Supply Chain Strategy and the Role of Suppliers

Supply Chain Strategy and the Role of Suppliers: Evidence from

the Indian Sub-Continent

INTRODUCTION

Organizations are increasingly recognizing that an effective

supply chain strategy can be a driver of long-term competitive

advantage. Moreover, they are viewing supply chain strategy as

an important element of overall business strategy (Qi et al., 2009),

and as a means to responding in a timely manner to changing

competitive conditions. Fisher (1997) made the distinction

between physically efficient and market responsive supply chain

strategies. Physically efficient supply chains are those in which

the primary objective is to minimize the physical costs associated

with the production and delivery of goods with relatively

predictable demand patterns (Qi et al., 2011). In contrast, market

responsive supply chains seek to minimize the market mediation

costs associated with imbalances between supply and demand for

products with highly unpredictable demand (Roh et al., 2014).

More recently, Fisher’s characterization has been recast in terms

of lean supply chains that emphasize waste reduction, and agile

supply chains that emphasize responsiveness to changing market

conditions (Qi et al., 2009).

The principles of a lean supply chain strategy are derived

from lean management (Qi et al., 2009) which emphasizes the

reduction and elimination of waste and non value-added activity.

In contrast, agility implies responding to changing demand in a

timely manner (Tan et al., 2002). While a firm may tend to

emphasize one of these strategic orientations, their strategy should

embrace both so that the firm can compete on multiple dimensions

of performance (Lo and Power, 2010, Ketchen Jr. et al., 2008).

Regardless of the orientation however, the effective execution of

corresponding supply chain practices can enable a firm’s supply

chain strategy to yield competitive advantage in areas such as

quality, cost, innovation, delivery reliability, and time to market

(Li et al., 2006, Jajja et al., 2014a).

An important factor in the successful execution of supply

chain strategy is its alignment with supplier tactics (Cox et al.,

2004, Kannan and Tan, 2003, Schmitz and Platts, 2003). To the

extent that a supplier acts as an extension of the buyer, the

supplier’s ability to execute in a manner that is consistent with the

buyer’s strategic objectives is a key determinant of the buying

firm’s performance. Chen (2011) argued that a buyer’s strategic

priorities provide the backdrop for developing appropriate

supplier selection and evaluation processes. Strategic sourcing

that reflects a firm’s relationships with its suppliers positively

influences the firm’s ability to achieve objectives relative to

agility (Chiang et al., 2012). Buying firms can also acquire

flexibility by appropriately selecting and configuring their supply

networks to emphasize sourcing and vendor flexibility (Gosling

et al., 2010, Luo et al., 2009). Similarly, firms that seek to develop

lean supply chains should select and evaluate suppliers

accordingly (Aksoy and Öztürk, 2011).

Despite the significant body of research on supply chain

management, there is little research that explicitly examines the

relationship between a buyer’s supply chain strategy and its

suppliers’ tactics, and the performance implications for the buyer

(Arlbjørn and Paulraj, 2013). Supplier selection and buyer-

supplier engagement influence buyer performance (e.g., Kannan

and Tan, 2006). How effectively a supplier can serve a buyer is,

however, predicated on the buyer having a clear strategic focus

with respect to its suppliers, and suppliers being equipped to

perform accordingly (Koufteros et al., 2012). The link between a

firm’s strategic supply chain focus and the actions of its suppliers

is thus an important one.

The current study addresses a research gap by investigating

relationships between the supply chain strategies of buying firms,

key drivers of supplier performance, and measures of buyer

performance. These relationships are embedded in a structural

equation model that is tested using survey data from firms in India

and Pakistan. Despite the growth of emerging markets as hubs for

manufacturing activity, much of the supply chain management

literature continues to focus on developed world contexts. The

rising number of manufacturing companies and the expansion of

supply chains in the Indian sub-continent in particular, provide

significant opportunity for research (Osama et al., 2012).

However, as noted by Avittathur and Swamidass (2007), ‘While

the supply chain practices in the U.S. have been the focus of

intense research for nearly 15 years, the supply chain practices in

China, India, and other developing countries have received very

little attention.’ India and Pakistan are the two largest economies

within the South Asian Association for Regional Cooperation

(SAARC), and two of the largest countries by population (World

Bank, 2015). They share a number of economic factors (Conover,

2011, IMF, 2012), and belong to the group of twelve secondary

emerging markets (FTSE, 2010).

