Supply strategy and business performance

Abstract

PurposeThe purpose of this paper is to analyze the effect of purchasing and supply strategies on business performance.Design/methodology/approachThe empirical results are based on information provided on a questionnaire by purchasing managers in 180 Spanish industrial firms.FindingsAn organization's commercial and financial performance increases when it increases the relative importance of flexibility and decreases the relative importance of reductions in stock levels and purchasing prices in its supply strategy. The best performing firms are those that combine quality, dependability, and flexibility as priority objectives and relegate cost reductions to secondary importance.Research limitations/implicationsAlthough the research is designed to mitigate the effect of common method bias, it still depends on perceptual measures of performance. Further research should enlarge the list of generic competitive objectives to take into account newer dimensions cited in existing literature, such as innovation or environmental management.Practical implicationsThe results provide useful information for managers who wish to configure an optimal profile of competitive objectives for their purchasing and supply function.Originality/valueThe paper uses an approach that introduces two innovative elements. First, strategy is conceived of as a profile of generic competitive objectives, not as a set of practices deployed by the purchasing function. Second, the study introduces the concept of the relative importance of a competitive objective, rather than the absolute importance of that objective, which enables an analysis of the effect of the interrelationships among the different competitive objectives.