Arm Report (mm).docx

IMPACT OF SUPPLIER RELATIONSHIP MANAGEMENT (SRM) ON ORGANIZATION PERFORMANCE

This report is being submitted in partial fulfillment of the requirements for the degree of Master of Business Administration

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Acknowledgments In the name of Allah the Most Gracious and the Most Merciful Alhamdulillah, all praises to Allah for the strengths and His blessing in hauling out this thesis work entitled

“Impact

of

Supplier

Relationship

Management

on

Organization

performance”. Special admiration goes to my thesis supervisor, Syed Ghazanfer Inam, for his direction, mentorship and incessant support. Under his professional supervision, I found the passion of conducting the academic research and develop the needed skills. His priceless assistance of productive comments and suggestions all through the thesis work had added the achievement of our thesis. Our genuine gratitude goes to my beloved parents for their love, prayers and encouragement, without which it was not possible to reach the current position in life. We are also thankful to all those who directly or indirectly contributed in this thesis with their valuable information, all their support means a lot to me.

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Abstract Selection of supplier through proper professional selection procedure, supplier operational integration, supplier development and value management are the strategies used for strengthening relationship with the suppliers. The supplier relationship management plays a crucial role in improving organizational performance and helping in creating a brand image of quality, reliability and customer satisfaction that gives the focal company’s product or service a competitive advantage. Supplier selection is the key to a successful relationship. Selection of an incompetent supplier as a SC partner means doom for any attempt to build successful relationship. Supplier evaluation must be based on purely professional basis and follow the RFx and tender or bids document procedure, Supplier operation integration is another aspect of buyer-supplier relationship. In this strategy operational information is shared with the supplier. This allows the supplier to organize supplies to meet the buyer’s requirement. Developing supplier capabilities to enable it to ensure zero-defect supplies is another benefit of supplier operational integration. This research project evaluated the variable in supplier relationship management and the primary data for the purpose showed that proper supplier selection, supplier development, supplier operational integration and information sharing and communications are critical to SRM

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Table of Contents S.NO.

DESCRIPTION

PAGE NO. ii

1.

Acknowledgements……………………………………………..

2.

Abstract………………………………………………………….

iii

3.

List of Tables………………………………………………….....

v

4.

List of Figures……………………………………………………

vi

5.

Chapter 1: Introduction………………………………………….

1

1.1 Overview…….…………………………............................... 1.2 Problem Statement…………………………………………. 1.3 Background, Objectives and Significance of the Study……. 1.4 Outline of the Study………………………………………... 1.5 Definitions…..……………………………………………… 6.

Chapter 2: Literature review…………………………………….

5

7.

Chapter 3: Research Methods……………………………………

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3.1 Method of Data Collection………………………………… 3.2 Sampling Technique………………………………………. 3.3 Sample size………………………………………………… 3.4 Instrument of Data Collection……………...……………… 3.4.1 Validity and Reliability test………………………... 3.5 Research Model developed ………………………………... 3.6 Statistical Technique………………………………………. 8.

Chapter 4: Results……………………………………………….

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4.1 Findings and Interpretation of the results…………………. 4.2 Hypotheses Assessment Summary…………………............ 9.

10. 11.

Chapter 5: Discussions, Conclusion, Policy Implications and Future Research………………………………………… 5.1 Discussions.………………………………………………….. 5.2 Conclusion …………………………...……………………… 5.3 Policy Implications……………..………….…………………. 5.4 Future Research…………………………..…………………… References…….................................................................................... Appendix.............................................................................................. v

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25 27

List of Tables S.NO.

TABLE(S)

1.

3.1 Case Processing Summary

2. 3. 4. 5.

3.2 Reliability Test Statistics 4.1 Model Summary 4.2 ANNOVA 4.3 Coefficients

6.

4.4 Hypothesis Assessment Summary

Page Number 15 15

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17 18 19 21

List of Figures S.NO. 1.

FIGURE(S) 3.1 SRM Model

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Page Number 16

Impact of (SRM) On Organization Performance

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Chapter 1: Introduction 1.1

Overview The supply chain management considers working with external firms to

meet the customer service goals as an integral part of achieving efficient and effective operations. The external firms are the suppliers of goods and services in their area of core competency and by providing quality inputs help the focal company meets its objectives. The selection of suppliers and building a relationship with the suppliers is described as supplier relationship management (SRM). Selection of supplier through proper professional selection procedure, supplier operational integration, supplier development and value management are the strategies used for strengthening relationship with the suppliers. The supplier relationship management plays a crucial role in improving organizational performance and helping in creating a brand image of quality, reliability and customer satisfaction that gives the focal company’s product or service a competitive advantage. In order to meet customer requirements and compete in the highly competitive business, the business entities have to be extremely flexible. This starts with the top management commitment. If the top management does not acknowledge the importance of global competition and the requirements of the end-consumer and suppliers role in meeting the customer requirements, the rest of the company will suffer the consequences. Of course all flexibility aspects are important for the business both at strategic and operational level.