Recognition that firms in the Indian subcontinent need to

align business strategies, supply chain strategies, and tactics to

achieve competiveness in a global context is increasing (Sahay

and Mohan, 2003). Saad and Patel (2006) highlighted how factors

including cost and quality were motivating the implementation of

supply chain practices by companies in the Indian automotive

sector. They also discussed the challenges that companies faced

in raising supply chain performance. These included supplier

capacity and a lack of professional purchasing practices. Two

additional studies also speak to supply chain management in the

Indian automotive sector. Joshi et al. (2013) noted that

environmental factors such as skill levels, the regulatory

infrastructure, and globalization had the greatest impact on supply

chain competitiveness. However this was followed by buyer-

supplier relationships, cost performance, flexibility, quality, and

delivery. Moser and Wohlfarth (2009) found that quality and cost

were the most important factors related to supplier base

management, but that suppliers were deficient in the areas of

quality performance, technical capability, and management

processes. They also noted that significant performance gaps

existed between first tier suppliers which included international

companies/joint ventures, and second and third tier suppliers that

were largely small, resource constrained domestic companies.

These studies notwithstanding, empirical research on supply

chain management in India and Pakistan is limited.

RESEARCH FRAMEWORK

Effective execution of a supply chain strategy requires a firm

to adopt a corresponding supply structure (Roh et al., 2014). This

in turn has an impact on the performance of supply chain partners

(Fisher, 1997). The present study builds on prior work that

characterizes supply chain strategy as having a primary emphasis

on either leanness or responsiveness (Christopher et al., 2006,

Fisher, 1997, Goldsby et al., 2006). The scope of inquiry is limited

to buyer strategy, implications for supplier selection as reflected

in supplier tactics, and buyer performance. This section develops

the constructs for supplier tactics which follow from the two

strategic orientations, and the proposed hypotheses that connect

buyer strategy, supplier tactics, and buyer performance.

Lean-Focused Supply Chain Strategy

Supplier Quality Practices

A lean supply chain strategy necessitates an organization

developing partnerships with suppliers that emphasize product

and process quality. Supply quality improves when suppliers are

selected based on their quality focus and performance (Kaynak

and Hartley, 2008). Similarly, strategic collaborative relationships

with suppliers reduce opportunistic behavior by suppliers and

improves quality outcomes (Loch and Wu, 2008). In such

relationships, partners meet frequently to discuss mutual quality

expectations (Monczka et al., 1998). This strengthens social ties

and enhances reciprocity and fairness, while reducing competition

between partners (Sambasivan et al., 2011). Suppliers will

perceive the relationship as being more than merely transactional,

and this can motivate them to meet their buyers’ expectations by

enhancing their own quality practices (Nyaga et al., 2010).

A quality focused buyer-supplier partnership can also be a

source of competitive advantage with respect to customer

satisfaction (Li et al., 2006). Supplier quality practices directly

impact the quality of final products and a buyer’s operational

effectiveness (Baird et al., 2011). These practices are a key driver

of a buyer’s rejection rates, the cost of scrap and rework, and

overall product quality (Sila and Ebrahimpour, 2005). Quality

focused suppliers can be a source of competitive advantage in

terms of new product development, and thus enhance customer

satisfaction and market performance (Oh and Rhee, 2010).

Reductions in supplier quality failures can in turn improve the

buyer’s inventory, quality, and productivity performance. This

plays an important role in increasing the buyer’s brand loyalty,

motivating repeat purchases, and attracting new customers (Berry

and Waldfogel, 2010). We thus hypothesize

H1a: A lean-focused supply chain strategy is positively

related to supplier quality practices H1b: Supplier quality

practices positively influence a buyer’s quality and market-

based performance

H1c: Supplier quality practices positively influence a buyer’s

operational performance

Supplier Cost Effectiveness

Companies with a lean supply chain focus tend to select cost

effective suppliers (Wang et al., 2004). They may engage in

development activities with key suppliers to understand and

improve their suppliers’ cost structures (Ahmadjian and Lincoln,

2001). They also meet with them on a regular basis to expedite

the resolution of cost-related supplier issues (Sanders, 2007).

