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Journal of Purchasing & Supply Management 10 (2004) 151164


www.elsevier.com/locate/pursup

Lean, Agile and traditional supply: how do they impact


manufacturing performance?
Raffaella Cagliano, Federico Caniato, Gianluca Spina
Department of Management, Economics and Industrial Engineering, Politecnico di Milano, Piazza Leonardo da Vinci, 32, Milano 20133, Italy
Received 18 June 2004; received in revised form 13 September 2004; accepted 2 November 2004

Abstract
The study empirically explores the supply strategies of European manufacturing rms within the third edition of the International
Manufacturing Strategy Survey. Four clusters are identied on the basis of the supplier selection criteria and the integration
mechanisms adopted. Two clusters are similar to the Lean and the Agile models, while the other two are more traditional supply
strategies, even if they present some advancement compared to the arms-length supply model. The strategies are then described in
terms of contingent and structural factors and manufacturing performance. Lean and Agile strategies outperform the other clusters
on many dimensions, while no signicant difference emerges between the two in terms of performance.
r 2005 Elsevier Ltd. All rights reserved.
Keywords: Supply strategy; Lean; Agile

1. Introduction
In todays competitive environment, the management
of purchasing and supply has become a key issue for
most companies, leading to the recognition of its
strategic relevance (Dyer, 1996; Carter and Narasimhan,
1996; Narasimhan and Das, 1999; Mol, 2003). Recent
studies expressed the need for the denition of a supply
strategy, extending concepts developed in the eld of
manufacturing and operations strategy to the management of upstream relationships (Harland, 1996; Harland
et al., 1999). Supply strategies are generally dened on
the basis of either supplier selection criteria or integration mechanisms. Some authors consider supplier
selection criteria as the link between the competitive
strategy of the buying rm and the supply strategy, in
the sense that they align supply with competitive
Corresponding author. Tel.: +39 02 2399 2801;
fax: +39 02 2399 2720.
E-mail addresses: raffaella.cagliano@polimi.it (R. Cagliano),
federico.caniato@polimi.it (F. Caniato), gianluca.spina@polimi.it
(G. Spina).

1478-4092/$ - see front matter r 2005 Elsevier Ltd. All rights reserved.
doi:10.1016/j.pursup.2004.11.001

priorities (Krause et al., 2001). Other authors instead


remark that companies are increasingly looking for
competitive success not only through the integration of
internal business processes and strategic alignment of
internal functions but also through the integration and
alignment of inter-company processes (Frohlich and
Westbrook, 2001). From this perspective, supply strategies are dened according to the adoption of the various
integration mechanisms, providing denitions and
classications based more on the practice that on the
goals of supply. These dimensions are jointly considered
by the literature on supply models, such as Lean supply
(Lamming, 1993) and Agile supply (Christopher, 2000),
which are comprehensively described according to
multiple dimensions, but each one separately and mainly
with case-based evidence. However, the literature lacks
extensive research that considers both supplier selection
criteria and integration mechanisms to identify alternative supply strategies. Besides, several authors claim
that supply strategies effectively impact the rms
performance; however, very few demonstrated this
relationship, and only within the limits previously
mentioned (Frohlich and Westbrook, 2001; Narasimhan

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R. Cagliano et al. / Journal of Purchasing & Supply Management 10 (2004) 151164

and Das, 2001; Rosenzweig et al., 2003). Also, the


relative benets of the Lean and Agile supply models
have been widely debated, but no extensive study has
been performed to support the theory on wide empirical
evidence (Christopher, 2000; Stratton and Warburton,
2003).
In order to provide new insights on the subject, this
paper empirically studies the alternative strategies of
supply management, dened on the basis of both
supplier selection criteria and integration mechanisms,
and their impact on manufacturing performance, in
terms of conformance, exibility, delivery, lead time and
costs. The purpose is to identify the possible choices
available to managers to better shape the supply strategy
of their companies, and to provide them with an
assessment of the possible consequences for manufacturing, supporting the widely claimed strategic relevance
of purchasing. The paper is based on the evidence drawn
from a sample of European companies operating in the
engineering industry, characterised by medium-to-high
level of outsourcing.

2. Research background
Both evidence from the eld and widely recognised
contributions in the literature (Venkatesan, 1992; Quinn
and Hilmer, 1994; Quinn, 1999) agree that in the last
decades more and more activities have been externalised, leading rms to concentrate on a limited set of
tasks that contribute, together with many other companies, to the production of increasingly complex systems.
Thus, company performance no longer depends only on
the effectiveness and efciency of internal processes, but
is instead strongly inuenced by inter-company processes, that is, the processes that involve activities
performed by subjects belonging to different companies
(e.g. Stevens, 1989).
In particular, the role of purchasing has evolved
dramatically in the recent past, due to both the increased
level of outsourcing and the globalisation of the business
environment, requiring the development of advanced
supply management capabilities (e.g. Kraljic, 1983;
Olsen and Ellram, 1997). In this context, purchasing is
considered more relevant than in the past, to the point
of achieving strategic importance (e.g. Dyer, 1996;
Carter and Narasimhan, 1996; Narasimhan and Das,
1999; Mol, 2003).
2.1. Supply strategy
The need to dene supply management strategies is
widely recognised in the literature (e.g. Watts and Hahn,
1993; Harland, 1996; Harland et al., 1999; Krause et al.,
2001). Also, the process and the content of supply
strategy are debated by a number of scholars. Among

