Questioning the relevance of supplier satisfaction for preferred customer treatment: Antecedent effects of comparative alternatives and multi-dimensionality

https://doi.org/10.1016/j.pursup.2021.100672Get rights and content

Highlights

  • Influence of supplier satisfaction on resource allocation tested via supplier survey.

  • Satisfaction proved to be sufficient condition for preferred customer status.

  • Relative evaluation of relationship outcomes was identified as necessary condition.

  • Relative outcome evaluation was predominantly influenced by economic satisfaction.

  • Social satisfaction showed a stronger effect on overall satisfaction than economic.

Abstract

Through the construct of supplier satisfaction, recent research explains the supplier's preferred treatment of a given customer. This cause-and-effect phenomenon is often not contrasted with other reasons or controlled for. This work addresses this issue and uses two tactics to elaborate upon social exchange theory, namely, construct splitting and construct contrasting, to analyse the development of preferential customer treatment. For this purpose, a structural equation model is used with data from the international automotive industry. The results extend the breadth of constructs explaining preferred customer treatment (PCT) and challenge the existing reasoning by questioning the relative importance of supplier satisfaction. While supplier satisfaction does affect PCT, the relative supplier satisfaction defined as a comparison of outcomes between the actual and the best alternative business relationships influences PCT much more.

Furthermore, by distinguishing between the economic and non-economic dimensions of supplier satisfaction, the study indicate that economic satisfaction has a higher influence on the relative satisfaction whereas social satisfaction a higher one on absolute supplier satisfaction.

These findings imply that despite the current debate about the importance of behavioural constructs such as supplier interaction and social capital, supplier resource allocation decisions are actually dominated by economic and relative aspects of satisfaction. This outcome calls for a more economically driven debate about behavioural supply management approaches.

Introduction

In industries characterized by a high level of competition, which results in a continuous need for price or product differentiation (e.g., the international automotive industry), the success of a firm depends on resources such as suppliers’ capabilities and the materials they deliver (Corswant and Fredriksson, 2002; Koufteros et al., 2012; Schiele, 2015). However, with the increasing importance of the supplier as a source of innovation and differentiation, competition for limited supplier resources is inherent in these industries (Pulles et al., 2016b; Schiele, 2015a; Schiele and Vos, 2015). Thus, purchasing and supply management must initiate, maintain and secure supplier relationships to ensure privileged access to supplier resources (Nollet et al., 2012; Schiele et al., 2011, 2012a; Wynstra et al., 2019).

Creating competitive advantages through strategic external collaboration–especially in supply markets characterized by supplier oligopoly–is not a straightforward task when the supply base is shared with competitors. The creation of competitive advantages depends on the buying firm's ability to position itself as a preferred customer (Huettinger et al., 2012; Pulles et al., 2014, 2016b; Steinle and Schiele, 2008). The term ‘preferred customer’ refers to a buying organization that receives better treatment from a supplier in comparison to other customers. Better treatment may refer to product quality (Nollet et al., 2012), improved availability of products, services and resources (Nollet et al., 2012; Steinle and Schiele, 2008), price benefits (Schiele et al., 2011), and early and exclusive access to supplier innovations (Ellis et al., 2012; Schiele, 2015a; Schiele et al., 2011). These benefits are based on a customer prioritization decision made by suppliers (DeWulf et al., 2001; Wetzel et al., 2014), which results in a selected customer receiving elevated social status recognition and preferred resource allocation (Steinle and Schiele, 2008).

In this context, purchasing and supply management (PSM) studies such as Huettinger et al. (2012), Vos et al. (2016), Pulles et al. (2016a), and Nollet et al. (2012) emphasize the importance of supplier satisfaction for a customer to achieve preferential status. The general proposition is that in a business relationship, satisfied suppliers are more willing to grant the buying firm preferential status and treatment in comparison to other customers (Brokaw and Davisson, 1978).