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The pre-selection process of suppliers contains two steps: criteria formulation and supplier pre- selection based on the criteria. The two criteria used in literature are dependent and independent criteria. The independent criteria are used when screening for eligible suppliers. These relate to a supplier’s organization and its prosperity (Boer,Labro, &Morlacchi, 2001). They are classified into four groups: general business environment and financial issues, organization and strategy, technology, and other factors. The first two groups relate to the suppliers’ financial well-being, management capabilities, and future plans and possibilities. The third group covers the technical issues that are linked directly to the production of the product or the service. The fourth group of criteria focuses more on sustainability and risks associated with it. Hence, if criteria from each group are used in the preselection, the buying company can ensure holistic evaluation of the suppliers. Supplier selection is only the first step to SRM. How the relationship is implemented and managed are even more important as the management of relationship is what results in a long term successful association that is in the interest of both the buyer (the focal company) and the supplier(s).

1.2

Problem Statement This research project evaluates the impact of supplier relationship

management on organizational performance. The relationship between supplier and the company has a key role in accomplishment of goals in any organization. When all stake holders are integrated into supply chain and consider themselves as an extension of the focal company’s organization in meeting the customer service goals, the supply chain can create value for all of the stakeholders. The objective of this

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research is to study the impact of supplier relationship management on SC performance.

1.3

Background, Objectives and Significance of the study In the past, companies relied on inspection of supplies to control quality,

while utilizing arm’s length type of relationships with their supplier. However, relying on mass inspection to control quality is often ineffective and expensive (Wagner, 2006). Mass inspection simply just sort out the defect, and at that point it is too late. The supplier has already paid to produce those defective supplies, while the buyer has wasted time and resources to receive those defectives. Quality results from prevention of defectives through process improvement, not inspection (Choy & Lee, 2002). A cooperative relationship between supplier and buyer would suggest a process improvement simply because the realization of mutual dependence. Supplier quality improvement can be approached from two different angles Reactive and Proactive. In Reactive, the buyer reacts to quality problems throughout the flow of materials, and quality improvement is only initiated to reduce these problems. On the other hand Proactive approach included working together, with a larger amount of shared information. “You cannot manage what you cannot measure” (Chan, 2003). Therefore, it is easy to see that supplier evaluation and measurement are vital parts of supplier management. Evaluation can and should take place before anything is purchased

Impact of (SRM) On Organization Performance

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from a supplier and continuously during the relationship. The case company of this thesis is dealing with challenges of how to actually execute these evaluations. The key objective of this study is to analyze how supplier relationship if managed effectively affects organization performance. Suppliers are key to the success or failure of the organization, if suppliers provide quality materials and low lead time, the organization will have competitive edge against its rivals and vice versa. 1.4

Outline of the Study This study had comprised of five chapters where chapter number one

contains introduction of the study. An introduction chapter also contains overview of the study, statement of the problem, background, significant and objective of the study. At the end of the chapter number one, definitions of the study variables had also been given to make easier for reader to understand. The literature review of the thesis in discussed in chapter number two which was written from more than fifteen research papers to make clear understanding of the topic under study. As of the literature review chapter end, possible hypotheses of this thesis research had been discussed. The purpose of this chapter was to differentiate this study from previous work. The research method had been discussed in chapter number three. This chapter contains method of data collection, technique of sampling to collect data from population, total sample size i.e. number of observations to be analyzed, data collection instrument such in this study a comprehensive questionnaire had been developed and statistical technique applied for the purpose of testing research

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hypotheses. This had been also divided into validity and reliability test. The next issue was how research model to be developed. The results, findings and interpretations of the study had been discussed in chapter number four. At the end of the chapter number four, hypotheses assessment summary had been shown to see which hypothesis had been accepted or rejected. In final chapter of the study, discussions, conclusion, implication and future research had been discussed.

1.5

Definitions

1.5.1 Supplier Relationship Management (SRM). SRM is a practice where organizations make strategic association with third party (supplier) who provides inputs that are used to produce something to meet the demands of the specific customers. 1.5.2 Organizational Performance. It is the actual results of the organizations’ outputs measured against inputs to achieve organizational goals.

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Chapter 2: Literature Review The cycle view of supply chain considers supply chain as a series of buyer-supplier relationships cycles linked to form the supply chain. This indicates the importance of buyer supplier relationship in supply chain. Figure 2.1 Cycle View of SC – A series of Buyer-supplier connections (Chopra & Meindl, 2016)

The relationship with supplier helps organizations, reduce risk and improve the overall performance of the all business activities in which company operates. There are two elements of supplier relationship management, first, explicit commitment or promise between buyers and supplier, second, agreement between suppliers and