the various frameworks, following Harland (1996), we


adopt the established approach derived from the
literature on Operations Management (and particularly
on Manufacturing Strategy; e.g. Hayes and Wheelwright, 1984; Hill, 1989), where goals and actions are
dened on the basis of the competitive strategy of the
company.
Similarly, also the need to align supply management
strategies to the competitive priorities of the company
has been widely supported theoretically (Reck and
Long, 1988; Bothe, 1989; Freeman and Cavinato,
1990; Watts et al., 1992; Narasimhan and Das, 2001).
Moreover, the strategic role of purchasing management
and the alignment of the purchasing strategy with the
competitive strategy has been demonstrated to provide
relevant benets to the performance of the overall
network and his actors (Narasimhan and Das, 2001).
Often supply chain strategies are characterised mainly
through the level and type of integration (e.g. Frohlich
and Westbrook, 2001); however, many contributions
remark that the content of supply management strategies goes beyond the integration of activities along the
supply chain and a number of other variables have been
used in the literature to describe them (Harland, 1996;
Narasimhan and Das, 2001; Tan et al., 2002).
Harland (1996), on the ground of manufacturing
strategy literature, denes supply network strategy as
the set of variables inuencing both the structure and
the infrastructure of the network. Specic practices have
also been included in the denition: at the purchasing
level, three main categories of practices were highlighted, that is, supply base leveraging, buyersupplier
relationship development and supplier performance
evaluation (Narasimhan and Das, 2001). Tan et al.
(2002) investigated supply chain management strategies
considering both supply chain management practices
and supplier evaluation practices.
In synthesis, it can be concluded that supply strategies
are characterised by multiple dimensions; among these,
two widely studied dimensions are supplier selection
criteria and integration mechanisms. The former indicate the goals of the strategy and consequently drive
supplier evaluation practices, and the latter instead
summarise advanced supply management practices.
2.2. Supplier selection criteria
A fundamental decision that is required by supply
managers is the selection of suppliers, i.e. scouting,
evaluation and identication of the best-suited supplier
among many others, for each part (e.g. Morris and
Calantone, 1991; Ellram, 1990; Monczka et al., 1998).
Supplier selection is closely related to the strategic role
of the purchasing function, since competitive priorities
at rm level are translated into supplier selection criteria
to ensure coherence and alignment between competitive

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strategy and functional strategies (Watts et al., 1992;


Krause et al., 2001). There is a wide agreement on the
main categories of supplier selection criteria, which
correspond to the principal manufacturing performance
and competitive priorities: cost, quality, delivery and
exibility (e.g. De Meyer et al., 1989; Miller and Roth,
1994; Verma and Pullman, 1998; Vonderembse and
Tracey, 1999). In particular, the criterion adopted by
traditional procurement strategies is cost, in order to
supply materials at the lowest possible cost. This can
take place both on a local and a global scale, if the
traditional approach is extended to the global market
(see e.g. Arnold, 1989). However, many authors showed
that other criteria, namely quality, delivery and exibility, are in most cases equally or more important, in
particular, when supply has a direct impact on
competitive performance and consequently is strategically relevant, like in the case of innovative and unique
products (see, e.g. Lamming et al., 2000).
Moreover, many authors highlighted the importance
of widening this consolidated set of criteria to include a
more long-term oriented perspective (see, e.g. Virolainen, 1998). First of all, several authors included
innovation, that is, the ability of the supplier to provide
design and technological capabilities to the customer
(e.g. Clark, 1989; Ellram, 1990; Dyer, 1996). Other
authors included, for example, supplier location, which
can be critical in the context of JIT purchasing
(Gunasekaran, 1999); willingness to share information,
which is typical of partnership sourcing (Ellram, 1991);
or legal terms (Krause et al., 2001).
2.3. Integration mechanisms
Another critical set of decisions of supply strategy
concerns the operational practices that involve both
customer and supplier (e.g. De Toni and Nassimbeni,
1999). The focus of recent literature has been on the
integration of activities and information ows both
within and across company boundaries (Narasimhan
and Das, 2001; Narasimhan and Kim, 2002; Romano,
2003), in order to foster superior performance for both
partners (Hakansson and Snehota, 1995; Frohlich and
Westbrook, 2001).
The literature widely explored the different mechanisms that are put in place by companies to achieve
integration between customers and suppliers. In particular, two different areas of customersupplier integration have been dened: operational integration and
technological integration (e.g. Spina, 1992). The rst
area refers to the integration of operational activities
such as planning, production, delivery and quality. The
wide set of techniques that can be traced back to the
Just-in-Time approach are aimed at obtaining operational integration between customers and suppliers (e.g.
Lamming, 1993; Dyer and Ouchi, 1993). Similarly, new

153

techniques and methodologies have been proposed


recently, which put more emphasis on information
sharing or joint decision-making, rather than on the
redesign of internal operations. Examples of these
techniques are VMI (Vendor-Managed Inventorysee,
e.g. Holmstrom, 1998; Disney and Towill, 2003) or
collaborative planning and forecasting (e.g. Aviv, 2001).
In this direction, the development of ICT, and especially
the Internet, is expected to play a very important role in
supporting supply chain integration (e.g. Phillips and
Meeker, 2000; Graham and Hardaker, 2000; Cagliano
et al., 2003).
Technological integration, instead, refers to collaboration in designing and developing new products.
Co-design, early supplier involvement and rapid prototyping are just some examples of techniques used for this
purpose (e.g. Clark and Fujimoto, 1991; Kamath and
Liker, 1994, Sobek et al., 1998; Spina et al., 2000).
In this paper, we focus on the operational integration
mechanisms that companies use for integrating processes with their suppliers; within these practices, it is
important to recognise two distinctive elements (e.g.
Frohlich and Westbrook, 2001). Some practices are
aimed at integrating the forward physical ows, while
other practices are more oriented towards the coordination and integration of backward information and data
ows from customers to suppliers. These two ways of
integrating supply chain processes are different in
nature. The rst type of integration requires a closer
coupling of the production systems between the
customer and the supplier, and even the co-location of
plants. As a consequence, often the integration of
physical ows is closely related to purchasing practices
such as supply base leveraging and rationalisation
(Lamming, 1993). The second type of integration
mechanisms is instead aimed at leveraging on information from the counterpart to improve internal activities
and operations management.
Despite the interest devoted by the literature to
operational integration techniques, there is a lack of
studies that try to understand how these techniques are
put together and are coupled with other supply management choices in a coherent strategy.
2.4. Supply models: Lean and Agile supply
Although widely discussed, supplier selection criteria
and integration mechanisms have been mainly studied
separately. A remarkable exception is provided by the
authors who studied supply models and who provided
comprehensive pictures of alternative ways of managing
vertical relationships. The best known by far is the Lean
supply model (Lamming, 1993; Womack and Jones,
1996), which was developed in the automotive industry
as a way to manage complex, tiered networks of
suppliers with the goal of reducing costs while ensuring

