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BAHRIA UNIVERSITY

ISLAMABAD CAMPUS

Supplier Management and


Development
Final Project

Submitted by:
Submitted to:

Group number 5
Dr Nadeem Kureshi

Introduction
As nowadays sourcing relationships become more complex and strategic in nature,
supply chain professionals need new insights and more sophisticated supplier
development and management tools. Todays modern technology and innovative
ideas are helping supply chain managers to develop better relationships with their
strategic partners and also offer better overall solutions to supply related problems.
Good suppliers are an important asset to your organization because they provide
the products and services that are essential to daily operations. Each supplier
represents a relationship which needs to be nurtured, as well as an element of risk
which
needs
to
be
managed.
Collecting and maintaining accurate, complete, up-to-date information is critical to
maintaining a clear picture of current and potential suppliers, while ongoing twoway communication is vital for good relationships. But in many organizations,
supplier adoption and communication processes are cumbersome, time-consuming
and inconsistent.
This paper focuses on the importance of the overall relationship with suppliers that
one firm can have, the better the relations the better the results for both the firms.
Not all organizations realize the importance of good relationship management with
suppliers and that is why results of a questionnaire that had been conducted earlier
are shared at the end of this paper. The reason of research is because previously
very less light has been shed on a topic of this field in context of the Pakistani
market, though this may be the same reason why results may be inaccurate to
some extent as very less previous data was found with regard to the Pakistani
Industry. Furthermore this paper leaves room for future researchers to continue
research in this, less explored field of study.

Historical Background
The term Supplier management was first coined by Leenders in 1966 during his
doctorial thesis which described the concept of supplier management as efforts by
the buying firm to increase the quantity of potential suppliers and also to improve
the performance of suppliers. The term has been defined more expressively as an
effort by the industrial firm to improve the capabilities or performance of its
suppliers. Toyota of Japan has utilized the term keiretsu shindan (enterprise group
diagnosis) repeatedly since World War II (Hines, 1994b) to carry out business with
nominated suppliers without switching to others at that point in time and make
every effort to raise the performance of the nominated suppliers. Moreover, the
term Supplier management has had a connection with supplier associations (Kyoho
Kai) for production development, as a means to spread best practice Supplier
management (Hine, 1994). Post-war Toyota had a fast circulation of knowledge
sharing of network-processes due to the reason that it enjoyed an impressive
partnership with supplier associations, supplier networks and suppliers themselves,
thus laying down the foundation of Supplier management activities (Dyer &
Nobeoka, 2000).
According to Wagner (2006a) the first wave of Supplier management research was
started by quality management researchers during 1989-91 and the second wave
started from 1995 when researchers started working on relationship issues. Since
the start of the second wave, few key authors have contributed significantly over
the years in the evolution of Supplier management theory and practice. One of the
significant contributors in the topic of Supplier management is Krause, who has
published 11 research articles since 1997, followed by Wagner, Carr, Forker, Hahn
and Humphreys, each of whom have 3 or 4 research publications. All of these
researchers have emphasized the importance of Supplier management and
contributed to the body of knowledge on this subject over the years. Furthermore,
all of them have recommended further research to advance the knowledge for both
the academic community and industry so as to improve supply chain competency.

Research Methodology
This research has been conducted in various industries in order to uniformly draw
the results. Organizations such as Red crescent, Airblue, and other telecom
organizations may express the aspects of various firms while dealing with their
suppliers.
Experts from various organizations such as Air blue, Red Crescent. Mobilink, Stork
Turbo and many other organizations have been asked to fill these research
questionnaires within the prescribed time. The respondents are intentionally chosen
from the executive level since the major matters in most of the organizations
especially in Pakistan are taken along the higher level of hierarchy. Along with that,
it has also been ensured that the respondents have been serving in their
organizations since quite some time, in order to make the results more authentic
and specific with regard to the actual operations in their respective organizations.
The research questionnaire including about 17 questions have been designed to
effectively look over to the relations of different companies in different sectors with
their suppliers in the long run and how they may evaluate and integrate with their
suppliers of different sizes.
All the questions designed are closed-ended with one question being judgementbased, or open-ended. These closed-ended questions are designed in such a way so
as to uniformly standardize their results and effectively bring conclusions along. The
Likert-scale designed for each question has been selected to be the standard scale
for these questions, after sufficient research over each and every content and
variable. However they may be chances for errors and the results may subject to a
slight degree of biasness, due to human errors.
The questions have been elaborated along with their contexts and variables in the
following section and the sample papers have also been attached along with the
report in order to authenticate the results and their subjective interpretations.
The results have been calculated from the questionnaires from each respondent,
and relative interpretations have been made from them with the least level of
biasness and human error. Graphical representations have also been made from the
survey results in order to clearly determine the results and judgements have been
made along with.