Impact of (SRM) On Organization Performance

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buyers about codifying the ideas exchange. This is the very basis of strategic supply chain flexibility, and aims to evaluate all the parties directly involved in the firms market. Those parties include its customers, vendors/suppliers and competitors. This is done by looking at these parties and surveying them, and documenting the results to review the company’s existing strategies to focus and direct the supply chain development effort. Harrison and Hoek (2011) argued that during the development of the supply chain, purchasing had gone from being an isolated department from other elements of the business systems of the company to being integrated with other departments. An important part of procurement sometimes neglected is the business alignment of the purchasing department. Business alignment points towards an alignment around specific business objectives set by top management. If the professional purchasers are not well informed of the objectives set by the firm, they might be sourcing from suppliers which are not fully right for business needs. 2.1

Building Supplier Relationship Before looking at supplier relationship management, the meaning of a

supplier relationship must be understood. To develop the buyer-suppliers relationship strong the parties involved in supply chain must understand that: The firm shares knowledge important for decision making to achieve synchronization amongst supply chain members, by means of a real-time information sharing system. The ultimate opposite scenario, is that of no information sharing at all.

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Suppliers are selected based on their ability to provide quality, reliable delivery, short lead-time, capability of supplying/processing other jobs in addition to those for which they are the original supplier. The ultimate opposite scenario is a supplier chosen solely based on price. So, consequently, the buying company will try to avoid any long-term agreements as it may weaken their position for negotiating (Cooper & Gardner, 1993). The firm has multiple suppliers clustered together sharing information and working together to deliver the best service to your firm. The worst case scenario is only one supplier. According to Harrison and Hoek (2011) a supplier evaluation is a mechanism to develop and advance a supplier relationship, and to center relationship management on business-relevant improvement opportunities. In terms of the actual measurement, the main focus is around the three output areas: costs, quality and delivery reliability. However, with a continuous improvement focus, no performance is perfect. Therefore, there is always room for improvements and supplier expectations are always rising. Jonsson (2008) stated that materials bought as means of production almost comprise of higher than 50% percent of the total costs of manufacturing. Therefore, it is crucial to work with the right suppliers for business needs and to meet the future demands of the customers. Therefore, a comprehensive method of supplier selection is essential to the buying company. Furthermore, an assessment approach to acquire reliable results of supplier performance should be established. This would include an on-site evaluation of the supplier assessing supplier capabilities and quality system as well as product samples (Yeung & Chin, 2004).

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Rinehart, Eckert, Handfield, Page and Atkin(2002) argued that literature provides many different inter-organizational relationships such as alliances, partnerships, collaborative relationships and transactional relationships. The definitions of the various relationships are often used interchangeably and that’s why a lot of confusion is created.Kerlinger and Lee (2000) argued that it may be imperative for theory to include single, clear definition in order to be validated and advanced. Literature should be consistent in their use of inter-organizational relationships in order to prevent ambiguity. This is important for companies since indistinctness about the relationships terms can lead to disconnects in the expectations between suppliers and buying companies. A mutual understanding of expectations is therefore necessary for making the relationship as efficient as possible to meet upmarket demand for the products. In this regard, the companies had been advised to make potential agreements with suppliers so that supplier can provide Just in Time delivery of the needed quality materials. Long term relationships with supplier also help organizations to mutually understand the problems faced be both. 2.2

Supplier Selection and Procurement Perspective Supplier selection is the key to a successful relationship. Selection of an

incompetent supplier as a SC partner means doom for any attempt to build successful relationship. Supplier evaluation must be based on purely professional basis and follow the RFx document procedure, that is RFI- Request for Information, RFP- request for proposal and Request for quotation (RFQ) or bids and tender documents must be obtained from the potential supplier for rigorous evaluation.

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Once the supplier is selected the relationship building measures and supplier involvement in operations can begin. Figure 2.2 Steps to Supplier Selection (Bowersox, Closs, & Cooper, 2009)

An assessment approach to acquire reliable supplier performance should be established. This would include an on-site evaluation of the supplier assessing supplier capabilities and quality system as well as product samples (Yeung & Chin, 2004). The objectives of procurement are an assured continuous supply of strategic inputs of specified quality, minimizing the investment through just-in-time delivery to minimize the total cost of ownership (TCO) of the supply. Supplier development is often used to help supplier develop to meet the buyer requirement. 2.3

Building Supplier Relationship Traditional businesses treated suppliers as adversaries, making profit at

their expense. Suppliers were not trusted and following the Porter principle considered effort to dilute supplier power. A firm would use many suppliers to ensure that suppliers did not acquire an upper hand. The modern businesses consider supplier as supply chain partner. The relationship is in mutual interest as both parties benefit from the relationship. Instead of

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working with many supplier the SC prefers to work with one (or few if justified by risks) supplier. When one (or few) supplier is used the total requirement of input is consolidated and supplier becomes interested due to large quantity. Volume consolidation brings the benefits of economy of scale for the supplier and creates a willingness to invest in meeting the quality and capacity requirements. The buyer can leverage its purchasing power to negotiate a good price and quality from the supplier (Jonsson, 2008) 2.2.1 Strategies for Procurement Relationship The organization performance can be enhanced by developing right strategies for procurement of supplies. Volume consolidation discussed above promises considerable cost reduction in purchasing and lowering the total cost of ownership by supplies with effectively zero-defects, just-in-time supplies to minimize investment in supplies. Supplier operation integration is another aspect of buyer-supplier relationship. In this strategy operational information is shared with the supplier. This allows the supplier to organize supplies to meet the buyer’s requirement. Developing supplier capabilities to enable it to ensure zero-defect supplies is another benefit of supplier operational integration. Supplier managed inventory is another strategy that can help improve organization’s performance. The supplier relationship development gives access to point of sale (POS) data or inventory position through electronic data interchange (EDI) to replenish the supply as vendor (supplier) managed inventory (VMI).

