which has implemented an SES to innovate its sourcing professionals’ work processes. Based on our analysis of the survey and qualitative data we collected, we found the impacts of both types of SES use (1) to be negative on job satisfaction when work process interdependence was high, (2) to be positive on job satisfaction when work process interdependence was low, and (3) to be mediated by job satisfaction for job performance. We discuss the implications of our findings for the literature at the intersection of information systems and operations management as well as for the information technology enabled innovation of sourcing processes and, more generally, complex business processes.

• Research article

  The burden of rank: The impact of preferred supplier status on excessive buyer requests

  Industrial Marketing Management, Volume 71, 2018, pp. 19-26

  Show abstractNavigate Down

  Supplier attempts to ascend the supplier pyramid of buying firms are ubiquitous. Yet, it is unclear whether these attempts might entail undesirable consequences. To address this gap, this research theoretically and empirically examines the effect of preferred supplier status on excessive buyer requests. The results show that preferred supplier status indeed entails so far unaccounted relationship costs as it enhances excessive buyer requests. Alarmingly, this effect is subject to increasing rates as preferred supplier status grows. The results show as well, however, that suppliers can reverse this relationship if they are willing to adhere to relational norms in terms of voluntarily participating in the buyer's supplier development program. This means that initial status gains enhance excessive requests, but at a certain point suppliers can reduce excessive requests through increasing their status when they adhere to relational norms. These results offer new directions both for researchers and practitioners.

• Research article

  Why in the world did they reshore? Examining small to medium-sized manufacturer decisions

  Journal of Operations Management, Volumes 49–51, 2017, pp. 37-51

  Show abstractNavigate Down

  Small to medium-sized enterprises (SMEs) are moving their manufacturing operations from low-cost countries back to high-cost countries, reversing earlier offshoring decisions. These reshoring decisions cannot be completely explained by changing location-related costs. To better understand why SMEs are reshoring, we evaluate nine product-line decisions – six to reshore and three to remain offshore – and codify four empirical observations. We then integrate these observations with relevant literature to develop and analyze a system dynamics model of SMEs' offshoring and reshoring decisions. Synthesizing the above, we articulate propositions regarding SMEs’ reshoring decisions. We conclude by discussing these decisions through the lens of the heuristic decision-making literature, providing managerial and policy implications.

• Research article

  Supplier development efforts: The suppliers' point of view

  Industrial Marketing Management, Volume 42, Issue 2, 2013, pp. 180-188

  Show abstractNavigate Down

  Reliance on few competent suppliers has driven companies to be more involved in their suppliers' activities. Supplier development (SD) is a supplier management practice implemented with strategic suppliers. Whereas research adopting the customer's standpoint indicates that SD activities have a positive impact on supplier performance, few studies have examined the supplier's perspective. We explore the conditions favoring suppliers' participation in SD activities using survey data from a sample of Canadian manufacturers. The empirical results of this study suggest that trust and preferred customer status are key antecedents of supplier participation in SD activities, and confirm the positive impact of this participation on the suppliers' operational performance. The results indicate that a dynamic environment also motivates suppliers to participate in SD activities.

• Research article

  Power-imbalanced relationships in the dyadic food chain: An empirical investigation of retailers' commercial practices with suppliers

  Industrial Marketing Management, Volume 48, 2015, pp. 187-201

  Show abstractNavigate Down

  Multiple retailers exercise various commercial practices with their suppliers. These practices emanate from a power-imbalanced dyadic relationship largely governed by the heightened retail power. These power-imbalanced, supplier–retailer relationships are the focus of this study. Drawing on the current literature of power-imbalanced relationships in supply chains, we propose and explore a conceptual model illustrating the most significant practices applied in the dyadic, supplier–retailer relationships in the Greek food chain and we evaluate their importance as perceived by suppliers. Insights from qualitative in-depth interviews with various stakeholders and a survey with 398 food suppliers identify dependence, financial goal incompatibility, informational asymmetry and behavioral uncertainty as the most significant determinants of the commercial practices. These practices are grouped into three main categories: upfront payments, unanticipated changes of agreements and negotiation pressures. The importance of these practices for suppliers is highlighted and implications for the supply chain actors beyond the dyad are provided. Significant managerial and policy implications are reported.

• Research article

  The impact of performance measurement on purchasing group dynamics: The Canadian experience

  Journal of Purchasing and Supply Management, Volume 23, Issue 1, 2017, pp. 17-27

  Show abstractNavigate Down

  Purchasing groups were first created in the healthcare sector, which has faced unprecedented challenges in terms of cost control for over two decades. Purchasing groups are indeed supposed to generate additional savings and more efficient purchasing processes. However, although various aspects of purchasing groups have been studied since the early 2000s, both their performance measurement and the influence that this measurement has on inter-organizational dynamics have been neglected. In purchasing groups, the dynamics between the group itself and its members often results in tensions between both parties. Performance measurement within purchasing groups could alleviate those tensions, since “objective” data could then be used to improve communication.

  Based on a case study, this research sheds light on performance measurement in a purchasing group, on the dynamics between the group and its members, and on the interaction between performance measurement and inter-organizational dynamics. Results indicate that measuring performance impacts the dynamics between both parties, but that the relationship is also the other way around, and that the inter-organizational dynamics is quite complex. In addition, this paper proposes a framework summarizing the research findings.

  What are two aspects of supply chain management?

  Supply chain management has five key elements—planning, sourcing raw materials, manufacturing, delivery, and returns.

  What are the two primary objectives of supply chain management?

  SCM's primary goal is to keep a firm afloat and ultimately to drive it to success. Other objectives of SCM include improving efficiency and quality, minimising costs, optimising delivery and distribution and providing the best possible experience to your customers.

  What are the three 3 functional areas that make up the supply chain?

  The three levels of supply chain management are strategic, tactical and operational..

  Strategic Planning. This level of supply chain management is responsible for developing long-term plans that outline the company's overall objectives and goals. ... .

  Tactical Planning. ... .

  Operational Execution..

  What are the functions of supply chain management?

  The five functions of supply chain management include the following:.

  Purchasing. The first function of supply chain management is purchasing. ... .

  Operations. ... .

  Logistics. ... .

  Resource Management. ... .

  Information Workflow..