Suppliers may be motivated to reduce their costs and improve

their processes and technologies if they perceive cost

effectiveness to be a key requirement of buyers (Hill, 1995). They

can benefit as their cost structure improves and their commitment

to waste reduction is recognized by buyers. This can in turn

strengthen their bargaining position (Ahmadjian and Lincoln,

2001).

Supplier cost is directly related to the price of a buyer’s final

product or service. In addition to benefiting from their suppliers’

cost reduction initiatives, lean-focused companies may purchase

in volume from selected suppliers to achieve economies of scale

and further cost effectiveness (Lacity and Hirschheim, 1993).

Reductions in supply costs thereby enable buyers to sell their

products at lower prices than their competitors. This can

positively influence customer satisfaction, customer retention,

and market share. Reductions in a supplier’s non-value added

activities can also reduce lead times and increase the buyer’s

productivity, thus enhancing the buyer’s operational and quality

performance (Gunasekaran et al., 2004, Shin et al., 2000). We

therefore posit that

H2a: A lean-focused supply chain strategy is positively

related to supplier cost effectiveness

H2b: Supplier cost effectiveness positively impacts a buyer’s

quality and market performance

H2c: Supplier cost effectiveness positively impacts a buyer’s

operational performance

Responsiveness-Focused Supply Chain Strategy

Supply Flexibility

A supply chain that emphasizes responsiveness requires

organizations to have flexibility at all echelons of the supply chain

(Hopp et al., 2010). Moreover, such supply chains seek flexibility

from both long- and short-term perspectives. The former means

developing a supply base capable of adapting to structural

changes in manufacturing technology, processes, and demand

(Lee, 2004). The latter means having suppliers with the ability to

meet short-term changes in demand (Gosling et al., 2010). Clarity

regarding the need for supply chain responsiveness can also be an

important factor in tracking organizational efforts to achieve long-

and short-run flexibility (Swafford et al., 2006).

A flexible supply base provides a smooth flow of supplies

that reduces the overstocking or understocking of inventory (Tang

and Tomlin, 2008). It can help firms reduce safety stock, lead

times, and the need for safety production capacity (Hopp et al.,

2010, Yusuf et al., 2003). In addition, flexibility within the supply

base enables organizations to introduce new products quickly,

which in turn helps to satisfy both short- and long-term changes

in demand (Swafford et al., 2006, Khan and Pillania, 2008). New

products can also help firms attract new customers if they have an

early presence in the marketplace (Swafford et al., 2008). We

hypothesize

H3a: A supply chain strategy with a responsiveness focus

positively influences supply

flexibility

H3b: Supply flexibility positively influences a buyer’s

operational performance

H3c: Supply flexibility positively influences a buyer’s quality

and market performance

Supply Delivery

Recognition of the importance of supply delivery is

increasing as supply chains are becoming more complex and

geographically dispersed (Ganesan et al., 2009). Quick and

reliable delivery of products downstream increases overall supply

chain responsiveness (Lee and Whang, 1997). A supply chain

strategy that emphasizes responsiveness thus encourages the

development of fast and reliable supply sources (Chopra and

Sodhi, 2004). Similarly, suppliers of responsiveness-focused

firms derive value from being able to respond in a timely manner

to both scheduled and urgent buyer needs (Ha et al., 2011).

Quick and flexible product delivery systems enhance a

supplier’s ability to reliably deliver products and services on time

(Milgate, 2001). This has positive implications for a buyer’s

delivery reliability, as well as for its inventory costs, customer

satisfaction, and competitive position (Beamon, 1999). For

example, the ability of suppliers to deliver on time, both for

routine and urgent orders, reduces stock-outs and overstocks on

the part of the buyer, and thus corresponding costs (Ting and Cho,

2008). Moreover, it obviates the need for the buyer to purchase in

bulk to reduce inventory costs and compensate for supply

uncertainties (Li et al., 2006). State-of-the-art delivery facilities

and management systems can also help firms reduce inventory

levels, time to market, and overall costs (Chen and Paulraj, 2004).

