Supply chain friends: The good, the bad, and the uglyby David M. Gligor, Carol L. Esmark

Business Horizons

About

Year
2015
DOI
10.1016/j.bushor.2015.05.005
Subject
Marketing / Business and International Management

Similar

Quality costs

Authors:
National Council for Quality and The, Reliability
1971

Child labour: the high cost of gold

Authors:
The Lancet
2013

Text

b

Business Horizons (2015) 58, 517—525

Available online at www.sciencedirect.com

ScienceDirectaGlobal Supply Chain and Logistics Excellence Network, Massachusetts Institute of Technology (MIT), 2A Pesiaran Tebar Layar, Seksyen U8, Bukit Jelutong, 40150 Shah Alam, Selangor, Malaysia bCollege of Business, Mississippi State University, 324 McCool Hall, Mississippi State, MS 39762, U.S.A. 1. Supply chain relationships: Friend or frenemy

The importance of firms developing close relationships with suppliers has been well recognized by supply chain managers. Similarly, the supply chain management literature highlights the key role and impact of positive buyer-supplier relationships (Autry & Golicic, 2010; Daugherty, 2011). Closer buyer-supplier relationships have been found to result in a variety of benefits for the parties involved, including superior levels of customer service (Vickery, Jayaram, Droge, & Calantone, 2003), lower overall cost (Carey, Lawson, & Krause, 2011), and increased trust (Delbufalo, 2012).

However, the majority of this research focuses on firm-to-firm level relationships and ignores the role of individuals. Despite calls for additional studies employing individuals as the unit of analysis, few

KEYWORDS

Supply chain relationships;

Friendships;

Business relationships;

Trust;

Communication;

Gender differences

Abstract The importance of firms developing close relationships with suppliers has been well recognized by supply chain managers. However, business relationships ultimately progress due to individuals within firms interacting over time. Our results from in-depth interviews with supply chain managers revealed that decisions made by managers within the supply chain can’t be accurately explained or fully understood without accounting for the important influence of the friendships managers across firms develop with each other. This is of significant importance for senior managers since supply chain costs typically account for 60% to 90% of a company’s total costs. In this article, we seek to shed some light on the implications of developing personal relationships with counterparts within the supply chain. We conclude by providing guidelines that upper management can follow to enhance the potential positive benefits associated with the inherent development of personal relationships/friendships and, equally important, mitigate the potential negative impact of such relationships. # 2015 Kelley School of Business, Indiana University. Published by Elsevier Inc. All rights reserved. * Corresponding author

E-mail addresses: gligor@mit.edu (D.M. Gligor), c.esmark@msstate.edu (C.L. Esmark) 0007-6813/$ — see front matter # 2015 Kelley School of Business, Indiana University. Published by Elsevier Inc. All rights reserved. http://dx.doi.org/10.1016/j.bushor.2015.05.005Supply chain friends: The and the ugly

David M. Gligor a,*, Carol L. Esmarkgood, the bad, www.elsevier.com/locate/bushor supply chain studies investigate the critical role of develop friendships with people we like, so the 518 D.M. Gligor, C.L. Esmarkmanagers as important decision makers within such firm-to-firm relationships (e.g., Gligor & Autry, 2012). Supply chain researchers have recognized this gap and have emphasized the need for a ‘‘deeper understanding of the behavioral complexities that emerge through the interaction between the buyer(s) and provider(s) of logistics services’’ (Marasco, 2008, p. 141). This is a limitation in the supply chain literature since business relationships ultimately progress due to individuals within firms interacting over time (Haytko, 2004). As managers interact across firms within a supply chain, some form friendships that can significantly impact the decision-making processes of the individuals involved. Psychology and sociology studies suggest that it is difficult for relationship participants to separate business decisions from the nature and quality of their friendships (Lian & Laing, 2007), which can lead to decisions being made that are not in the best interest of the firm. We make an important contribution in this area by offering a better understanding of how personal relationships/friendships impact managers’ behavior in a supply chain context.

Aside from contributing to the supply chain literature, we primarily seek to shed some light for supply chain managers on the implications of developing personal relationships with counterparts across the supply chain. Thus, our primary audience is managers with some role and decision-making prerogatives within their firms’ respective supply chains. To achieve this goal, we conducted in-depth interviews of 1 to 2.5 hours’ duration with 26 managers from nine different firms. The Grounded Theory methodology was used for data collection, analysis, and interpretation.

Our results revealed that decisions made by managers within the supply chain can’t be accurately explained or fully understood without accounting for the important influence of the friendships developed across firms. This is of significant importance for senior managers since supply chain costs typically account for 60% to 90% of a company’s total costs. Consider these interview excerpts:

Excerpt 1: ‘‘When I have a vendor that I really like, I’ll give him more business if I have more of a personal relationship with him. The reality is that if circumstances allow it, we all want to do business with people we enjoy interacting with.’’

Excerpt 2: ‘‘It’s all about relationships with people. I’ve found that if people like you, they’ll find a way to do business with you. Wepersonal and business elements go hand in hand. It’s hard to separate them. We’re humans and most of us like to socialize.’’

Excerpt 3: ‘‘People will do business with people they like and sometimes that matters more than the price.’’

Despite the benefits that come from close business relationships, our research shows that there are also negative consequences. Consider the manager who gives a second chance to a poorly performing supplier or the manager who divulges too much information to a supplier he or she wrongly trusted. There is a dark side to business friendships that can result in suboptimal business decisions. Understanding the personal relationships within which business relationships are embedded helps to explain why supply chain managers behave a certain way and can guide managers on reaping the benefits while avoiding the pitfalls that friendships can entail.