The impact of supply chain relationship configurations on supplier performance: investigating buyer–supplier relations in the aerospace industry

Abstract

Purpose A supplier may sell not only to one buyer (sole relationship configuration) but also to the buyers competitors (shared relationship configuration) for a specific product category. This study examines the performance implications when suppliers establish shared relationships with the buyer’s competitors.Design/methodology/approach Secondary data are used to test hypotheses relating a supplier’s relationship configurations to its operational performance. A seemingly unrelated regression approach (SUR) is applied to analyze the data, followed by endogeneity checks of the empirical findings.Findings The study shows that suppliers with less-shared ties with buying firms’ competitors exhibit superior inventory efficiency and asset turnover. Thus, suppliers can improve operational efficiency by creating relatively exclusive, deep and trust-based relations instead of more extensively shared and shallower relationships.Research limitations/implications Based on agency theory as a theoretical lens and aerospace industry data, this research contributes by addressing the supplier’s perspective and linking its operational efficiency performance with its chosen supply relationship configuration.Practical implications Suppliers need to understand the performance implications of choosing relatively exclusive relationships versus shared relationships with buying firms. The research provides new insights for managers and can guide their supply chain decision-making.Originality/value Little is known about how a supplier’s relationship configurations can elevate, or impair, its operational efficiency. While conventional wisdom holds that suppliers should focus on multiple avenues of revenue growth by selling to buyers’ competitors, this study demonstrates that more sales to a buying firm’s rivals might, in fact, reduce a supplier’s efficiency.

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“…When the production rates of suppliers are greater than or equal to the demand rate, Equations ( 8) and ( 9) can be rewritten as Equations (39) and (40) to represent suppliers' inventory, I S k , k∈ R 1 , and inventory holding cost (IHC S R 1 ), as shown in [1].…”