We posit that

H4a: A supply chain strategy with a responsiveness focus

positively influences supply delivery

H4b: Supply delivery positively influences a buyer’s

operational performance

H4c: Supply delivery positively influences a buyer’s quality

and market performance

Performance

Improvements in productivity, scrap and rework costs, and

inventory levels, improve a firm’s financial performance, thereby

improving returns on investment, sales, and assets (Kaynak,

2003). Moreover, the production and delivery of high quality

products increases a firm’s ability to respond to changing

customer demand, attract new customers, retain existing

customers, and decrease customer rejections (Lin et al., 2005).

Hence

H5a: Operational performance positively impacts financial

performance H5b: Quality and market performance

positively impacts financial performance

Figure 1 presents a model of the hypothesized relationships

between buyer supply chain strategies, supplier tactics, and

performance.

Figure 1: Linkages between buyer supply chain strategies,

supplier practices, and buyer performance

RESEARCH METHODOLOGY Survey Instrument

A survey instrument was developed to collect data to test the

hypothesized relationships. The first section of the instrument

sought demographic information about respondents and the

companies they represented. The remaining sections asked Likert

scaled questions about the buying (respondent) firm’s supply

chain strategy, its suppliers’ tactics, and measures of the

respondent firm’s performance respectively (Table 1). Survey

items were drawn from prior empirical studies. Kristal et al.

RSCS

LSCS

QMP

SFL

SQP

SCE

(2010) explored two aspects of supply chain strategy, exploiting

existing capabilities, and exploring new resources and

opportunities. The work of Kristal et al. (2010) and Tan et al.

(2002) provided the background and motivation for items related

to a lean supply chain focus. Similarly, studies by Qi et al. (2009)

and Sánchez and Pérez (2005) on supply chain flexibility, agility,

and strategy provided the basis for scales items related to a supply

chain focus on responsiveness.

Sila and Ebrahimpour (2005) and Kaynak and Hartley (2008)

offered insights for developing items on supplier quality practices,

and the work of Shin et al. (2000), Yeung (2008), and Smytka and

Clemens (1993) provided the basis for items on supplier cost

effectiveness. Survey items on supply flexibility were based on

studies by Sánchez and Pérez (2005) and Swafford et al. (2006),

while Stewart (1995), Li et al. (2006) and Narasimhan et al.

(2010) provided the basis for items on supply delivery. Items on

performance were derived from studies by Brah and Chong

(2004) and Qi et al. (2009) (operational performance), Brah et al.

(2000), Zu et al. (2008), Kim and Lee (2010) and Kristal et al.

(2010) (quality and market performance), and Vickery et al.

(2003) and Chen and Paulraj (2004) (financial performance).

Data Collection

The instrument, which was in English, was pre-tested by

thirty managers who were familiar with their organization’s

supply chain activities. It was also reviewed by researchers

familiar with the domain of the study. Based on their feedback,

the instrument was revised and sent to 1,300 managers identified

from two sampling frames: companies registered with the three

large stock exchanges of Pakistan in Karachi, Lahore, and

Islamabad (850), and with The Federation of Andhra Pradesh

Chamber of Commerce and Industry and Bangalore Chamber of

Commerce and Industry, both in India (450). Target respondents

consisted of middle to top managers in the relevant functional

departments of the selected companies. The total design

methodology of Dillman (2007) was used to guide data collection.

The questionnaire and a cover letter requesting participation, and,

where relevant, that the instrument be directed to the appropriate

individual, were sent electronically to respondents. Follow up was

carried out using telephone calls, emails, and personal visits.

A total of 397 (255 from Pakistan, 142 from India)

questionnaires were returned, of which 101 were incomplete. This

yielded a total of 296 (191 from Pakistan, 105 from India) useable

responses, an effective response rate of 22.77%. A profile of the

sample used in the analysis is shown in Table 1.

--------------------------------------

Table 1: Respondent Profile

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RESULTS Measurement Models

As described above, scale items were derived from existing

literature and subject to pretesting. As such, content validity can

be considered to have been established. All constructs had values

of Cronbach’s α well in excess of 0.70 (Table 2), providing

evidence of construct reliability (Nunnally and Bernstein, 1994).

