Sustainable supply management as a purchasing capability

Abstract

Sustainable supply management as a purchasing capability:A power and dependence perspective Purpose Uses the relative power and total interdependence concepts as an intervening theoretical lens to explain why and how sustainable supply management initiatives by manufacturing firms differ across the Kraljic matrix according to purchasing capability. Design/methodology/approachTested hypotheses by subjecting survey data from 338 manufacturers on buyer-supplier relationships in Europe and North America to regression analysis. FindingsShows three situations where relative power and total interdependence determine the effectiveness of purchasing capabilities. First, sustainability programs impact supplier compliance in all Kraljic categories but bottleneck items. Second, there are significant tradeoffs between lower cost and higher social and environmental supplier compliance for noncritical components. Third, strategic alignment of sustainability objectives between corporate and supply function levels only leads to improved financial performance for strategic components. Research implicationsFurther research could take power and dependence into account to explain when and how purchasing capabilities focused on sustainability can be achieved. Practical implicationsShows how supply strategists could devise tailored approaches for different purchasing categories with respect to power and dependence when pursuing economic, social and environmental objectives in combination-the triple bottom line-along their supply chains. Originality/valueIllustrates and provides a theoretical explanation for why sustainable supply management is a purchasing capability that must vary across purchasing categories defined by different situations of power and dependence.Keywords: sustainability, supply strategy, procurement/purchasing/supply management processes, survey methods, IPS International Purchasing Survey, regression analysis.Article classification: Research paper 1 SUSTAINABLE SUPPLY MANAGEMENT AS A PURCHASING CAPABILITY:A POWER AND DEPENDENCE PERSPECTIVE INTRODUCTIONSustainable supply management (SSM) is increasingly becoming a major managerial problem for supply strategists. Cost-cutting efforts drive firms to relocate production to geographic regions around the world where labor costs are lower and working conditions and care for the environment are often neglected. At the same time, these firms claim that they intend to take responsibility and strive to improve working conditions and reduce their environmental impact. The situation becomes even more complicated as production is outsourced to a greater extent to specialized contract manufacturers. As brand owners, the buying firms are still accountable for the economic, social and environmental impact of their products and services, while losing control over how these are actually produced (see, e.g., Huq et al., 2014;Walker et al., 2014).The sustainable sourcing literature offers the advice to view SSM as a potential purchasing capability that can help a firm thrive (e.g., Pa...

Linking technological system architecture and purchasing categories

“…The literature shows that the buyer firm can move a component's purchasing portfolio category [21]. Our theoretical framework does not support category changes in cases of identical architecture.…”

“…Total dependence is at its highest level. Since both buyer and supplier are heavily involved in the partnership, a balance of power is assumed [21]; however, supplier dominance has also been reported [14] [13].…”

“…Buyers seek to adapt to their dependence, reduce the negative consequences of the unfavorable situation, or try to find other solutions [14] Figure 1. Categories, dimensions, and power and dependence in the purchasing portfolio matrix [14] [13] [21] Leverage items are associated with high profit impact but low supply risk. These items can be obtained from various suppliers, giving buyers the dominant negotiating position.…”

The role of context, activities, and organization, in Value-Based Procurement

“…(D) The introduction of a firmcentral procurement council can help drive the value proposition. Centralization (Giunipero and Monczka 1997, Trautmann, Turkulainen et al 2009, Jia, Orzes et al 2017, Standardization Lewin 1996, Bals, Laine et al 2018), Organization in general (Schneider andWallenburg 2013, Akın Ateş, van Raaij et al 2018), Hierarchies (Buckles and Ronchetto 1996), Activity centricity (Lidegaard, Boer et al 2015) Procurement Account Manager (Kotteaku, Laios et al 1995, Bals andTurkulainen 2017), Contextualization (Simpson, Power et al 2007, Dabhilkar, Bengtsson et al 2016 The still be a useful perspective on procurement strategy, but the many activities and organizational aspects discussed in this context make little sense to accommodate for when buying off-the-shelf products available in abundance. The introduction of Strategic Sourcing provides a way of gathering all similar activity under one division and stimulates sharing and using experience between procurers.…”

“…Contextualization also involves ensuring that explicit procedures and processes are followed, as well as regulations, laws, and norms (Simpson, Power et al 2007, Dabhilkar, Bengtsson et al 2016)…”