Impact of SRM on organization performance

Impact of (SRM) On Organization Performance 1

Impact of Supplier Relationship Management on Organization

Performance

M. Naeem Siddiqui

Dr. Masood Ahmed

Iqra University

Abstract

The study was aimed to evaluate that how managing supplier relation can

affect the performance of the organization in different sectors. The survey

approach was used to explore the major determinants of the supplier

relationship management. As this study was purely qualitative in nature,

therefore, the primary source for data collection had been used. To

achieve this objective a comprehensive survey questionnaire had been

prepared to ask relevant respondents to provide rational answers to the

questions. The observation people include employees of the different

organization, Supply Chain Managers, students specializing in Supply

Chain Management, and owners of the business. The statistical test of

Multiple Linear Regression was applied for testing possible hypotheses of

study. The MLR test was run through SPSS software. The study concluded

that supplier relationship management significantly affected organization

performance.

Keywords: Supplier Relationship Management, Supplier Development, Organization

Performance

Chapter 1: Introduction

Overview

Apart from the rapidly changing customer demands, also due to these technological

developments in the past years - the consumer is now more aware of the variety in

products and prices and demands a higher quality for a lower price. This also forces

businesses to continuously improve their processes and output to meet these customer

requirements.

This global competition is growing due to these improved communication possibilities,

and the possibility of outsourcing production, but also opening new branches abroad.

Businesses are now competing on a worldwide scale, products and services must for

example be produced or provided with competitive labor costs and product materials that

meet the quality requirements of the nowadays more demanding consumer.

Therefore to be able to meet these customer requirements and compete in this tensely

competition, the business entities have to be extremely flexible. This starts at the top of

each business, on a strategic level. If the top does not acknowledge the importance of

global competition and the requirements of the nowadays end-consumer the rest of the

company will suffer the consequences. Of course all flexibility aspects are important for

the business to be flexible, thereby meaning also on an organizational level and on an

operational level.


The pre-selection process of suppliers contains two steps: criteria formulation and

supplier pre- selection based on the criteria. The two criteria used in literature were

dependent and independent. The independent criteria are used when screening for eligible

suppliers, and they relate to a supplier’s organization and its prosperity (Boer, Luitzen, et

al,2001). They are classified into four groups: general business environment and financial

issues, organization and strategy, technology, and other factors. The first two groups

relate to the suppliers’ financial well-being, management capabilities, and future plans

and possibilities. The third group covers the technical issues that are linked directly to the

production of the product or the service. The fourth group of criteria focuses more on

sustainability and risks associated with it. Hence, if criteria from each group are used in

the pre-selection, the buying company can ensure holistic evaluation of the suppliers.

Problem Statement

The key objective of this study was analyzing and managing supplier relationship on

organization performance. The relationship between supplier and the company has a key

role in accomplishment of goals in any organization, because all the channels in supply

chain integrate their activities in order to meet market demand.

Background, Objectives and Significance of the study

In the past, companies have relied on inspection to control quality, while utilizing arm’s

length type of relationships with their supplier. However, relying on mass inspection to

control quality is often ineffective and expensive according to Wagner and Stephan

(2006). Mass inspection simply just sort out the defect, and at that point it is too late. The

supplier has already paid to produce those defectives, while the buyer has wasted time

and resources to receive those defectives. Quality results from prevention of defectives

through process improvement, not inspection (Choy & Lee, 2002). A cooperative

relationship between supplier and buyer would suggest a process improvement simply

because the realization of mutual dependence. Supplier quality improvement can be

approached from two different angles Reactive and Proactive. In Reactive, the buyer

reacts to quality problems throughout the flow of materials, and quality improvement is

only initiated to reduce these problems. On the other hand Proactive approach included

working together, with a larger amount of shared information.

“You cannot manage what you cannot measure” (Chan, 2003). Therefore, it is easy to see

that supplier evaluation and measurement are vital parts of supplier management.

Evaluation can and should take place before anything is purchased from a supplier and

continuously during the relationship. The case company of this thesis is dealing with

challenges of how to actually execute these evaluations.

The key objective of this study was analyzing that how supplier relationship if managed

effectively affect organization performance. Suppliers are key to the success or failure of

the organization, if suppliers provide quality materials and less lead time, the

organization will have competitive edge against its rivals and vice versa.

Outline of the Study This study had comprised of five chapters where chapter number one contains

introduction of the study. An introduction chapter also contains overview of the study,

statement of the problem, background, significant and objective of the study. At the end


of the chapter number one, definitions of the study variables had also been given to make

easier for reader to understand.

The literature review of the thesis in discussed in chapter number two which was written

from more than fifteen research papers to make clear understanding of the topic under

study. As of the literature review chapter end, possible hypotheses of this thesis research

had been discussed. The purpose of this chapter was to differentiate this study from

previous work.

The research method had been discussed in chapter number three. This chapter contains

method of data collection, technique of sampling to collect data from population, total

sample size i.e. number of observations to be analyzed, data collection instrument such in

this study a comprehensive questionnaire had been developed and statistical technique

applied for the purpose of testing research hypotheses. This had been also divided into

validity and reliability test. The next issue was how research model to be developed.