To improve convergent and discriminant validity, items that had

factor loadings of less than 0.60 were deleted. Values of Average

Variance Extracted (AVE) in excess of 0.50 for each construct

provided satisfactory evidence of the convergent validities of

constructs (Segars and Grover, 1993).

--------------------------------------

Table 2: Measurement Items and Factors Loadings

--------------------------------------

To test for discriminant validity, chi-square difference tests

between pairs of constructs were carried out. Values of Average

Variance Extracted (AVE) for each construct were greater than

their squared inter-construct correlations (SIC) with other

constructs, thereby establishing discriminant validity (Segars and

Grover, 1993). Results also indicated that all constructs had

values of Comparative Fit Index (CFI) in excess of 0.90 in a single

factor CFA model, thus satisfying uni-dimensionality

requirements. Confirmatory factor analysis of all variables

yielded acceptable overall model fit (Chi-square = 937; d.f. = 593;

Chi-square/d.f. = 1.58; RMR = 0.036; RMSEA = 0.044; CFI =

0.952; TLI = 0.947; IFI = 0.953; NFI = 0.88).

To establish whether common method bias was present, the

Harmon single factor test (Podsakoff et al., 2003) was carried out.

CFA results indicated that a single component factor of all items

explained 33.14% of total variance, less than the 50% that is

indicative of bias. In addition, a significant rise in the value of chi-

square (Δ χ236 d.f. = 3,457) from a single-factor model to a model

in which items were loaded onto their respective latent factors

also indicated the absence of common method bias.

Structural Model

Figure 2 shows the results of the test of the structural model.

The model was tested using

AMOS structural modeling software. The values of multiple fit

indices suggested good model fit (χ2701 d.f. = 1127.6; χ2/df = 1.609;

CFI = 0.939; IFI = 0.940; TLI = 0.932; NFI = 0.856; RMSEA =

0.045) (Segars and Grover, 1993).

*p<0.01

Figure 2: Structural model showing path estimates

Results indicate that with one exception, there is support for

the hypotheses. Path coefficients indicate that firms whose supply

chain strategy emphasizes leanness, focus on supplier quality

practices (β = 0.365) and cost effectiveness (β = 0.394) in making

decisions regarding which suppliers they partner with (H1a, H2a).

Similarly, firms whose primary strategic orientation emphasizes

agility focus on supplier flexibility (β = 0.387) and delivery

capability (β = 0.465, H3a, H4a). For firms with a lean focus, both

supplier quality practices and cost effectiveness positively

influence quality and market performance. As might be expected,

supplier quality practices have a greater relative impact (β =

0.406) on quality and market performance than does a focus on

cost (β = 0.206, H1b, H2b). While supplier quality practices

positively impact operational performance (β = 0.343), the

relationship between supplier cost effectiveness and operational

performance is not statistically significant (β = 0.024, H1c, H2c).

Supplier flexibility has a greater influence on operational

performance (β = 0.313) than does delivery capability (β = 0.185,

H3b, H4b). For firms with a primary strategic focus on

responsiveness, both supplier flexibility (β = 0.293) and delivery

capability (β = 0.235) have a positive influence on quality and

market performance (H3c, H4c). Operational performance (β =

0.264) has a weaker positive influence on financial performance

than does quality and market performance (β = 0.663, H5a, H5b).

The model was also tested to examine whether supplier

tactics mediated the relationship between buyer supply chain

strategy and performance. Paths between the two strategy

constructs and the two performance constructs were added to the

structural model including control variables (Little et al., 2007,

Baron and Kenny, 1986). The model yielded acceptable fit (χ2722

d.f. = 1171.9; χ2/df = 1.623; CFI = 0.938; IFI = 0.939; TLI = 0.930;

NFI = 0.855; RMSEA = 0.046). None of the direct relationships

between strategy and performance were significant (p > 0.10), but

as with the original model, there was significant support for all

hypothesized relationships except hypothesis H2c. This provides

empirical evidence that supplier tactics fully mediate the

relationship between buyer supply chain strategy and

performance.

Contingency Analysis

Prior research has suggested that organizational

demographics can influence relationships between strategy,

supplier behavior, and, buyer performance (Yeung, 2008, Reed

and Walsh, 2002, Qu and Brocklehurst, 2003, Jajja et al., 2014b).

