Supplier selection, monitoring practices, and firm performance

Abstract

Our paper examines whether supplier selection and monitoring practices affect the association between supplier strategies and organizational performance. Management accounting researchers (Atkinson, A., Waterhouse, J., 1996. Strategic Performance Measurement: Scope and Implementation Issues; Gietzmann, M.B., 1996. Accounting, Organizations and Society, 21 (6), 611–626, p. 613) argue that supplier partnerships can enhance cost management efforts by improving product quality, accelerating the product development process, and increasing process efficiency through supplier-originated ideas and technologies. However, the development of effective supplier partnerships may also require different selection and monitoring practices than arms-length supplier transactions. Empirical tests using data from the automotive and computer industries indicated that the performance gains from supplier partnerships practices are contingent on extensive use of non-price selection criteria, frequent meetings and interactions with suppliers, and supplier certification. In contrast, these selection and monitoring practices appeared to have little effect on the performance of organizations following arms-length supplier relations.