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Seeking strategic supplier’s input in new product development result in improving operational efficiency as the supplier can help in redesigning the process to reduce the effort required in operational processes. Rinehart, Eckert, et al, (2002) state that many different inter-organizational relationships such as alliances, partnerships, collaborative relationships and transactional relationships are being used in the literature. The definitions of the various relationships are often used interchangeably and that causes some confusion. Kerlinger and Lee (2000) argued that consistent definition of the type of buyersupplier relationship is important to prevent ambiguity. This is important for companies since indistinctness about the relationships terms can lead to disconnects in the expectations between suppliers and buying companies. A mutual understanding of expectations is therefore necessary for making the relationship as efficient as possible to meet up market demand for the products. 2.4

Supply Chain Flexibility and Service Level Agreement Supply chain flexibility is a way to react rapidly to the increasingly shifting

needs and wants of the customers. In this regards making close and strong relationship with suppliers who provide important inputs to the organization, which are used in the production of specific products to cater the requests and wants of the customers. If the relationship with supplier is strong and committed, the suppliers will provide customize goods and services in accordance with the needs of specific customers.

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Logistics supply chain flexibility is also necessary for achieving the needed customer satisfaction. Flexibility is necessary because forecasting is never completely accurate, and risks overcapacity or lost sales. Variability in demand has always been a problem for many businesses and is only growing as customer needs are changing and product life cycles are shortening. A key issue for companies is how to deal with this growing variability problem. Logistics service providers are under pressure due to increasing service level requirements and increasing consumer wishes. The logistics companies must render quality services to customers to make people satisfy. An increasing importance of details, and also of achieving high level of quality services had forced logistics companies to reform the structures of relationship with customers. The new way of structuring relationships between supplier and customers is called Service Level Agreement (SLA). SLA can be defined as a document in which supplier and customer make written agreement to specify what customer may expect and what the suppliers and/or logistics providing company will provide in terms of services. SLAhad been considered as a useful document because the quality of the service can be enhanced through clearly defining and focusing on main services to meet up customer and business requirements. The main services that the customers expect from the supplier were called KPIs which are quantifiable measures that logistics service providers use to determine and contrast performance of the organization in achieving the day to day and strategic goals.

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Although SLAs are implemented in business relationships in various sectors, SLAs are a recent phenomenon for the logistics sector. SLAs are only implemented by a couple of logistics service providers and they are only implemented in a couple of business relationships. There are probably a couple of explanations that prevent them to implement SLAs in business relationships. How could these explanations be identified? Is the logistics sector such a different sector in implementing SLAs in business relationships compared to other sectors? And is it possible to standardize SLAs in business relationships in the logistics sector? These questions are still too answered by the research practitioners. Mentzer and DeWitt, et al, (2001) argued that there are many relationships within supply chains and it is of the interest to manage these multiple relationships among the actors involved for optimizing supply chain performance. The relationships among these actors vary from simple transactional relationships to complex interdependent relationships. Ganesan (1994); Berry and Parasuraman (1991) argued that value creation in the supply chain had been achieved through long lasting relationships between customers and suppliers, and that’s why many companies are moving closer towards long term relationships with suppliers. The role of information technology sector in this regard cannot be ignored when talking about development of the modern economic development throughout the world (Kramer, Jenkins, & Katz, 2007). It is one of the faster growing sectors with a great influence on everyday life of the people. However, the industry is facing various problems related to supply chain management including supplier and buyer relationship. Many of the biggest ICT corporations have been criticized because of

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unethical practices of their suppliers. Bad working conditions, long working hours, limited or missing health and safety regulations, child labor, and violated human rights are among the most common issues occurring in suppliers of ICT companies (FLA, 2012). Besides this, the manufacturing processes and waste streams in the IT sector have an essential impact on environmental pollution (Chen, Lai, & Wen, 2006; Dawkins, 2005; Wu, 2013). Another problem refers to data security and usage of information by the parties throughout the supply chain. For example, suppliers who provide one organization with input materials are the suppliers of various companies in the region; therefore, they can manipulate and share the product information with other competing firms. Supply chain strategy development is to determine the order winning criteria, the object being to define, prioritize and eventually weight the customers' critical purchasing (customer oriented) factors. Managing a supply chain included mobilizing all the diverse operations and actions that may adjoin worth to consumers and simultaneously to organizations (Lummus, 1998). 2.5