To obtain a more nuanced understanding of the relationships

underlying the results described above, the structural model was

tested for the contingent effects of four variables; company age (≤

15 years, > 15 years), size (≤ 500 employees, > 500 employees),

ownership (local, joint venture/foreign), and exporters/non-

exporters.

While in most cases path coefficients were statistically

significant irrespective of the level of contingent variable (Table

3), several important exceptions emerged. The most notable

reflected whether a company exported or not and the relationship

between supplier delivery and operational performance (H4b).

Specifically, for non-exporters, neither supplier cost effectiveness

nor flexibility influenced operational or quality and market

performance. Similarly, supplier delivery influenced operational

performance only for older companies, those with some level of

foreign ownership, and exporters.

--------------------------------------

Table 3: Contingency analysis (p > 0.01) --------

------------------------------ DISCUSSION AND

CONCLUSION

While it is reasonable to expect that the alignment of a

buyer’s supply chain strategy with the capabilities of its suppliers

is a driver of buyer performance, the results provide empirical

evidence of the underlying relationships. Moreover, they show

that supply chain relationships among firms in India and Pakistan

are consistent with those in more advanced economies. Firms

with a strategic focus on responsiveness or on being lean can

achieve higher levels of performance by partnering with suppliers

whose internal systems are similarly oriented. Suppliers are in

effect extensions of producer firms. The appropriate selection of

suppliers thus enables them to help in the effective execution of

the buying firm’s strategy. As noted by Moser and Wohlfarth

(2003) however, large differences exist between the capabilities

and resources of 1st tier and lower tier suppliers in India, and it is

likely the same case in Pakistan. This puts a burden on firms to

identify appropriate suppliers from what may be a relatively small

pool. Moreover, an additional challenge may exist in that an

organization’s competitors may utilize the same pool of suppliers.

Consistent with prior research, the results show that supplier

commitment to quality improvement translates directly to positive

measures of the buyer’s operational performance (Kaynak and

Hartley, 2008, Kannan and Tan, 2006). Similarly, firms with

flexible and reliable suppliers enjoy high levels of operational,

quality, and market performance, consistent with findings

regarding the significance of supplier base flexibility and delivery

(Prajogo et al., 2012, Gosling et al., 2010, Liao et al., 2010). As

highlighted by Joshi et al., (2013), cost, quality, flexibility, and

delivery are key determinants of supply chain competitiveness in

India. As noted above however, variation in capability is a key

reality of the supplier pool. The results thus highlight the

importance of alignment between an organization and its

suppliers. They also suggest that organizations that can overcome

barriers to flexibility such as those attributable to poor

infrastructure and government policies, key drivers of supply

chain competitiveness (Joshi et al, 2013), will be at a competitive

advantage.

The results do not suggest a direct relationship between

suppliers’ commitments to cost effectiveness and buyers’

operational performance. This may reflect survey respondents not

knowing about, considering, or fully appreciating the impact of

suppliers’ efforts to reduce waste on downstream production

activity, and thus not fully leveraging cost reduction potential. It

may also be a function of the relatively low diffusion of lean

manufacturing practices (Panizzolo et al., 2012). This is in turn

the result of cultural norms and a limited talent pool with the

corresponding skill set. However, given the importance of cost as

a driver of supply chain competitiveness among Indian firms

(Saad and Patel, 2006, Joshi et al., 2013, Moser and Wohlfarth,

2009), it represents a significant opportunity. Consistent with the

observation of Moser and Wohlfarth, it also suggests the value of

greater supplier development efforts. While supplier development

is an accepted practice in developed markets such as those in the

U.S. and Japan, it is not clear to what extent it is accepted or

routinely practiced in India and Pakistan. As Panizzolo et al.,

(2012) imply however, cultural factors and the relatively small

pool of managers and engineers with the requisite skills may

constrain development efforts. In contrast, for firms whose

strategic orientations emphasize responsiveness, efforts to partner

with suppliers that act quickly and are responsive to change are

not only viewed favorably by the marketplace, they effectively

support the firm’s efforts with respect to time-based competition.

