An empirical study of the link between buyer-supplier relationships and purchasing performance

The purchasing department's performance is considered a key element to the success of a firm in terms of its contribution to meeting a firm's strategic objectives. Because of the significant percentage of sales revenue that is spent with suppliers, any improvement in purchasing's effectiveness in terms of reducing the cost of materials, improving the quality and delivery of incoming materials and services, and bettering the internal operating efficiency of the purchasing department can translate to greater profitability for a company.; This research focused on the relationship between certain purchase type, buyer-supplier strategies, organizational structure, and purchasing performance. The research objectives were (1) propose a theoretical framework that links these elements, and (2) empirically test this theoretical framework to determine if the assumptions underlying the framework hold true. The study was designed to determine: (1) if commodity type purchased affects the strategy a purchasing department chooses, (2) whether the level of performance of the purchasing department improves when engaged in more cooperative buyer-supplier relationships, (3) whether purchasing's organizational structure has an effect on performance of the purchasing department, as a moderator of the buyer-supplier relationship (4) if there were significant differences among two industries that exist in distinct competitive environments. These objectives were reached by collecting data from the food processing and electronics industries through the use of a survey instrument.; Statistical evidence was first gathered to confirm internal validity of newly developed scales for cooperative relationships, arm's-length relationships, performance measurements, and reward/measurement system measurements. Multiple regression, t-test for differences, and correlation analysis were then performed to determine if significant relationships existed between item type purchased (commodity or unique), relationship established, organizational structure, and purchasing performance. Within the electronics industry, there were indications that a relationship existed between item type purchased and relationships that are established with suppliers. However, this same relationship was not apparent within the food processing industry. In addition, some of the evidence suggested that implementation of supply base reduction and early supplier involvement in product design and development do result in higher performance levels than arm's-length strategies, in the areas of quality, delivery, and cost reduction. Finally, organizational structure, in terms of cross-functional teams and customer satisfaction related reward/measurement system measures, were predictive of performance measures.