Citation
(2014), "Executive summary of “Procurement performance and manufacturer-supplier relationships: a multivariate analysis in Kuwaiti manufacturing companies”", Journal of Business & Industrial Marketing, Vol. 29 No. 5. https://doi.org/10.1108/JBIM-04-2014-0084
Publisher
:Emerald Group Publishing Limited
Executive summary of “Procurement performance and manufacturer-supplier relationships: a multivariate analysis in Kuwaiti manufacturing companies”
Article Type: Executive summary and implications for managers and executives From: Journal of Business & Industrial Marketing, Volume 29, Issue 5
This summary has been provided to allow managers and executives a rapid appreciation of the content of this article. Those with a particular interest in the topic covered may then read the article in toto to take advantage of the more comprehensive description of the research undertaken and its results to get the full benefits of the material present.
The Gulf States (Saudi Arabia, Kuwait, United Arab Emirates, Oman, Bahrain and Qatar) have emerged as a major global market accounting for 26 per cent of European, 22 per cent of Japanese, 27 per cent of Southeast Asian and 14 per cent of US exports. While these states’ economies are undoubtedly oil-based, many have implemented ambitious plans to diversify their economies through a more accepting philosophy toward globalization. One sector which has received considerable investment and contributed to this diversification is manufacturing.
However, despite the growing importance of manufacturing within these countries (particularly Kuwait), relatively little is known about how parties within this sector interact. Indeed, very few studies have addressed buyer/supplier behavior in the Gulf States.
In global supply chains, a close link between buyers and suppliers is increasingly cited as a critical differentiator between high and low performers. Specifically, collaboration and closer relationships, in contrast to the traditional price-driven transactional relationships, have been found to be linked to higher quality and lower costs as well as enhanced delivery. In addition, ongoing collaboration with suppliers plays an important role in an organization’s ability to respond to dynamic and unpredictable change, improve financial performance and increase internal collaboration, which in turn improves service performance. Better relationships with suppliers have also been found to positively contribute to the buyer’s innovation process and new product development.
In “Procurement performance and manufacturer-supplier relationships: a multivariate analysis in Kuwaiti manufacturing companies”, Dr M. Tawfik Mady et al. document and contrast the performance of the procurement function and supplier relationships in two different Kuwaiti manufacturing sectors and provide a reliable and valid scale for measuring the performance of the procurement function in Kuwait. Focusing on 62 different plants in two different manufacturing sectors – food processing and refractors – the study also examines whether variance in type of industry or plant size affects the supplier selection-procurement performance and/or supplier relationship-procurement performance association.
They found that plant managers in Kuwait seem to be very satisfied with the overall performance of the procurement functions of their plants, which consisted of on-time delivery, receiving the exact ordered quantities, bargaining for the best price, and quality assurance of the delivered parts and items. Results indicated that a plant’s strong relationship with its suppliers has a statistically significant impact on three of the four performance measures – timing, quantity and price. Therefore, it could be concluded that the strength level of the relationship with a supplier could be used as a predictor of a plant’s success in achieving reliable deliveries of the right quantities of well-priced parts and components. This was also true for the relationship between a plant’s success in selecting the appropriate supplier and the performance of its procurement function.
In the highly competitive Kuwaiti environment, manufacturing companies, for the entire sample, were able to achieve a relatively high overall procurement performance. They were also capable of selecting the appropriate supplier, and having strong relationships with their suppliers. One possible explanation of these results is the fact that most international suppliers are dedicated to penetrate the Kuwaiti market and retain their industrial buyers in this open market.
Similarly, the study revealed that plant size is not a determinant factor with regard to a plant’s ability to succeed in achieving high procurement performance, in selecting the appropriate supplier, and in achieving stronger supplier relationships in the Kuwaiti manufacturing companies.
Both the quality of a supplier relationship and selecting the appropriate supplier are significant predictors of the procurement performance of the Kuwaiti plant. However, the variance in plant size and/or industrial sector does not significantly affect the supplier selection-procurement performance and/or supplier relationship-procurement performance associations. In general, the findings of this study are in line with previous research concerning the conventional wisdom that a stronger buyer/supplier relationship has a positive effect on the operational performance of the procurement function.
From a practical point of view, the continuous improvement in supplier relationships and the practices of the careful selection of local and/or international suppliers seem to be essential practices for the enhancement of the procurement performance of the manufacturing unit. Kuwaiti manufacturers should seek all avenues to implement effectively these two practices in every systematic and institutional system. Seeking quality assurance certifications, such as ISO-9000 and quality awards, represents some possible recommendations in this direction. Enhancing supplier relationship is usually one of the major criteria of these awards.
Not investigated in the current research – but worthy of addressing – is the role of culture, especially as it has been claimed that the Gulf States exhibit a distinct and unique culture foreign to the typical Western culture – a culture which could impact the very basic elements that govern business relationships. Several authors have proposed possible linkages among a number of cultural variables that are highly relevant in buyer/supplier relationships. On the other hand, others suggest that the culture does not pervade all aspects of buyer/supplier relationships.
For the full article, enter 10.1108/JBIM-01-2012-0005 into your search engine.
(A précis of the article “Procurement performance and manufacturer-supplier relationships: a multivariate analysis in Kuwaiti manufacturing companies”. Supplied by Marketing Consultants for Emerald.)