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high quality. This model prescribes long-term relationships between customers and suppliers, based upon a
close integration of both physical and information ows,
adopting practices such as EDI exchange, cost transparency, JIT with Kanban, co-design, etc. A similar model
is network sourcing, proposed by Hines (1994), which is
based on Japanese automotive industry and puts high
emphasis on supplier coordination, supplier development and the creation of a tiered network.
An alternative model, which also received great
attention, is Agile supply (Christopher, 2000; Van Hoek
et al., 2001; Christopher and Towill, 2002). This model,
developed in industries such as apparel and personal
computer, characterised by high volatility and uncertainty of demand, focuses on achieving high responsiveness to the market through the management of a
dynamic supply network. The main goals are speed of
delivery, exibility and quality, which can be achieved
through dynamic partnerships, rich information sharing
and the coordination of physical ows without rigid
investments, in order to allow rapid reconguration.
The adoption of a supply model is the translation into
practice of a supply strategy. However, existing contributions either compare different strategies dened on
a single dimension or describe a single model through
multiple dimensions, but mainly on the basis of case
evidence, or compare different models from a theoretical
perspective. Despite the existing contributions, however,
literature still lacks an extensive empirical analysis of
alternative supply strategies based on multiple dimensions, which instead could provide a more complete
picture of the levers available to managers for shaping
the supply strategy in different contexts and to align it
with company goals.

2.5. Supply strategy and operations performance


The literature on purchasing and supply management
discussed also the impact of supply strategy on the
buying rms performance. Some authors considered
separately the impact of the two levers previously
described, supplier selection criteria and integration
mechanisms. Vonderembse and Tracey (1999), for
example, showed that the adoption of supplier selection
criteria has a positive impact on manufacturing performance. As far as integration is concerned, Narasimhan
and Das (2001) showed that the internal integration of
strategic purchasing practices with the rms objectives
enables superior manufacturing performance; however,
they did not address external customersupplier integration. Frohlich and Westbrook (2001), instead, showed
that also external integration has a positive impact on
the improvement of the buying rms performance.
Recently, Rosenzweig et al. (2003) showed that manufacturing-based competitive capabilities mediate the

impact of supply chain integration on business performance.


Existing contributions deal generally with one dimension of supply strategy at a time; the literature on supply
models instead, while discussing single strategies from a
broader perspective, provides also an evaluation of the
impact on manufacturing performance. Lean supply is
by denition directly connected to the adoption of the
Lean manufacturing model (Womack et al., 1990;
Womack and Jones, 1996), which can result in lower
costs, higher quality and reliability. Agile supply,
instead, allows higher speed and exibility, while
ensuring the needed quality level (Mason-Jones and
Towill, 1999; Christopher, 2000). These contributions,
however, are mainly based on case evidence or simulation, and do not provide comparisons of the various
models. Consequently, extensive empirical evidence
showing the impact of supply strategies on manufacturing performance is still lacking.

3. Research aims and propositions


Given the above background, the aim of this paper is
to investigate supply strategies and their impact on
operational performance on the basis of extensive
empirical evidence.
To this purpose, we use the approach of strategic
configurations, which can be dened as coherent and
clearly distinct strategies for managing supply relationships, responding to different competitive priorities of
the business, and tting different contingent settings.
The study of congurations is particularly useful to
capture the complexity of relationships between individual variables (Miller, 1996). This approach was widely
adopted in the strategy and organisation study literature
(e.g. Miles and Snow, 1978; Mintzberg, 1979; for a
review see McGee and Thomas, 1986). Similarly, a
number of studies in the operations management eld,
and mainly in manufacturing strategy, aimed at
identifying strategic congurations (e.g. Miller and
Roth, 1994; Bozarth and McDermott, 1998, Kathuria,
2000; Frohlich and Dixon, 2001). Most of these studies
were based on clustering companies according to their
competitive priorities, and describing the congurations
also through the action programmes or operational
levers used coherently within each set of companies.
Some authors adopted a similar approach in the eld of
supply chain management, and generally they proposed
taxonomies based on structural characteristics of supply
networks (e.g. Grandori and Soda, 1995; Harland et al.,
2001) or on characteristics of the object exchanged (e.g.
Rosenfeld, 1996; Lamming et al., 2000). Structural
characteristics of the network, according to Harland
(1996), are relevant dimensions of a supply network
strategy; however, also infrastructural variables should

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be considered to completely describe a strategy.