However, as will be shown in the following, supplier satisfaction research is scarce (Essig and Amann 2009; Schiele et al., 2012a). Supplier satisfaction as a concept is still missing a common understanding of how it should be defined and operationalized as an object of research (see Table 1). In addition, there are heterogeneous empirical findings of the possible cause-and-effect relationship between satisfaction and the resource allocation decisions of a supplier.

Positive validation can be found in studies from Pulles et al. (2016a) and Vos et al. (2016). Pulles et al. (2016a) showed in their survey analysis that the overall satisfaction of automotive suppliers has a significant positive influence on their preferential treatment of a German car manufacturer. In addition, the work of Vos et al. (2016) extended the previous study from Huettinger et al. (2014), showing that supplier satisfaction has a positive effect on preferred customer status, which results in preferential customer treatment. In contrast, Baxter (2012) found no evidence of a direct influence of supplier satisfaction on preferred customer treatment (PCT). Instead, PCT could be explained by the development of supplier commitment, which was positively influenced by supplier satisfaction (Baxter, 2012). Based on these contradictory empirical results, this paper draws attention to two major research or evidence gaps:

First, Pulles et al. (2016a) and Vos et al. (2016) both conducted surveys within the German automotive industries, whereas Baxter (2012) and Baxter and Kleinaltenkamp (2015) referred to diverse industries such as food and tobacco, printing and publishing, pulp, paper, and machinery. This approach leads to the potential existence of unidentified relationship- or industry-specific factors mediating or moderating supplier satisfaction as a predictor for PCT.

Accordingly, empirical studies regarding supplier satisfaction have so far failed to contrast socio-psychological construct satisfaction with alternative explanatory approaches to test its general predictive power. With reference to Schiele et al.’s (2012a) proposed model, the relative evaluation of a customer relationship in comparison to other business relationship outcomes (Anderson and Narus, 1990; Christiansen and Maltz, 2002) has not yet been empirically tested regarding its significance as an antecedent to PCT. Thus, it remains unclear what influence supplier satisfaction has compared with alternative explanations and whether there are interactions between these factors.

Second, in comparison with the wide range of scientific contributions regarding customer or employee satisfaction (Brown and Lam, 2008; Garbarino and Johnson, 1999; Homburg and Rudolph, 2001; Kenett and Salini, 2012), the concept of supplier satisfaction has received much less attention (Essig and Amann, 2009; Huettinger et al., 2012; Johnson et al., 2011). Thus, it can be argued that the contradictory empirical findings could be the result of different satisfaction conceptualizations and operationalization approaches. Moreover, current supplier satisfaction conceptualizations emphasize different dimensions of supplier satisfaction but do not evaluate whether and how specific dimensions might be more relevant for PCT than others.

Therefore, our research aims to answer two questions: ‘Does supplier satisfaction maintain its explanatory power for PCT when contrasted with alternative constructs?’ and ‘Do specific satisfaction dimensions play a dominant role in attaining PCT?’

In this context, the social exchange theory (Blau, 1964; Thibaut and Kelley, 1959) acts as a theoretical framework for developing our research model and hypotheses. The latter are tested by using partial least squares (PLS)-based statistical analyses with survey data gathered from the international supplier base of a German car manufacturer. Our study extends the existing supplier satisfaction research in several ways. First, the data show that supplier satisfaction, while in general maintaining its role as a predictor for PCT, loses its predictive power when contrasted with the perceived relative net benefit from other relationships. This finding confirms Thibaut and Kelley's (1959) original postulation about the decisive role of the relative attractiveness of a business relationship for the maintenance of relationship continuity, as well as Schiele et al.’s (2012a) ‘cycle of preferred customership’. Furthermore, economic satisfaction is revealed to be the most relevant factor for fostering the perceived relative attractiveness of a business relationship. As a result, these findings contribute to future research by refining the role and operationalization of supplier satisfaction in the prediction of PCT.

We organized the paper by starting with a comprehensive literature review of supplier satisfaction research followed by the derivation of the research hypothesis. Thereafter, the methodology and results are presented in several subsections. We conclude with a discussion of our findings and managerial implications while pointing out our study's limitations and providing an outlook for future research.

