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Researchers Study Supply Chain Effects on Industry Performance

Millions of U.S. firms are involved in business-to-business (B2B) transactions with a host of external suppliers. Dr. Alok Kumar, assistant professor of marketing at the College of Business Administration, and colleagues analyzed certain practical ways manufacturing firms can manage their external suppliers efficiently to reap superior performance.

“Our study is particularly useful to industry majors such as Nissan and Toyota, which have invested heavily in efforts aimed at crafting high-performance supply chains but have been hampered by recurrent supply chain failures,” he said. “If a manufacturing firm is able to harness an efficient supply chain, they can be competitive at a cost advantage.”

Kumar and his colleagues outline the specific conditions where firms can benefit from monitoring or supervising their suppliers versus building a close, informal relationship with them. Both strategies are time consuming and costly but deploying the right relationship management tool for the firm can power a manufacturer’s performance.

Alok Kumar

Kumar with students at CBA

“Our study suggests that monitoring a supplier can support manufacturer performance when the firm also has in-house manufacturing,” he explained. “Manufacturers who lack in-house capacity can benefit more by relying on informal relationships to manage their supplier.”

Ultimately, the consumer benefits from an efficient supply chain. Products will be available at a cheaper cost because the product will be supplied on-time to the right specification because specific issues like stock-outs and incorrect shipments will be reduced when the manufacturer is able to manage its suppliers better.

“Concurrent Sourcing, Governance Mechanisms, and Performance Outcomes in Industrial Value Chains” was published in the Strategic Management Journal in 2014. His co-authors were Jan B. Heide of the University of Wisconsin-Madision and Kenneth H. Wathne of the University of Stavanger Business School in Stavanger, Norway.
Published: March 2, 2015