Taxonomies based on the object exchanged, instead,
provide information on the different settings in which
supply strategies better t.
Adopting a different approach, this study aims at
identifying congurations based on the use of supply
management levers, thus focusing on infrastructural
rather than on structural dimensions of the supply
chain. In particular, referring to the literature background, we use supplier selection criteria and integration
mechanisms to dene congurations.
The main assumption of the paper is that companies,
when dening their supply strategies, select among
different combinations of supply management levers;
in other words, the variables that form a supply strategy
do not present constant patterns of relationships
between each other. Instead, they are used in different
combinations, depending on the structure of the supply
chain, the contingent settings and the goals that are
sought by the company.
Given the focus of the present work, the rst goal of
the paper is to investigate which supply strategies are
actually adopted by manufacturing rms, identifying
alternative strategic congurations. Consequently, the
rst proposition that will be tested is the following:
Proposition P1. Manufacturing companies adopt different supply strategies, identified by the adoption of one or
more supplier selection criteria and the implementation of
supplier integration mechanisms, concerning either information or physical flows.
Clearly, we expect to nd strategies that can be traced
back to the models described by the literature, i.e.
the Lean, Agile and traditional supply models. Thus,
the analyses supporting Proposition P1 will also allow
us to evaluate the relevance and diffusion of such
supply models. In order to better characterise the
congurations identied, they will also be analysed in
terms of a number of contingent and structural
variables: industry, company size, incidence of purchasing on total costs and degree of internationalisation of
purchases.
The second goal of the paper is to evaluate the impact
of supply strategies on the manufacturing performance
of the buying rm, in order to understand whether
different strategies lead to different performance. If this
is the case, we also want to evaluate which strategy is the
best performer. Consequently, the second research
proposition is:
Proposition P2. Different supply strategies have different
impact on the manufacturing performance of the buying
firm, in particular, advanced strategies are associated with
better performance than the traditional model.

155

4. Research methodology and sample


4.1. The sample
This study is based on survey data collected within the
third edition of the International Manufacturing Strategy Survey (IMSS III), a research carried out by a global
network aimed at exploring practice and performance in
manufacturing and supply chain management (see,
Lindberg et al., 1998, for more details).
Data were collected during 2001 by the national
research groups using a standard questionnaire, developed by a panel of experts, exploiting also the
experience of the previous editions of the research. In
nations where English is not commonly used, the
questionnaire was translated into the local language by
OM professors familiar with manufacturing and supply
chain strategy.
This study is based on the European sample of IMSS
III; the average response rate in the various countries
was 34%. We decided to focus on companies not too
vertically integrated, for which supply is a relevant issue.
For this purpose, we included in the subsequent analyses
only companies with an incidence of purchasing not
lower than 25% of total manufacturing costs. Overall,
the nal database used for the analysis consists of
284 companies.
Small companies (up to 249 employees) account for
52.5% of the sample, medium-sized companies (from
250 to 499 employees) account for 19.0%, while large
companies (from 500 employees up) account for 28.5%.
Firms included in the sample operate in the engineering
industry (ISIC 38 classication); the distribution of
the sample by country and industry is shown in Tables 1
and 2.
4.2. Measures
Three categories of variables have been considered for
the analysis:





supply strategy variables;


contingent and structural variables; and
manufacturing performance.

Table 1
Geographical distribution of the sample
Country

Country

Belgium
Denmark
Germany
Hungary
Ireland
Italy

14
30
23
30
25
53

4.9
10.6
8.1
10.6
8.8
18.7

Norway
Netherlands
Spain
Sweden
UK

27
12
15
19
36

9.5
4.2
5.3
6.7
12.7

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Table 2
Industry distribution of the sample
N

ISIC

Industry

381
382
383
384
385

Fabricated metal products


Machinery except electrical
Electrical machinery apparatus, appliances and supplies
Automotive and transportation equipment
Measuring and controlling equipment

80
87
67
25
25

28.2
30.6
23.6
8.8
8.8

284

Total

100

Table 3
Variables used in the analysis
Area
Supply strategy
Supplier selection criteria

Integration mechanisms

Contingent and structural variables

Manufacturing performance

Variable

Scale

Average

Quality of products/services
Delivery performance
Lowest Price
Supplier potential development
Logistic costs
Willingness to share information
Physical proximity
Legal and contractual terms
Agreements on delivery frequency
Information sharing on forecasts and production plans
Supply base redesign
VMI or consignment stock
Kanban systems
Co-location of plants

Importance (1 none5 high)


Importance (1 none5 high)
Importance (1 none5 high)
Importance (1 none5 high)
Importance (1 none5 high)
Importance (1 none5 high)
Importance (1 none5 high)
Importance (1 none5 high)
Adoption (1 none5 high)
Adoption (1 none5 high)
Adoption (1 none5 high)
Adoption (1 none5 high)
Adoption (1 none5 high)
Adoption (1 none5 high)

4.44
4.32
3.80
3.40
3.08
2.90
2.80
2.74
3.78
3.30
2.84
2.38
2.19
1.78

Industry
Size
Purchasing costs on total manufacturing costs
Domestic purchases
Purchases in Europe
Global purchases

ISIC code
Categorical
%
%
%
%

57.7%
54.0%
30.5%
15.5%

Volume exibility
Manufacturing conformance
Delivery speed
Delivery reliability
Manufacturing lead time
Mix exibility
Procurement lead time
Procurement cost

(1
(1
(1
(1
(1
(1
(1
(1

Supply strategy variables are used to identify supply


strategy congurations, while the others are used a
posteriori to describe the congurations detected, to
study external consistency and to evaluate the impact on
manufacturing performance.
Supply strategy variables cover two areas, according
to the denition given in the previous section: supplier
selection criteria and integration mechanisms adopted
with suppliers.
The detailed variables used for analysis are presented
in Table 3, where the average score for each variable in
the sample is also presented.

deteriorated5
deteriorated5
deteriorated5
deteriorated5
deteriorated5
deteriorated5
deteriorated5
deteriorated5

improved)
improved)
improved)
improved)
improved)
improved)
improved)
improved)

3.76
3.63
3.63
3.61
3.61
3.60
3.33
3.30

Most of the variables are measured on Likert-like


scales from 1 to 5. A few variables are categorical
(industry ISIC code and size class).
In order to ensure the reliability and the validity of
the measures, the variables selected were grouped
with a factor analysis. In particular, a Conrmative
Factor Analysis was performed, in order to test
the measures of the constructs identied by previous
research. This methodology allowed to use multiple
variables (e.g. multiple survey questions) to measure
each of the main constructs that are at the base of the
study.