Validity and reliability


Validity of an assessment is the degree to which it measures what it is supposed to
measure. This is not the same as reliability, which is the extent to which a
measurement gives result that is very consistent. Within validity, the measurement
does not always have to be similar, as it does in reliability. The survey questions are
considered and seen both as reliable and valid since the results are consistent, and
they have measured what they ought to measure.

Research questions
Demographics such as age, gender, experience, position: this marks the
beginning of the research questionnaire which includes the demographics of the
respondents. It is clearly evident that this survey does not require the respondents
to mention their names or their respective organizations or departments so as to
minimize any biasness all along the respondents and while evaluating the results. It
has been ensured that the maximum respondents from organizations thereby
representing their organizations have been working there since an ample time in
order to make them able to have sufficient information regarding their
organizations operations or relations with other firms, especially suppliers. It has
also been ensured that the respondents have been chosen from the higher level of
hierarchy since most of the long run decisions are often relied upon the top
hierarchy or the higher management level.
Supplier development:this content or variable is specified across around 4
questions in this research questionnaire, that is, in the first question which asks
about the length of business relationship between the organization and its
suppliers, in the fourth question which asks about the importance of suppliers
being critical to the success of the organization, in the fifth question that identifies
the importance of sharing all the details with the suppliers including the designs
and lastly the sixth question which asks about how keen the organization is
investing in the development of suppliers.

This content specifies the importance of an organization developing its suppliers,


whether permanent or contractual, with the help of maintaining good and effective
relationships with them. Developing ones supplier would mean and organization
may share its relative details along and help the supplier to improve its own
performance as well. Having the policy of investing in the supplier may help both
the firms to be more efficient and deal with the changing work environments.
Organizational structure: this variable is allocated across various questions, such
as, third question which states whether the firm knowingly outsources a significant
amount of its activities, the ninth question which asks about placement of
purchasing department in the organizations hierarchy.
This content specifies the importance of the organizational structure, the hierarchy
and whether or not the structure is able to outsource the activities either the
major ones or contractual or less significant ones. This content also helps to
determine whether the organization is a large scale or small scale which may also
drive its operations and their supplier relations both in the long run and small run.
Use of Information Technology:this variable is allocated in few of the questions
in the questionnaire, such as the tenth question which states whether the
organization is capable of formulating a formal purchase manual, and the eleventh
question which asks about the use of any automated version in dealing with the
suppliers.
This content elaborates the importance of the use of IT in any organization and how
the system of buying and maintaining relationships with the suppliers is related and
associated with it. The use of IT in any organization may speed up the process of
evaluation and selection and will automatically build better relationships leading to
better performances of all the firms involved.
Supplier evaluation: this variable is the main variable or content of this research
questionnaire. It is allocated all among in the various sections of this questionnaire.
First of all the second question specifies the variables over which the supplier is
evaluated and selected are to be specified, and then from the twelfth question, this
specific variable is tested across such as with respect to the questions such as the
total cost of ownership considered or not while making buying decisions, the
formal ethics policy related to SCM at the organization, the presence of a formal
supplier selection at the organization, and the time limit for the supplier selection
process to take place, till the sixteenth question of the research questionnaire.
This variable determines the supplier selection phase of any organization that ho
may it evaluate and select the respective supplier out of the pool. The time taken,
the ethics and conduct followed, the formal procedure followed, the variables over
which the pool is generated, and the allocation of costs and risks determine the
type of relationship between the supplier and the firm. It may also determine how
any organization may able to sustain the relationship for future purposes and how it
may help to identify whether the supplier can be dealt with in future or not.

Supplier integration: this content has been verified through one major question
that is, the eighth question which states the various factors over which the supplier
integration may be inhibited or withdrawn. These factors may refer to whether the
information has to be shared or not, the interest of suppliers in integration along the
firm, the resistance to change and the reliability of the supplier company. Lastly the
research question asks about whether the employees are satisfied with the
performance of their suppliers or not in the last question of this research handout.

This content may also determine the fact how the supplier is able to integrate to
yield better results across the organization. If the integration is positively sufficient,
the supplier company along with the organization may benefit from the outcome.
Otherwise, the negative impact cause from no integration or false integration may
cause negative outcomes for both the firms.

Results and individual analysis


The results from around 12 organizations have been briefly elaborated along with
their analysis and interpretation. However, the aggregated result and analysis is
discussed in the following section.

In this certain
of the total of
respondents,
respondents
as
a
.key
their
considered.
important
organization
tie
between
innovation.

question, out
12
the
majority
chose quality
aspect
that
organization
While the least
factor
that
chose was a
ratings
and

In this particular question most of the respondents agreed on outsourcing their


business activities. 7 of the 12 respondents agreed on outsourcing, that is 58
percent, 2 of them strongly agreed (17 percent), while 3 did not agree on this idea,
that is 25 percent.