Supplier Lead Time Reduction The suppliers comprise of just about 70% of lead-time troubles (Burton,

1988). In the environment of lean production just in time (JIT) buying needs supplying companies to make delivery of raw materials frequently in small batches. This would be possible if there is perfect coordination between buyer and supplier

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Heikkila (2002) argued that in order to make supply chain more responsive and to keep it away from uncertainty, organizations must work on reducing lead time. If the lead time decreases it minimizes the possible predicament of delivering inventories and removes quality issues related to keep buffer inventory. Organizations which share information with supplier helped to reduce lead time. (Larson & Kulchitsky, 2000) The research also indicates that logistic relationship between supplier and buyer under just in time method had vital role where supplier must respond to the needs of customers regarding both quantity and quality. 2.6

Competitive Performance There has been an extensive literature written on supplier relationship and

the performance of the company. The key performance taken by most research practitioners are cost reduction, quality improvement, lead time, just in time inventory, flexibility in operations and delivery. However, these alternative structures must prove to be beneficial; otherwise they will not deliver a competitive advantage. Additionally to these actions, the product launching at the right time is also resulting in company’s performance (Phan, & Matsui, 2011). 2.7

Research Hypothesis The literature review discussed above identifies the issues for this research

project. These issues have been converted into the hypotheses below: H1Development of the supplier significantly affects organization performance H2Building a relationship of trust with supplier significantly affects organization performance

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H3Supplier lead time significantly affects organization performance H4Information sharing with Supplier significantly affects organization performance

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Chapter 3: Research Methods 3.1

Method of Data Collection Two different types of data collection sources are available for the purpose of

doing research, Secondary data collection method and primary data collection method. For this study, primary data collection method was used. Primary data was collected by a questionnaire-based survey. The questionnaire was designed on a 5point Likert scale with 1- corresponding to strong disagreement and 5 to strong agreement with the statements. This kind of data is new and original. The study was conducted through a questionnaire. 3.2

Sampling Technique The simple random technique for sampling of the data had been applied in

this thesis for the purpose of collecting data from the relevant sample. 3.3

Sample Size This study contained the sample of 315 observations or respondents for the

purpose of analysis. The respondents included employees of different organizations, Supply Chain Managers, students specializing in Supply Chain Management, and owners of the business were the main respondents. 3.4

Instrument of Data Collection A well-furnished research questionnaire was developed to receive possible

responses from the selected sample size for the purpose of collecting data. The questionnaire included 15 questions (3 questions for each independent and

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dependent variable) prepared at Likert Scale containing 5 options such as Strongly agree, agree, Neutral, Disagree, Strongly Disagree. 3.4.1 Validity and Reliability Test The reliability test was applied to verify whether data collected through particular questionnaire is truly reliable for the analysis or not. The criteria is that if the value of the test is greater than 0.50, it would be considered that the data is truly reliable. But on the other hand, if the value is less than 0.50, then it would be considered that the data is not truly reliable. When the test was applied through SPSS software, the following results were generated. The following results had been generated of reliability test. Table 3.1 Case Processing Summary

Cases

Valid Excludeda Total

N 315 0 315

% 100.0 .0 100.0

a. List wise deletion based on all variables in the procedure.

The table 3.1 mentioned above shows the case processing summary about how many observations had been used as sample for the analysis of the study and how many cases are valid and or excluded. The above table shows that N or number of cases or observations included in this study are 315 and all the cases are valid (100%) and no case had been excluded from the study analysis.

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Table 3.2 Reliability Statistics Cronbach's Alpha N of Items .786

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The Cronbach’s Alpha value (0.786) is greater than 0.50 (i.e. 0.786>0.50), that suggested that Categorical Data used in this study is truly reliable for Multiple Linear Regression Analysis. On the basis of Reliability test, now the Regression analysis would be applied to explore that how supplier relationship management affect performance of the organizations. 3.5

Research Model Developed Following Research model was developed for the study

Figure 3.1 SRM Model (Source: Self-made) Independent Variables

Dependent Variable

Information Sharing with Supplier Supplier Lead Time Organization Performance Trust with Supplier

Supplier Development

Impact of (SRM) On Organization Performance 3.6 Statistical Technique In this study the Multiple Linear Regression (MLR) test had been applied to analyze the possible hypotheses of the study. The MLR test was applied through SPSS (Statistical Package for Social Sciences) software.

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Chapter 4: Results This chapter of Results covered up research findings and interpretation of the results. The objective of this chapter was to analyze the data and found and extract some possible results of this thesis. The key aim of the thesis was to examine that how supplier relationship management (i.e. Information Sharing with Supplier, Supplier Lead Time, Trust with Supplier and SupplierDevelopment) affect organization performance. To achieve this objective, a comprehensive survey questionnaire had been developed to gather data. As for as statistical test was concerned the Multiple Linear Regression (MLR) test had been chosen for inspecting supplier relationship management effect on performance of the organization. The MLR test was applied through SPSS software. 4.1

Finding and Interpretations of the Results Below was the output or results that were generated through SPSS software.