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The goodness of t of the model is conrmed by the


three indices commonly used (Hox and Bechger, 1998):
CFI (0.994), NNFI (0.991) and NFI (0.987). As far as
factor reliability is concerned, Cronbachs alpha was
used for testing internal consistency of the constructs.
According to Nunnally (1978) values of 0.50.6 are
acceptable for exploratory research. It should be
remarked that, although the data were collected within
the third edition of IMSS, some of the questions used in
factor analysis were not present in previous editions of
the survey, thus justifying the limited values of the
coefcient.
The supplier selection criteria dimension was measured through eight variables, which were classied in
three factors:




Operational performance, which includes quality of


products and service, delivery performance and
logistics costs. This factor refers to the current
performance of the supplier, and is the most
important selection criterion in our sample (average
3.94).
Lowest price, which stands alone as a single selection
criterion, conrming previous studies in the eld;
importance is rather high (average 3.76).
Collaboration and potential performance, including
aspects such as supplier potential development, willingness to share information, physical proximity and
legal and contractual terms. All these dimensions
relate to the potential performance of the supplier and
the ease of collaboration with him. This is the least
important factor (average 2.93).

The factor analysis on integration mechanisms conrmed the existence of two different dimensions:

Information sharing: this factor includes information


sharing on forecasts and production plans, and
agreements on delivery frequency. These are the most
used techniques in this category in our sample
(average 3.58).
Redesign and system coupling: the mechanisms included in this factor are aimed at redesigning the
supply base, through changes in the organisation and
management of the suppliers portfolio, and coupling
the interface between the customer and the supplier
(e.g. co-location, VMI, consignment stock and
Kanban). The degree of use of these techniques is
rather low on average (2.28).

The results of the factor analysis are presented in


Table 4.
Contingent and structural variables, as well as
manufacturing performance, were directly used in the
analysis, without grouping them into factors, since each
of them represents a different concept and we wanted to

157

separately investigate their relationship with supply


strategies.

4.3. Research methodology


The methodology for data analysis was chosen
according to the purpose of identifying congurations
of supply strategy and investigating the relationships
among congurations, contingent settings and the
impact on manufacturing performance.
Congurations were obtained through a two-stage
cluster analysis: hierarchical clustering with Wards
partitioning method and squared Euclidean distance
was rstly used to dene the most suitable number of
clusters and to dene the preliminary cluster centres
(Aldenderfer and Blasheld, 1984; Arabie and Huber,
1994); subsequently, a non-hierarchical technique (the
K-means algorithm) was used to assign each company
to a cluster, through an iterative process. This approach
is suggested (Ketchen and Shook, 1996) to exploit the
potential of both techniques, in particular, the iteration
of the K-means algorithm provides a more reliable
solution, while the Wards method helps determining the
number of clusters and forming rather equally populated groups.
The number of clusters was determined considering
also the interpretability of the solution obtained: passing
from ve to four clusters, two quite similar groups were
merged, while passing from four to three, the merging
involved two dissimilar groups. To validate the fourgroup solution, a test of equality of group means
(ANOVA) was performed, showing that all variables
differ signicantly across the clusters. Post hoc tests with
the Scheffe` method was also used to identify which pairs
of clusters are signicantly different from each other on
each single dimension.
As nal test, discriminant analysis was run to ensure
that the groups were correctly classied: the analysis
shows very good differentiation among the groups
(Miller and Roth, 1994).
Subsequently, ANOVA and Chi-square test was used
to investigate the relationships between supply strategy
congurations and the other variables. As a rst step, we
checked the cluster distribution across industry sectors
and size groups, in order to evaluate the relationship
with contingent variables. Since data were categorical,
Chi-square test was used to test the signicance of the
differences among frequencies. Subsequently, we investigated the relationship between clusters and structural
variables, namely the incidence of purchasing on
total costs and the degree of internationalisation of
purchasing. In these cases, ANOVA test of equality of
group means was used to assess the signicance of
the differences in the mean values of the various
congurations.

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158
Table 4
Conrmative factor analysis
Dimension

Factor

Variable

Factor loading

Factor average

Cronbachs alpha

Supplier selection
criteria

Operational
performance

Quality of products/
services
Delivery
performance
Logistic costs

0.612

3.94

0.614

0.644
0.562

Lowest price
Collaboration and
potential
performance

Integration
mechanisms

Information sharing

Redesign and system


coupling

Chi-square
d.f.
p-value
CFI
NFI
NNFI/TLI

3.76

Willingness to share
information

0.774

Legal and
contractual terms
Supplier potential
development
Physical proximity

0.671

Information sharing
on forecasts and
production plans
Agreements on
delivery frequency
VMI or consignment
stock
Kanban systems
Supply base redesign
Co-location of plants

2.93

0.677

3.58

0.607

2.28

0.542

0.585
0.352
0.592

0.733
0.505
0.613
0.452
0.333

98.684
59
0.001
0.994
0.987
0.991

Finally, the impact of supply strategy on manufacturing performance was evaluated, using ANOVA to
measure the signicance of the differences in the values
of each performance variable between the clusters. Post
hoc tests with the Scheffe` method was also used, in the
same way as we did for the congurations.