In
this
question all
respondents
the
side. 7 of
respondents
thinking of
that
played
an
role in the
their

particular
of
the
replied
on
agreeing
the
agreed with
the opinion
suppliers
important
success of

organization, that is 58 percent, while 5 strongly agreed to this view, that is 42


percent.

In
this
particular
question, most
of
the
respondents
did not agree
to share all the required details of their operations with their respective suppliers.
About 6 respondents out of 12 respondents did not agree with sharing information,
that is 50 percent, however the rest, that is around 3 respondents agreed with
sharing the information.

Through the
results of this
question, it is
evident that
the
greater
chunk
of
respondents, that is, 6 respondents have no idea regarding the investment of the
organization in the development of suppliers, 50 percent. However the least number
of respondents have disagreed over this aspect, that is, 2 respondents. (17 percent)

In this particular question, the majority of respondents were of no concept that their
organisations may have been contributing to areas where they are sourcing the Raw
materials. Out of the 12 respondents, 7 of them did not agree to this idea to have
their companies contributing to their supplier side areas. (58 percent) However, the
other respondents (42 percent firms) agreed that their companies might be
contributing to their suppliers as well.

Through
this
particular
question, it is
clearly
evident that for most of the organizations there exists a formal purchase manual for
their buying decisions. 8 respondents out of 12 agreed to have a formalized method
while 2 respondents were either not sure or did not agree to have it.

According to
this question,
half of the
organizations,
that is 50
percent,
are
capable
of
sharing
the
results along
with
their
suppliers. The rest are either not interested in sharing the results with their
suppliers that is 25 percent of firms, or they are just not sure if their organizations
are of the
concept
of
sharing their
results that is
25 percent.

This question exhibits the importance of total cost of ownership while taking
significant buying decisions. In this particular research, 8 respondents agreed to
have this aspect being considered while making such buying decisions, that is
around 67 percent, while the rest of respondents were not sure if it an important

aspect while
suppliers, that
And
the
organizations
this
aspect,
percent.

Through this
question,
it
ambiguous
there exists a
policy related
respective
not.
42
organizations
concept
percentage
have
not
about
this
that is 17
organizations
about this issue.

purchasing from
is 25 percent.
minority
of
disagreed
over
hat
is
8.3

particular
seems
that
whether
formal
ethics
to SCM at their
organizations or
percent of the
agreed over this
while the same
of organizations
been
bothered
aspect. The rest
percent
of
were still unsure

Perhaps it is important for each of the organization to have an ethics policy being
followed for the supply chain purposes. This would constitute a healthy environment
and a better conduct for the firms to have relationships with their strategic partners
or other organizations.

According to
this
question
survey shown, it seems that 83 percent of the organizations believe over the fact
that their organizations follow a formal supplier selection process while evaluating
and selecting their suppliers. The rest of organizations do not have a formal supplier
selection process being followed in their firms that is 17 percent.
The results shown above depict how important it is nowadays to have a formal
supplier section process for any organization whether it is of large nature or of a
small nature. Having a formalized process would mean the supplier pool would have
to pass through all stages to get to the Pre-qualified list stage.

According to this particular question, maximum numbers of firms have agreed over
the reliability of their supplier firms. Out of all the factors that were not aggregately
agreed upon, this factor seemed as of the utmost importance. Other variables such
as the information being too secret, limited interest of suppliers, and the resistance
to change were greatly disagreed over all along the firms. After this reliability
variable which was agreed, most of the firms agreed over the fact that the suppliers
have limited interest in integration.
This may call the importance of how supplier companies seem to have limited
interest that may lead to average performance of both the firms since they are
unable to maintain strategic relations all along. The fact that suppliers are reliable
enough depicts that organizations are well encouraged to share their details and
information with their suppliers.

Q: Where is the purchasing deparment placed in tour organization?


6
5
4
3
2
1
0 is the purchasing deparment placed in tour organization?
Q: Where

The results of this question widely depict the importance of such purchasing
matters being related directly all along towards the top level executive in the firm,
about 42 percent or organizations agree over this aspect. The least agreed variable
in this question is the taking the purchasing decision directly to the department
head in any organization, that is about 25 percent.

Q: does your organization use an automated system to evaluate supplier performance?


6
5
4
3
2
1
0

does your
organization use an
automated system
to evaluate supplier
performance?

The majority of respondents agreed over the idea that their organizations use a
system which is not automated to evaluate their suppliers performances, that is,
about 42 percent of organizations. However the rest of 33 percent agreed over the
fact that they follow an automated system, however they may have some system
evaluate their suppliers performances. Out of it, 25 percent firms have no system to
evaluate. The concept of automated version has been recently started by
organizations in Pakistan. However most of the organizations may not be able to
afford an automated version due to the cost and nature of their organizations.

How long does the supplier selection process take?