Section snippets

Understanding supplier satisfaction

To conceptualize supplier satisfaction, this study systematically reviewed the literature following the approach of Tranfield et al. (2003) to ensure the accuracy and relevance of the identified potential sources and the replicability of their research. The first step of the review started by limiting the scope to English-language, peer-reviewed journals. The literature was identified by using database searches within the EBSCO host database (Business Source Premier) and the ScienceDirect and

Hypotheses development

Based on the identified shortcomings, the research model of this study focuses specifically on two aspects (see Fig. 1):

  • 1)

    Contrasting supplier satisfaction in its role as an antecedent of PCT with an alternative explanatory construct to investigate its explanatory power to predict PCT, and

  • 2)

    Subdividing the construct of supplier satisfaction to test its validity and reliability and operationalizing supplier satisfaction as a multi-dimensional construct.

Variable measurement

This study uses multi-item scales for measuring the independent and dependent constructs. All constructs are measured with a six-point scale ranging from “Strongly disagree” to “Totally agree” (see Appendix A).

Social supplier satisfaction was measured by adapting the operationalization of non-economic satisfaction by Rodríguez del Bosque et al. (2006) using the indirect satisfaction measurement approach developed by Ruekert and Churchill (1984) to measure satisfaction with social interactions

Findings

To test the derived hypothesis, the PLS analysis was conducted by applying a path-weighting scheme (maximum of 3000 iterations) to estimate the hypothesized paths and employed a bootstrapping procedure with replacement using 5000 resamples to estimate the significance of these paths.

The results of the bootstrapping procedure stated in Table 7 and Fig. 2 indicate a positive impact of supplier satisfaction on PCT (H1: T = 2.397, β = 0.157). In addition, the perceived CLalt shows a significant

Discussion

By measuring supplier satisfaction, previous researchers (Huettinger et al., 2014; Schiele, 2015a; Vos et al., 2016) assume that sociopsychological factors exist that have a significant influence on the supplier-specific resource allocation process. The influence of these sociopsychological factors represents an alternative to existing, sales-oriented approaches to customer prioritization. Existing approaches are based on the premises of bounded rationality and cognitive limitations (Cyert and

Authorship statement

S. Piechota: Conception and design of study, acquisition of data, analysis and/or interpretation of data, Drafting the manuscript, revising the manuscript critically for important intellectual content, Approval of the version of the manuscript to be published. A. Glas: Conception and design of study, Drafting the manuscript, revising the manuscript critically for important intellectual content, Approval of the version of the manuscript to be published. M. Essig: Conception and design of study,

Declaration of competing interest

None.

Steffen Piechota holds an MSc Degree in Business Administration and is working for an international automobile manufacturer for more than eight years. He has managed numerous projects in the field of supplier relationship management, supply management and logistics. Besides his job as Head of Parts Distribution North East Europe, he is an external PHD student at the Chair for Materials Management and Distribution at the Bundeswehr University Munich. His research is related to supplier

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    Steffen Piechota holds an MSc Degree in Business Administration and is working for an international automobile manufacturer for more than eight years. He has managed numerous projects in the field of supplier relationship management, supply management and logistics. Besides his job as Head of Parts Distribution North East Europe, he is an external PHD student at the Chair for Materials Management and Distribution at the Bundeswehr University Munich. His research is related to supplier satisfaction as part of a holistic supplier relationship management approach.

    Andreas H. Glas is an Assistant Professor at the Competence Network Performance Based Logistics at Bundeswehr University Munich. His research investigates the buyer-supplier cooperation and is in particular focusing on performance-based contracts and service-based innovation. He co-edited the book Performance-Based Logistics and is working on several research topics linked to projects in the automotive, manufacturing and aerospace industries.

    Michael Essig holds the Chair for Materials Management and Distribution at the Bundeswehr University Munich and is the Co-Director of the Research Center for Law and Management of Public Procurement as well as the Competence Network Performance Based Logistics. From 2009 to 2012, he acted additionally as the Vice President for Research at Bundeswehr University. His main research interests are strategic supply management, supply networks, supply chain management and public procurement.

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