different clusters). For each factor, the gures in


brackets show the clusters whose values are signicantly
different (Scheffe` method with po0:05).
The discriminant analysis shows that the clustering
algorithm classied correctly 97.8% of the companies,
indicating very good differentiation among the clusters.
Each cluster has been labelled according to its
characteristics and is described here in details:

5. Results
5.1. Supply strategy configurations
The constructs measuring supply strategy identied
through the factor analysis were used to detect supply
strategy congurations, using a cluster analysis that
resulted in the nal classication of the companies into
four groups. Table 5 shows, for each cluster, the number
of rms, the cluster centre (average value of each factor)
and the ANOVA signicance (which can be used only
for descriptive purposes because the clusters have been
chosen to maximise the differences among cases in

1. Leanness: the rst cluster is characterised by the


selection of suppliers based on a very wide set of
criteria, including all the factors considered, which
have the highest values compared to all the other
congurations. In particular, both operational performance and lowest price are very important
selection criteria, but also collaboration and potential
performance are taken into consideration. This group
of companies adopts information integration mechanisms to a very large extent, showing the highest
value comparing to all the other clusters. Quite high
attention is also devoted to the redesign of the supply

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159

Table 5
Supply strategy congurations (number in brackets indicate clusters that are different at po0:05)
Area

Factor

Sample

1. Leanness

2. Agility

3. Price and
visibility

4. Leverage

ANOVA
sig.

Selection
criteria

Operational performance

3.94

4.23 (3,4)

4.09 (3,4)

3.77 (1,2,4)

3.47 (1,2,3)

0.000

Lower price
Collaboration and
potential performance
Information sharing

3.76
2.93

4.44 (2,4)
3.32 (3,4)

2.78 (1,3)
3.21 (3,4)

4.36 (2,4)
2.63 (1,2)

2.56 (1,3)
2.39 (1,2)

0.000
0.000

3.55

4.35 (2,3,4)

4.01 (1,3,4)

3.09 (1,2,4)

2.41 (1,2,3)

0.000

2.26

2.71 (3,4)

2.48 (3,4)

1.95 (1,2)

1.86 (1,2)

0.000

284
100%

82
28.9%

67
23.6%

96
33.8%

39
13.7%

Operational
integration

Redesign and system


coupling
N
%

base and the adoption of system coupling mechanisms, although not as much as with information
integration. In summary, this cluster is characterised
by an equally high attention to supplier performance,
price and collaboration potential, and a systematic
and diffused adoption of supply integration practices,
both forward and backward, in line with the wellknown model of Lean supply proposed by Lamming
(1993), which prescribes the selection of suppliers
according to all relevant criteria and the adoption of
advanced integration mechanisms in order to establish close collaboration. This cluster accounts for
28.9% of the sample.
2. Agility: the second cluster highlighted by the analysis
is characterised by the selection of suppliers mainly
on operational performance, but with also a relevant
attention to collaboration and potential performance,
while price is less important compared to clusters 1
and 3. There is also a large adoption of information
sharing mechanisms while supply base redesign and
system coupling is only partially in place. We can
conclude that these companies are characterised by
an approach to supply management focused on
exploiting information integration mechanisms to
obtain high performance from suppliers, also through
collaboration and advanced relationships. This strategy is very close to the Agile supply model proposed
by Christopher (2000), which prescribes the selection
of suppliers mainly on the basis of quality, speed and
exibility, the creation of long-term collaboration
and the integration through information technology.
This cluster represents 23.6% of the sample.
3. Price and visibility: companies belonging to this group
select suppliers rst of all on the basis of price, while
operational performance, although not negligible, is
less important, probably as an order qualier, not an
order winner. Collaboration and potential performance are unimportant criteria. This denotes a shortterm market approach to supply, but interestingly the

level of adoption of information sharing mechanisms


is not low (compared to cluster 4, it is signicantly
higher). On the other hand, supply base redesign and
system coupling are not adopted. In conclusion, these
companies, which account for 33.8% of the sample,
show an interesting approach to supply, since they
associate the more traditional, price-based strategy
with more advanced use of information sharing
mechanisms, aimed at increasing the efciency of
the purchasing and supply process through better
visibility. This strategy is similar to the supply
network model suggested by Lamming et al. (2000)
for functional products of higher complexity, which is
characterised by cost reduction and quality sustainability as competitive priorities and high level of ITenabled information sharing.
4. Leverage: this cluster of companies is characterised by
the selection of suppliers mainly on the basis of
operational performance, while price is denitely
marginal, as well as collaboration and potential
performance. Integration mechanisms are almost
absent, only information sharing is partially adopted.
This strategic conguration is thus focused on
optimising the effectiveness of supply, leveraging on
suppliers performance, but in a very traditional way,
without taking advantage of advanced tools and
practices. 13.7% of the companies in the sample
belong to this cluster.
Looking at these results, we can conclude that
Proposition P1 is supported by empirical data: alternative supply strategies are highlighted, which are
clearly identied by different sets of supplier selection
criteria and integration mechanisms. These strategies
can be traced back to the models presented in the
literature. In particular, Lean and Agile supply appear
to be actually adopted by European manufacturing
rms, as well as other, less advanced strategies.
However, the traditional supply model described in the

