Strategically managed buyer–supplier relationships and performance outcomes

Abstract

An empirical analysis of purchasing's strategic role in the firm is presented. This study uses data collected from high level purchasing executives at the Director/VP level representing a large cross industry sample of 739 firms. The data analysis is rigorous. Using data from 571 of the 739 firms, correlation analysis and exploratory factor analysis is performed. Data from the remaining 168 firms is used to conduct structural equation modeling. This is the first attempt to examine a structural model of strategic purchasing and its influence on supplier evaluation systems, buyer–supplier relationships, and firm's financial performance. Scales are developed to measure each construct and are shown to be reliable. Five hypothesized relationships are presented and supported by the literature. The first, second, and third hypotheses link strategic purchasing to supplier evaluation systems, buyer–supplier relationships and firm's financial performance, respectively. The fourth hypothesis links supplier evaluation systems to buyer–supplier relationships. And, the fifth hypothesis links buyer–supplier relationships to firm's financial performance. The results of the data analysis provide support for each of the five hypotheses above. The implications of this research are that a strategic purchasing function is important to the success of the firm. Firms that have a strategic purchasing function are more likely to implement a supplier evaluation system. This provides purchasing with a better understanding of which suppliers are performing well and which suppliers are not performing well. Increased emphasis on strategic purchasing and supplier evaluation systems are critical for firms seeking to establish long‐term relationships with their suppliers. Based on the findings of this study, strategically managed long‐term relationships with key suppliers can have a positive impact on the firm's financial performance.