As observed in developed markets, increases in income and

consumer sophistication coupled with technological innovation

have led to product life cycles becoming shorter in many

industrial sectors. The implications for markets such as those in

India and Pakistan in which incomes are rising, are thus

considerable.

The results of the contingency analysis are particularly

informative. The observation that supplier cost effectiveness and

flexibility positively influence operational and quality and market

performance for exporting companies but non-exporters, suggests

that pressure to compete internationally has had a positive effect

on how some buyers interface with their suppliers. The fact that

supplier delivery influences operational performance only for

older companies, companies with at least partial foreign

ownership, and those that export, further suggests that companies

with greater maturity in managing the supply chain can yield

dividends. It may also be a reflection of these companies being

better positioned to form supply partnerships with international

companies/joint ventures whose technical and management

development are at a higher level than that of domestic suppliers

(Moser and Wohlfarth, 2009). It should be noted that only 49% of

the locally owned firms in the sample were exporters, thus

highlighting the potential for future supply chain performance

improvements.

Rising incomes and customer expectations coupled with

challenges associated with access to and availability of resources

are changing the competitive landscape in India and Pakistan.

Organizations that are able to effectively leverage their supply

chains will be better positioned to respond to these challenges

than those that are not aligned with supply chain partners. In

addition, for firms in India and Pakistan seeking to establish

themselves as viable sources of supply in international markets,

raising quality, lead time, and cost performance will be essential.

This can again be achieved more effectively by leveraging

opportunities across the supply chain rather at the level of the

organization alone. With increasing supply chain costs in

established developing country locations such as China,

opportunities exist for organizations in India and Pakistan.

However, they will not be seen as legitimate alternatives if they

cannot offer comparable, if not higher, quality and flexibility at a

lower cost. The results presented in this study offer empirical

support for the critical mediating role of supplier functions on

buyer performance, and thus of the impact of effective supply

chain alignment. They also highlight the need to overcome the

lack of experience managers have in managing performance and

establishing performance cultures (Panizzolo et al., 2011)

The study is not without its limitations. It utilized relatively

small samples drawn from two countries which share a number of

economic, cultural, and social characteristics. However, the

implicit assumption is that the countries are homogeneous enough

that sample data could be combined. Larger samples from each

country would have provided greater confidence in making such

assumptions, and enabled comparative analysis that identified

differences in supply chain practices in the countries. The sample

sizes also meant that the number of responses from individual

industrial sectors was small. Larger samples would have enabled

contingency analysis to be conducted across industries, and

allowed more nuanced conclusions to be drawn. The current

work also suggests potential extensions. While the present focus

is on the Indian sub-continent, a logical next step is to explore

whether the results generalize to other developing market

contexts, particularly elsewhere in Asia. The expansion of the

manufacturing sector in countries such as Thailand and Vietnam,

decreasing cost and capability differentials between

manufacturing in China and other emerging markets in Asia, and

other factors including government policies that promote

domestic production, are motivating firms to explore new

manufacturing and sourcing locations. Understanding the

interplay between buyers and suppliers regarding strategy and

execution is thus germane. A related issue is that of the integration

of suppliers with buyers. While several studies in the supply chain

management literature have examined the concept of supply chain

integration, this has again been anchored in the context of

developed economies. As the results of the present study indicate,

aligning buyer strategy with aspects of supplier execution is an

important issue. This has important implications with regard to

integration that have not previously been explored.

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Table 1: Respondent Profile

Table

Measurement Items and Factors Loadings1

Construct

Items

Factor

loadings

Cronbach’s

Alpha

CFI

Number of

Employees

Frequency

Industry Sector

Frequency

<50

Automobile

51-100

Chemical/process

plants

101-200

Engg.

manufacturing

201-500

FMCG

501-1500

Pharma

>1500

118

Textile

Telecom/IT

Others/ Not

reported

Age of

Company

(Years)

Frequency

Export status

Frequency

0-5

Exporting

149

6-10

Non-Exporting

147

11-15

>15

164

Position of

Respondent

Frequency

Ownership

Frequency

Top Managers

Local

198

Senior

Managers

180

Joint venture (JV)

Middle

Manager

Foreign

Others

Lean Supply

Chain

Strategy

(LSCS)