Onwards the interpretation of the results was discussed and hypothesis was analyzed. Table 4.1 Model Summary

Model

R

R Square

Adjusted R

Std. Error of the

Square

Estimate

Durbin-Watson

1 .574a .330 .321 .4442510 1.690 a. Predictors: (Constant), Information Sharing with Supplier, Supplier Lead Time, Trust with Supplier, Supplier Development b. Dependent Variable: Organization Performance

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The model summary mentioned above in Table 4.1. The R in the above table is coefficient of correlation between the variables which is 57.4% which is greater than 50% that means the correlation between study variables both independent and dependent was statistically strong and significant. The R Square in above table is coefficient of determination. The value of R square (0.330) shows that independent variables (i.e. Information Sharing with Supplier, Supplier Lead Time, Trust with Supplier and Supplier Development) explained 33% variation in Organization Performance (i.e. dependent variable). The value (0.330) of the model is close to 0.50, therefore, data shows that study model is almost fit as per data provided by the respondents. Along with R square, the multiple regression analysis also gives us value for Durbin Watson. The test values can vary from 0 to 4. In this study the value of Durbin Watson is 1.690 which is less than 2 (1.690<2), therefore, study found positive correlation between the adjacent residuals. Table 4.2 ANOVA

1

Model Regression Residual Total

Sum of Squares 30.101 61.181 91.283

Df 4 310 314

Mean Square 7.525 .197

F 38.130

Sig. .000a

a. Predictors: (Constant), Information Sharing with Supplier, Supplier Lead Time, Trust with Supplier, Supplier Development b. Dependent Variable: Organization Performance

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The ANOVA matrix had been mentioned above in table 4.2. The sig value (0.000) in the table is less than 0.05(α=0.05), (0.000<0.05), hence, the study rejected the null hypothesis and failed to reject (i.e. accept) alternate hypothesis that supplier relationship management significantly affect organization performance. Table 4.3 Coefficients Unstandardized Standardized Coefficients Coefficients Std. B Error Beta T Sig. 1.675 .237 7.076 .000 .128 .037 .184 3.491 .001 .023 .046 .026 .495 .621 .038 .046 .042 .835 .404 .448 .050 .459 8.872 .000

Model 1 (Constant) Supplier Development Trust with Supplier Supplier Lead Time Information Sharing with Supplier a. Dependent Variable: Organization Performance

95.0% Confidence Collinearity Interval for B Statistics Lower Upper Bound Bound Tolerance VIF 1.209 2.140 .056 .200 .781 1.280 -.068 .114 .800 1.250 -.052 .128 .856 1.168 .349 .547 .806 1.241

H1: Supplier Development significantly affects organization performance. In the above table 4.3 the sig value for Supplier Development is 0.001 which is less than set level of significant (α=0.05), the signs of the confidence interval are the same (+ve), and the value of the VIF (Variance Inflator Factor) 1.280 which is less than 2, therefore, the recommended null hypothesis was rejected and HA was accepted that Supplier Development significantly affects organization performance. Thus study found that if the organizations strive to develop the suppliers in term of technology, operations etc., then the performance of the organization will be augmented. H2: There is a significant impact of Trust with Supplier on organization performance

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The table 4.3 also shows the sig value (0.621) for 2nd variable (Trust with Supplier) is greater than set level of significant (α=0.05), (0.621>0.05), the signs of the confidence interval are not the same (one positive and one negative), therefore, the study failed to reject suggested null hypothesis. But the value of the VIF (Variance Inflator Factor) 1.250 which is less than 2 is acceptable for the study. Overall, the study found that trust with Supplier had not significantly affected organization performance. Therefore, the study suggested, as per data provided, that no supplier had unconditional relationship and mutual trust with the organizations and there was the possibility that supplier may share a secret information of the company with the competitors of the company. H3: There is a significant impact of Supplier Lead Time on organization performance In table 4.3, the sig value for 3rd variable is 0.404 which is greater than set level of significant (α=0.05), (0.404>0.05), the signs of the confidence interval are also not the same (one positive and one negative), therefore, the study failed to reject suggested null hypothesis, that Supplier Lead Time had not significantly affected organization performance. But the value of the VIF (Variance Inflator Factor) 1.168 which is less than 2 is acceptable for the study. Overall, the study found that suppliers and organizations had neither mutual understanding nor organizations panelize suppliers to reduce lead time and promote Just in Time system. H4: There is a significant impact of Information Sharing with Supplieron organization performance

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In table 4.3 exhibited above, the sig value for 4th variable i.e. Information Sharing with Supplier is 0.000, which is less than 0.05 (α=0.05), also, the signs of the confidence interval are the same (+ve), and the value of the VIF (Variance Inflator Factor) 1.241 that is also less than 2, therefore, suggested H0 was rejected and the study accepted the alternate hypothesis (HA) that Information Sharing with Supplier has significant impact on organization performance. Thus, the study found that if the company may share information with their key suppliers in terms of product quality, state of the art technology, materials etc. then it will enhance the performance of the organization. Therefore, it suggested that companies should share information with supplier if organizations desire to increase the performance. 4.2

Hypotheses Assessment Summary The summary to assess hypotheses had been given below:

Table 4.4 Hypotheses Assessment Summary S. No 1. 2. 3. 4.

