How to Make Everyone Happy in the Supply Chain

March 22, 2010
A new study by Oregon State University reveals that the balancing act between keeping costs under control and keeping suppliers happy is even more difficult than previously thought due to tough economic conditions

In the world of a supply manager, navigating the territory between internal customers, suppliers and buyers is tricky. A new study by an Oregon State University supply chain researcher shows this balancing act between keeping costs under control and keeping suppliers happy is even more difficult than previously thought due to tough economic conditions.

In a recently published paper in the Journal of Business Research, Zhaohui Wu hypothesizes that since research has shown that companies believe supply managers should have the ability to “wear many hats” and take on multiple roles as needed, that this ability would have a positive relationship with the manager’s interpersonal relationships.

In fact, Wu’s in-depth interviews with 11 supply managers and their key contacts in eight diverse U.S. companies shows just the opposite: Suppliers believe that supply managers who excel at these different roles are viewed in a more negative light by suppliers.

“Suppliers seem to think they are acting fake, that the supply manager is putting on different faces,” Wu says. “They questioned the sincerity of the manager, and the better that manager was at navigating between the roles, the more the supplier doubted his intentions.”

As Wu’s paper points out, this is paradoxical and thus shows that being the middleman in a supply chain relationship is more complicated than ever. Companies and suppliers state they want a supply manager with the ability to take on multiple roles—to negotiate on behalf of the buyer as well as to work efficiently with the supplier. As the researchers point out, “Individuals depending upon their organizational position may perceive role-changing behavior differently.” The four roles the researchers identified are: a negotiator for the buyer, a facilitator between buyer and supplier, an advocate for the supplier, and an educator of internal customers.

As an example to illustrate the complex nature of the role of the supply manager, Wu offers this example:

“Let’s say you are the buyer for GM, and you have an established relationship with a trusted overseas supplier of an essential component for your product, and all of a sudden your company wants you to get a better deal, or perhaps they want it earlier,” he says.

“Now, your supplier also has to trust you. At the same time they may tell you, we’ve got an issue and now the product is going to be late, or perhaps they say they can rush delivery but it will cost more and the cost they quoted is more than your company wants to pay.”

All of these negotiations are part of the “many hats” that Wu says a supply chain manager wears. He says in today’s economy, the situation is even tougher, which is why more research is needed.

“The nature of supply management has changed,” Wu says. “Most of the time now, you are dealing with overseas companies, and price negotiation is just part of the job. There is more time pressure to get the product, more focus on quality control, and managing the expectation of both the suppliers and your internal customers.”

Wu says the supply manager plays an ever more important role in coordinating the process, which requires taking on multiple identities.

“It’s a more cognitive, more sophisticated job than it was in the past,” he says. “In the past, supply managers were largely seen as number crunchers, people who had to be good with negotiating contracts. This is no longer the case.”

The research shows that in some cases managers are successfully able to take on these different roles, but the trust between buyer and supplier can be affected. Because this juggling of roles is an aspect of the modern managers, Wu says more research needs to be done to find out how managers can integrate their roles smoothly.

“Maybe some of the supply chain managers are just naturally good at smoothly navigating relationships, we don’t know,” Wu says. “Or perhaps there are tools that can help form a coherent identity. The cognitive aspect is missing in supply chain research; in this paper we are just measuring the behavioral aspect.

Wu, an associate professor in Oregon State University’s College of Business and director of the college’s Sustainable Business Initiative, is an expert on supply chain networks and management. He is lead author on the paper, which was written with Michelle D. Steward of Wake Forest University and Janet L. Hartley of Bowling Green State University.