8
7
6

How long does the


supplier selection
process take?

5
4
3
2
1
0
2 months or more

2 to 4 weeks

1 week or less

Majority of organizations select their suppliers in the course of 2-4 weeks that is
around 58 percent of organizations. And the least number of organizations, that is

only 8.3 percent or organizations, have agreed to evaluate the suppliers in the
course of 2 months or more, and 1 week or less.
The reason being that most of the organizations have already an established pool of
their suppliers list which they may use to refer to any future needs of their new
suppliers. Perhaps they may take some time in evaluating the suppliers with respect
to any new product or any new operation.

Overall I am Fairly satisfied with the performance of our suppliers


12
10
8
6
4
2
0

Overall I am Fairly
satisfied with the
performance of our
suppliers

The majority of respondents have agreed to be satisfied with the performance of


their suppliers,that is 83 percent of employees. However the rest of respondents
have strongly agreed for the performance for their suppliers, that is 17 percent.
However, no firm has disagreed over this content.
The reason being the integration of the supplier along with the operations that are
being followed by the firms themselves. If the suppliers are well attached all along
the operations of firms, the results may be positive and healthy.

Average length of business relationship between your organization and its suppliers?
5
4
3
2
1
0

average length of
business relationship
between your
organization and its
suppliers?

This question focuses the duration of business conducted within a firm and its
suppliers. In this case the more the years the more it means that relationships with
suppliers are strong. The results of the question show that most respondents have
had good long-term relations with their suppliers, mostly ranging from above 5
years or more, while none had relations that were below one year. Though it could
also depend on the nature of business the organization is operating in.

Aggregated analysis:
From the results drawn above and their individual analysis, it can be extracted that
the supplier selection and evaluation plays a great importance for any organization,
and building relationships along with the suppliers is highly crucial for any
organization, regardless of its size and nature. From the given metrics, quality is the
utmost variable that is used to evaluate any supplier out of the pool, however other
variables such as credit terms, ratings and past record may also play significance in
dealing with them.

Perhaps, for most of the organizations it seems evident that the suppliers are crucial
and highly significant to the organizations, regardless of how they manage their
operations, that is, whether they may outsource their operations or not. Outsourcing
any operation would depend over the size and capability of any firm whether it
would outsource one of the core aspects or the short term tasks. However, those
firms that may outsource their core competencies may have a greater attention
over their selection of suppliers, along with a greater degree of dependence on
them for their own firms success.
In most of the cases, firms are reluctant in sharing their required details with their
suppliers, however they may also be unsure of whether to invest their supplier
development, probably due to lack of trust and ethical conducts being followed as a
large in most of the industries. With this behavior, firms may also act reluctant while
investing in areas contributing towards their suppliers. They may not be able to
effectively contribute towards areas of their suppliers and this may in turn inhibit
their long term strategic relationship.
Moreover, most of the organizations are able to operate over their formal purchase
manual in evaluating and selecting their suppliers. They may also consider their
Cost of Ownership and the ethics policy while building relationship with their
supplier companies, and they may also follow a formal procedure in developing their
suppliers, that is, by sharing the results with their supply companies and their
performances as well.
Lastly, the results shown from the factor whether firms automate their systems or
not solely depends upon their nature and their age, along with their sizes and their
operation nature. These may also be an important aspect since the automation of
systems is not as popular in Pakistan and may not be affordable for all the
organizations.

Limitations
This research study has been conducted to generalize the results all across the
industries since the survey has involved many various industries into consideration.
But since these results have been applied to a small number of firms, hence the
results cannot be generalized over all the organizations regardless of their nature,
size and their relations with other firms. This research topic has not yet been

explored sufficiently, perhaps the results cannot be quantified over a wider aspect,
but the understandings can be used for future references.
Moreover, no such research has been used in the past relative to this research study
hence the results cannot be quantified and considered as authentic results, but this
survey can be used for future purposes with regard to judgments and qualitative
surveys.

Future research analysis


This survey can be used as a reference for future students or individuals in any
industry for qualitative as well as quantitative purposes. However since this survey
research has been used all across the industries and with no regard to their nature
and age in future respondents of a specific industry or sector can be considered
and taken as subjects to better generalize the results relative to each industry.
The questions designed in this survey are general and may not target any one
sector industry; however these survey questions can be designed as sector specific
for any future purposes or references since the results would have to be specific
with respect to industries or sectors.
The conclusions drawn from these results may exhibit the judgment nature, which
may also include biasness and human errors while evaluating the graphs. However
these conclusions in future should be evaluated by more than one individual in
order to reduce the human errors and biasness.
Along with the likert scale questions, various open ended questions or interviews
must also be conducted in order to enhance the results and research analysis done
for future purposes. This may limit and force the respondents to select from the
available options and does not allow them to express their opinions and ideas over
any topic or area they would feel.