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160

literature, based on price and market mechanisms, was


not highlighted in our sample. In fact, the two more
conservative supply strategies that emerged from the
study are characterised either by the adoption of
operational performance as the selection criterion or
by a selection based on price together with a certain level
of implementation of information integration mechanisms. This is a relevant result, since it shows that less
advanced supply strategies evolved from the traditional,
exclusively price-based model.
In summary, we observe that two main types of
strategies emerge. On the one hand advanced supply
models, which include Leanness and Agility: although
different, these congurations pursue a wide variety of
goals in selecting suppliers and adopt integration
mechanisms to a large extent, in line with the general
model commonly referred to as partnership. Price and
visibility and Leverage strategies, on the other hand,
reect more a traditional supply model driven by shortterm goals and adopting a market approach to supply,
with a limited use of integration tools and practices.
This distinction, however, does not mean per se that the
former are better performing than the latter; each
conguration could best t a specic contingent setting.
Following this line of reasoning, one can conclude that
alternative strategies exist, which should be selected
according to the context.
5.2. Contingent and structural variables
In order to better understand the reasons underlying
the choice of a specic supply strategy conguration,
clusters have been characterised by a number of
contingent and structural variables. In particular, we

considered the industry sector, the company size, the


level of outsourcingin terms of incidence of purchasing on total costsand, nally, the degree of internationalisation of purchases. Industry and size are two
of the factors most commonly considered as inuencing
strategic choices; the level of outsourcing and the
internationalisation of purchases, instead, have been
chosen because they are expected to have a direct
inuence on the choice of the supply strategy.
The distributions of the clusters according to these
variables are presented in Table 69; here also the results
for the test of equality of group means are shown. The
results show that only the company size and the
percentage of global purchases are signicantly different
among clusters, while the other variables show some
differences from one cluster to the other, but these are
not statistically signicant. Anyway, for descriptive
purposes, we can characterise the four clusters through
the contingent and structural settings that seem to better
t each strategic conguration.
1. Leanness: companies in this cluster are more concentrated within the electrical machinery (383) and
automotive industry (384) compared to the overall
sample. Moreover, this group is characterised by a
relevant presence of large companies (41.5%), higher
than in any other group. Finally, the level of
outsourcing is higher than the sample mean (60.0%
of total costs on average), and the percentage of
global purchases is statistically higher (19.1%)
compared to clusters 3 and 4.
2. Agility: this strategy is more diffused in the metal
products (381) and instrumentation industries (385)
and characterises, in particular, large companies

Table 6
Supply strategy congurations across industries (ISIC codes)

381
382
383
384
385
Chi-square sig.

1. Leanness (%)

2. Agility (%)

3. Price and visibility (%)

4. Leverage (%)

Sample (%)

22.0
30.5
30.5
11.0
6.1

34.3
26.9
16.4
9.0
13.4

28.1
30.2
24.0
9.4
8.3

30.8
38.5
20.5
2.6
7.7

28.2
30.6
23.6
8.8
8.8

0.489

Table 7
Supply strategy congurations and rm size

Small (o249)
Medium (250499)
Large (500+)
Chi-square sig.

1. Leanness (%)

2. Agility (%)

3. Price and visibility (%)

4. Leverage (%)

Sample (%)

39.0
19.5
41.5

49.3
14.9
35.8

58.3
24.0
17.7

71.8
12.8
15.4

52.5
19.0
28.5

0.001

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161

Table 8
Supply strategy congurations and incidence of purchasing on total production costs
1. Leanness

2. Agility

3. Price and visibility

4. Leverage

Sample

Average

60.0%

57.8%

56.4%

55.8%

57.7%

ANOVA sig.

0.491

Table 9
Supply strategy congurations and internationalisation of purchasing

Domestic
Europe
Global

1. Leanness (%)

2. Agility (%)

3. Price and visibility (%)

4. Leverage (%)

Sample (%)

ANOVA sig.

47.9
33.0
19.1

52.3
28.4
19.3

58.8
29.5
11.6

57.9
31.1
11.0

54.0
30.5
15.5

0.096
0.715
0.033

(35.8%). The level of outsourcing does not differ


signicantly form the sample distribution, but global
sourcing is signicantly higher (19.3%) compared to
clusters 3 and 4.
3. Price and visibility: companies in this cluster are
distributed almost like the overall sample, as far as
industry sectors are considered, but show a signicantly lower presence of large companies (17.7%).
The level of outsourcing for these companies is in the
average (56.4%) and global purchases are signicantly lower (11.6%) compared to the total sample.
4. Leverage: this conguration is mainly diffused in the
machinery industry (382), while is less present in
transportation (384). There is a very high concentration of small companies (71.8%) and the level of
outsourcing is slightly lower (55.8%), compared to
other congurations. Local sourcing prevails.
In synthesis, we can conclude that Leanness and
Agility congurations, which we have described as more
advanced, are more frequently adopted by large
companies, but within all industries. These strategies
are chosen by companies for which purchasing has a
high incidence on total costs, and is done globally to a
relevant extent. The other two strategies, instead,
are more diffused among smaller rms, for which
purchasing is slightly less relevant and is made locally
to a larger extent.
Since statistical signicance is not high, we can
conclude that contingent and structural factors affect
only to a certain extent the selection of the supply
strategy. In particular, size has a clear impact on the
selection of the supply strategy, suggesting that large
rms are adopting advanced strategies more than small
rms, either because they have greater resources
available or because they have higher complexity to
manage. This is partially conrmed by the analysis of
the relationship of supply strategy with the internationalisation of purchasing: leanness and agility are

adopted by the rms for which global sourcing is more


relevant, suggesting that these strategies are correlated
with the expansion of supply markets.
5.3. Manufacturing performance
Finally, we investigated the impact of supply strategies on manufacturing performance, to understand
whether sourcing and integration decisions affect the
internal effectiveness and efciency of the buying rm
and, in particular, to compare the performance of
different supply strategies.
ANOVA was performed on the manufacturing
performance improvements achieved by the companies
characterised by different supply management strategies.Table 10 shows the results of the analysis, the
gures in brackets show the clusters whose values are
signicantly different (Scheffe` method with po0:05).
The results show that different supply strategies lead
to signicantly different manufacturing performance
improvement on many dimensions, in particular, conformance, volume and mix exibility, manufacturing
and procurement lead time and procurement cost. Only
delivery speed and reliability do not show different
performance improvement across the four clusters.
In particular, Leanness is the best performing strategy
on almost all dimensions, consistently with most of the
results discussed in the literature. Indeed, the performance of this cluster is statistically higher compared to
that of the Price and visibility group in terms of
manufacturing conformance, mix exibility and manufacturing lead time. Compared to the Leverage group,
these rms score higher in terms of manufacturing
conformance, volume and mix exibility, and procurement cost. The Agility strategy, however, shows high
performance improvement as well, not signicantly
lower than the Leanness one. In particular, this strategy
is the best performing as far as procurement lead time is
concerned, in line with its main purpose, with a value