In meetings and communications, our top

management highlights that

0.88

0.99

1. Our supply chain practices are

designed to provide high quality

products/services

0.81

2. All supply chain partners should

maximize quality for the end

customer

0.87

3. All members of our supply chain

should team up to maximize value for

the end customer

0.79

4. Minimizing cost throughout the

supply chain is important for our

business

0.76

Responsive

Supply

Chain

Strategy

(RSCS)

In meetings and communications, our top

management highlights that

1. Our supply chain should be able to

economically

satisfy variation in demand 0.80

0.91

0.99

2. Our supply chain should be capable

of developing new products before

competitors

0.77

3. Reduction of delivery lead time is

important

0.86

4. Delivery of the latest technology

products/services to our customers is

essential

0.87

5. Our supply chain adjusts

proactively to satisfy customers' new

needs

0.79

Supplier

Quality

Practices

(SQP)

1. Quality is the top criteria when we

select our suppliers

0.89

0.93

0.97

Our key suppliers

2. Are quality conscious in their interactions

with us 0.86

3. Do not train their employees on the

latest available technology 2

4. Have effective quality management

programs

0.83

5. Give the highest importance to our

satisfaction

0.89

6. Continually train their employees

on the latest management techniques

0.75

Supplier

Cost

Effectiveness

(SCE)

Our key suppliers

0.86

1.0

1. Continuously invest in in-house

operations to reduce cost

0.81

2. Seek help from us in reducing their

costs

3. Do not have access to low cost raw

material 2

4. Use statistical process control to

reduce rework and waste

0.82

5. Discourage wasted time and non-

value-added

activities

0.84

Supply

Flexibility

(SFL)

1. We can efficiently restructure our

supplier base in case of long-term

changes in the market, the

regulatory infrastructure, or our

competitors’ strategies

0.72

0.83

1.0

Our key suppliers can

2. Not economically meet our

unscheduled demand 2

3. Produce small batch sizes

economically

4. Modify their products/services in a

short period of time

0.81

5. Economically deliver a large

variety of products/services

0.82

Supply

Delivery (SD)

Our key suppliers

0.88

0.99

1. Never deliver supplies on time 2

2. Have very short delivery lead times

0.80

3. Can economically transport small

batch sizes

0.83

4. Have high quality transportation

systems

0.81

5. Cannot speed up urgent delivery

processes 2

6. Have cost effective transportation

systems

0.75

Operational

Performance

(OP)

1. Productivity

0.85

1.0

2. Cost of scrap and rework2

0.66

3. New product development time2

0.78

4. Inventory level2

0.83

5. Delivery lead time 2

0.76

Quality and

Market

Performance

1. Market share

0.83

0.90

0.93

2. Market share growth rate

0.83

3. Brand acceptance

0.85

4. Reject rate of customers 2

5. Repeat purchases by customers

0.70

(QMP)

6. Response time to changing market

needs 2

7. Customer satisfaction with

product/service quality

0.75

Financial

Performance

(FP)

1. Revenue growth

0.85

0.90

0.99

2. Overall profitability

0.86

3. Return on assets

0.81

4. Return on sales

0.82

1 Questions for constructs LSCS, RSCS, SQP, SCE, SFL, SD

answered using 5 point Likert scales, 1 = strongly disagree, 5 =

strongly agree. Questions for constructs OP, QMP, FP answered

using 5 point Likert scales, 1 = below competition average, 5 =

above competition average. 2 Item reverse coded

a Items deleted due to factor loading < 0.60

Table 3: Contingency analysis (p values > 0.01)

Size

Age

Ownership

Export

Hypothesis

Large

Small

New

Old

Local

JV/Foreign

Yes

H1a: SCLF

=> SQP

0.070

H1b: SQP

=> QMP

H1c: SCE

=> OP

0.344

0.104

0.114

0.278

0.398

H2a: SCLF

=> SCE

H2b: SCE

=> QMP

0.107

0.101

0.147

H2c: SQP

=> OP

H3a: SCRF

=> SFL

H3b: SFL =>

0.380

H3c: SFL =>

QMP

0.199

H4a: SCRF

=> SD

H4b: SD =>

0.412

0.087

0.179

H4c: SD =>

QMP

H5a: OP =>

0.065

0.079

H5b: QMP

=> FP

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