Hypothesis H1: Supplier Development significantly affects organization performance. H2: Trust with Supplier significantly affects organization performance. H3: Supplier Lead Time significantly affects organization performance H4: Information Sharing with Supplier significantly affects organization performance

Sig Value

Empirical Conclusion

.001

Accepted

.621

Rejected

.404

Rejected

.000

Accepted.

Impact of (SRM) On Organization Performance

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Chapter 5: Discussions, Conclusion, Policy Implications and Future Research 5.1

Discussions In recent years, building strong relationships with suppliers have become

very important to sustain competitiveness, customer attractiveness and to achieve larger market share. Many firms activities directed towards suppliers are uncoordinated, possibly carried out by different departments and thus not integrated into an overall supplier management. This stands contrary to growing opportunity concerning effect of the purchasing function on overall value creation. Different aspects of supplier management provide valuable insights and approaches. Still an overall framework integrating all these insights into a SRM framework remains desirable. The performance and past history of the suppliers help in taking decisions for its selection, as a result selecting the right supplier helps in getting more improved quality. Quality is a key factor of suppliers by which they can improve and maintain quality assessment and delivery performance. Therefore the SRM practices introduced in this research points out its relevance to quality performance. The key purpose of this thesis was to scrutinize that how supplier relationship management affects performance of the organization. To achieve this objective, a comprehensive questionnaire had been prepared containing 15 questions (3 questions for each independent and dependent variable) from the relevant sample (315 respondents), in order to gather data. The collected was then

Impact of (SRM) On Organization Performance

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evaluated through SPSS software. Finally, broadly speaking, the study found that supplier relationship management significantly affects organization performance. 5.2

Conclusion It is estimated that 50-70% of the costs of an organization is related to

provision of goods and services for the company. Supplier selection and supplier relationship management can result in a significant reduction in cost, improvement in quality of produce and a brand image that means large market share and a healthy return on investment. The research project has demonstrated the importance of suppliers relationship management on organization performance. 5.3

Policy Implications According to this study supplier relationship management has a significant

influence on organization performance. Organizations can use this information to align their strategies to achieve higher degree of performance. 5.4

Future Research For the future, the study can be conducted on different factors which can

influence supplier relationship and organization performance. Also study can be conducted in overall Pakistan and other countries as this study is confined to Karachi only.

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References Berry, L. L., & Parasuraman, A. (2004). Marketing services: Competing through quality. Simon and Schuster. Burton, T. (1988) JIT/repetitive sourcing strategies: trying the knot with your suppliers. Production and Inventory Management Journal, 29(4), 38–41. Chan, F. T. (2003). Performance measurement in a supply chain. The international journal of advanced manufacturing technology, 21(7), 534-548. Chen, Y. S., Lai, S. B., & Wen, C. T. (2006). The influence of green innovation performance on corporate advantage in Taiwan. Journal of business ethics, 67(4), 331-339. Choy, K. L., & Lee, W. B. (2002). A generic tool for the selection and management of supplier relationships in an outsourced manufacturing environment: the application of case based reasoning. Logistics Information Management, 15(4), 235-253. Cooper, M. C., & Gardner, J. T. (1993). Building good business relationships: more than just partnering or strategic alliances?. International Journal of Physical Distribution & Logistics Management, 23(6), 14-26. Dawkins, J. (2005). Corporate responsibility: The communication challenge. Journal of communication management, 9(2), 108-119.

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De Boer, L., Labro, E., & Morlacchi, P. (2001). A review of methods supporting supplier selection. European Journal of Purchasing & Supply Management, 7(2), 75-89. Ganesan, S. (1994). Determinants of long-term orientation in buyer-seller relationships. the Journal of Marketing, 1-19. Harrison, A., & Van Hoek, R. I. (2008). Logistics management and strategy: competing through the supply chain. Pearson Education. Heikkilä, J. (2002). From supply to demand chain management: efficiency and customer satisfaction. Journal of operations management, 20(6), 747-767. Jonsson, P. (2008). Logistics and supply chain management. New York. Kerlinger, F. N., & Lee, H. B. (2000). Foundations of Behavioral Research: Wadsworth, Thomson Learning. Northridge, CA. Kramer, W. J., Jenkins, B., & Katz, R. S. (2007). The role of the information and communications technology sector in expanding economic opportunity. Cambridge, MA: Kennedy School of Government, Harvard University. Larson, P. D., & Kulchitsky, J. D. (2000). The use and impact of communication media in purchasing and supply management. Journal of Supply Chain Management, 36(2), 29-39. Lummus, R. R., Vokurka, R. J., & Alber, K. L. (1998). Strategic supply chain planning. Production and Inventory Management Journal, 39(3), 49.