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Table 10
Supply strategy congurations and manufacturing performance (number in brackets indicate clusters that are different at po0:05)

Volume exibility
Manufacturing conformance
Delivery speed
Delivery reliability
Manufacturing lead time
Mix exibility
Procurement lead time
Procurement cost

1. Leanness

2. Agility

3. Price and visibility

4. Leverage

Sample

ANOVA sig.

4.01
3.82
3.71
3.77
3.79
3.89
3.44
3.48

3.75
3.74
3.64
3.57
3.65
3.64
3.46 (4)
3.42

3.72
3.47 (1)
3.55
3.56
3.47 (1)
3.47 (1)
3.25
3.16

3.37
3.47
3.68
3.47
3.53
3.29
3.08
3.03

3.76
3.63
3.63
3.61
3.61
3.60
3.33
3.30

0.000
0.000
0.586
0.275
0.012
0.000
0.025
0.005

(4)
(3,4)

(3)
(3,4)
(4)

statistically higher compared to the Leverage group. It


should also be noted that, while the industries considered in this study are those where the Lean supply
model has been developed, Agile supply emanates from
other industries such as apparel (see e.g. Christopher,
2000).
In summary, we cannot conclude that Leanness is the
only successful strategy, since Agility can be a viable
alternative.
As far as the two less advanced strategies are
concerned, we should rst of all emphasise that they
do provide similar delivery performance compared to
the Leanness and Agility strategies. Moreover, each one
of them has similar performance on other specic
dimensions. In particular, the Price and visibility
strategy leads to the same performance as agility on
volume exibility, while the Leverage strategy has very
similar manufacturing lead time. In synthesis, the two
less advanced strategies cannot be considered generally
less performing than the other strategies.
We can conclude that Propositions P2 is only partially
conrmed. On the one hand, supply strategies actually
have different impacts on manufacturing performance,
since Leanness and Agility have on average higher
performance compared to more traditional strategies on
most dimensions. But, on the other hand, there is no
statistically signicant difference between the performance of rms belonging to clusters 1 and 2, thus it
cannot be concluded that the two leading supply
models are clearly differentiated from this point
of view. Similarly, also the less advanced strategies
are not completely dominated on all performance
dimensions.

6. Conclusions
This study identied on an empirical basis different
congurations of supply strategy, i.e. alternative sets of
decisions and practices that are adopted by European
companies in the engineering sector to manage their
supply relationships.

(1)
(1)

(1)
(2)
(1)

The rst relevant conclusion emergent from the study


is the existence of four clearly differentiated supply
strategies, which represent alternative choices adopted
by manufacturing rms. Two of them, Leanness and
Agility, are the most advanced strategies, characterised
by the use of a wide set of supplier selection criteria and
the adoption of integration mechanisms, in the context
of long-term partnerships. On the other hand, there are
two more traditional strategies, which focus on shortterm selection criteria and no or partial use of
information integration mechanisms.
An interesting conclusion, however, is that even the
less advanced strategies do not correspond to the armslength supply model described in the literature, based on
price and pure market mechanisms. This shows that
supply strategies evolved in the recent past, not only for
those rms who have adopted state-of-the-art models
but also for the less advanced ones.
A third conclusion, directly connected to the
debate between the sponsors of the Lean and the Agile
models, is that there is no clear evidence of the
dominance of one model on the other. Both strategies
perform better than the remaining strategies, but neither
of them is clearly the best. This result suggests an
equinality hypothesis, i.e. the possibility of achieving
similar results through different strategies, with each
strategy probably better suited for a specic contingent
setting.
Moreover, it should also be noted that a nal
conclusion on the possible dominance of leanness and
agility can only be drawn after considering the
associated costs and risks, which were not investigated
in this study and could be addressed by future research.
Finally, the paper also shows that even less advanced
strategies can lead to relatively good performance, at
least on certain dimensions, like delivery and manufacturing lead time.
These results are relevant both for theory and
practice. On the one hand, they cast more light on
the alternative supply strategies that manufacturing
companies can put in place, and the relative contingent
settings and performance benets. On the other, they

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suggest the importance of considering both internal and


external consistency links in the denition of supply
strategies.
However, our analysis is based mainly on infrastructural characteristics of supply strategy, while structural
ones are also important. For this reason, further
analysis is needed to consider both types of variables
simultaneously. Besides, the contingent variables explored explain the different strategies only to a limited
extent. These variables are related to general characteristics of the company, while the literature highlighted the
relevance also of the characteristics of the supply market
and of the object exchanged as drivers of supply strategy
selection. Indeed, to better understand which contingent
and structural factors are the key drivers in the choice of
the supply strategy, a wider set of contingencies should
be taken into account. Furthermore, the industries
explored are limited to the assembled metal products
sectors, while in other contexts supply strategies can be
different, or provide different performance, or relate to
different contingent settings. Further research is needed
to empirically investigate supply strategies across
industry sectors, in order to understand whether
common patterns exist.

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