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Mentzer, J. T., DeWitt, W., Keebler, J. S., Min, S., Nix, N. W., Smith, C. D., & Zacharia, Z. G. (2001). Defining supply chain management. Journal of Business logistics, 22(2), 1-25. Phan, A. C., Abdallah, A. B., & Matsui, Y. (2011). Quality management practices and competitive performance: Empirical evidence from Japanese manufacturing companies. International Journal of Production Economics, 133(2), 518-529. Rinehart, L. M., Eckert, J. A., Handfield, R. B., Page, T. J., & Atkin, T. (2004). An assessment of supplier—customer relationships. Journal of Business Logistics, 25(1), 25-62. Wagner, S. M. (2006). Supplier development practices: an exploratory study. European journal of marketing, 40(5/6), 554-571. Wu, G. C. (2013). The influence of green supply chain integration and environmental uncertainty on green innovation in Taiwan's IT industry. Supply Chain Management: An International Journal, 18(5), 539-552. Yeung, I. K., & Chin, K. S. (2004). Critical success factors of supplier quality management. Asian Journal on Quality, 5(1), 85-109.

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Appendix SPSS Data View

32

Impact of (SRM) On Organization Performance SPSS Variable View

33

Impact of (SRM) On Organization Performance

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SPSS Output Case Processing Summary N Cases

Valid

% 315

100.0

0

.0

315

100.0

Excludeda Total

a. Listwise deletion based on all variables in the procedure. Reliability Statistics Cronbach's Alpha

N of Items .786

15 Model Summaryb

Model

R

1

.574a

R Square

Adjusted R

Std. Error of

Durbin-

Square

the Estimate

Watson

.330

.321

.4442510

1.690

a. Predictors: (Constant), Information Sharing with Supplier, Supplier Lead Time, Trust with Supplier, Supplier Development b. Dependent Variable: Organization Performance

ANOVAb Model 1

Sum of Squares

df

Mean Square

Regression

30.101

4

7.525

Residual

61.181

310

.197

Total

91.283

314

F

Sig.

38.130

a. Predictors: (Constant), Information Sharing with Supplier, Supplier Lead Time, Trust with Supplier, Supplier Development b. Dependent Variable: Organization Performance

.000a

Impact of (SRM) On Organization Performance

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Coefficients Unstandardized Coefficients Model B Std. Error 1 (Constant) 1.675 .237 Supplier Development .128 .037 Trust with Supplier .023 .046 Supplier Lead Time .038 .046 Information Sharing with .448 .050 Supplier a. Dependent Variable: Organization Performance

Standardized Coefficients Beta .184 .026 .042 .459

T 7.076 3.491 .495 .835 8.872

Sig. .000 .001 .621 .404 .000

95.0% Confidence Interval for B Collinearity Statistics Lower Upper Bound Bound Tolerance VIF 1.209 2.140 .056 .200 .781 1.280 -.068 .114 .800 1.250 -.052 .128 .856 1.168 .349 .547 .806 1.241

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Questionnaire FILL IN THE BOXES GIVEN BELOW: Gender

Name:

 Male

Organization:

 Female

Designation:

Years in Organization:  Less than 1

 1 to 5

 6 to 10

Contact Info. (Phone, Email,)

Phone:

Visiting card if available would

Email:

be very much appreciated)

Visiting Card

 More than 10

Attached Not available

Please indicate your agreement/disagreement with the following statements using the scale given below: Strongly Disagree 1

Disagree

Neutral 2

Agree 3

Strongly Agree 4

5

Impact of (SRM) On Organization Performance

38

3

4 5 6

7 8 9

10 11 12

13 14 15

In case the supplier faces shortage of important materials, your organization helps them to make available for the production. Your organization invests in developing supplier’s plants, equipment and technology to help him update its technology. Trust with Supplier Suppliers fill your organization’s orders without going through formal procedure in case of urgency. There has been an unconditional relationship of trust between Suppliers and your organization. You trust your suppliers that they will not share company’s information to your competitors. Supplier Lead Time Suppliers in your organization are selected based on their ability to reduce lead-time. Your organization and supplier has mutual understanding in maintaining Just in Time inventory to reduce lead-time. You penalize the supplier if he does not provide on time delivery of products Information Sharing with Supplier Your firm shares knowledge that is important for decision making to achieve coordination between supplier and the organization. Sharing information with supplier lead your organization to innovate new product Your organization share information with supplier to provide forward visibility, improved production planning, inventory management Organization Performance Strong supplier relationship management improves overall performance of your company. You want to make strong relationship with your supplier to improve future profitability of your organization. You have made strong relationship with your supplier to reduce transaction and overall costs.

Thank you for your help

Strongly Agree

2

Agree

1

Supplier Development Your organization provides financial support to suppliers to develop their production units

Neutral

QUESTIONS

Disagree

S. No

Strongly Disagree

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