The results, findings and interpretations of the study had been discussed in chapter

number four. At the end of the chapter number four, hypotheses assessment summary had

been shown to see which hypothesis had been accepted or rejected.

In final chapter of the study, discussions, conclusion, implication and future research had

been discussed.

Definitions Supplier Relationship Management (SRM) is a practice where organizations make

strategic association with third party (supplier) who provides inputs that are used to

produce something to meet the demands of the specific customers.

Organizational Performance It is the actual results of the organizations’ outputs

measured against inputs to achieve organizational goals.

Chapter 2: Literature Review

This study will signify the firms about how strong relationship with firms’ suppliers

affects the performance of the organization. In the modern era of competitive business

environment the selection of the right supplier is a key to be successful in all operations

of the business to obtain larger share of the customers from the market. The relationship

with supplier helps organizations, reduce risk and improve the overall performance of the

all business activities in which company operates. The research found that there are two

elements of supplier relationship management, first, explicit commitment or promise

between buyers and supplier, second, agreement between suppliers and buyers about

codifying the ideas exchange. This is the very basis of strategic supply chain flexibility,

and aims to evaluate all the parties directly involved in the firms market. Those parties

include its customers, vendors/suppliers and competitors. This is done by looking at these

parties and surveying them, and documenting the results to review and summarize in

brief the company’s existing strategies to focus and direct the supply chain development

effort.

Harrison and Hoek (2011) argued that during the development of the supply chain

management purchasing had gone from being an isolated department from other elements

of the business systems of the company to being greater integrated with other

departments accompanied with more top management involvement; from purchasing to

supply management. An important part of procurement sometimes neglected is the


business alignment of the purchasing department. Business alignment points towards an

alignment around specific business objectives set by top management. If the professional

purchasers are not well informed of the objectives set by the focal firm, they might be

sourcing from suppliers which are not fully right for business needs.

Building Supplier Relationship

Before looking at supplier relationship management, the meaning of a supplier

relationship must be understood. To develop the buyer-suppliers relationship strong the

parties involved in supply chain must understand that:

The firm shares knowledge important for decision making to achieve synchronization

amongst supply chain members, by means of a real-time information sharing system. The

ultimate opposite scenario, is that of no information sharing at all.

Suppliers are selected based on their ability to provide quality, reliable delivery, short

lead-time, capability of supplying/processing other jobs in addition to those for which

they are the original supplier. The ultimate opposite scenario is a supplier chosen solely

based on price. So, consequently, the buying company will try to avoid any long-term

agreements as it may weaken their position for negotiating (Cooper and Gardner (1993).

The firm has multiple suppliers clustered together sharing information and working

together to deliver the best service to your firm. The worst case scenario is only one

supplier. According to Harrison and Hoek (2011) a supplier evaluation is a mechanism to

develop and advance a supplier relationship, and to center relationship management on

business-relevant improvement opportunities. In terms of the actual measurement, the

main focus is around the three output areas: costs, quality and delivery reliability.

However, with a continuous improvement focus, no performance is perfect. Therefore,

there is always room for improvements and supplier expectations are always rising.

Jonsson (2008) stated that materials bought as means of production almost comprise of

higher than 50% percent of the total costs of manufacturing. Therefore, it is crucial to

work with the right suppliers for business needs and to meet the future demands of the

customers. Therefore, a comprehensive method of supplier selection is essential to the

buying company. Furthermore, an assessment approach to acquire reliable results of

supplier performance should be established. This would include an on-site evaluation of

the supplier assessing supplier capabilities and quality system as well as product samples

(Yeung & Chin, 2004).

Rinehart, Eckert, et al, (2002) argued that literature provides many different inter-

organizational relationships such as alliances, partnerships, collaborative relationships

and transactional relationships. The definitions of the various relationships are often used

interchangeably and that’s why a lot of confusion is created. Kerlinger and Lee (2000)

argued that it may be imperative for theory to include single, clear definition in order to

be validated and advanced. Literature should be consistent in their use of inter-

organizational relationships in order to prevent ambiguity. This is important for

companies since indistinctness about the relationships terms can lead to disconnects in

the expectations between suppliers and buying companies. A mutual understanding of

expectations is therefore necessary for making the relationship as efficient as possible to

meet up market demand for the products. In this regard, the companies had been advised

to make potential agreements with suppliers so that supplier can provide Just in Time


delivery of the needed quality materials. Long term relationships with supplier also help

organizations to mutually understand the problems faced be both.

Developing the Supplier

Hoejmose and Adrien‐Kirby (2012) argued that steady growth in Corporate Social

Responsibility (CSR) in relation to develop the company’s supplier in terms of plant size,

finance the operations which supplier cannot afford to develop and other likewise actions

since last two decades; nevertheless, at this time in point advancements are yet to

required (Millinton, 2008).

The concept of a „durable arm’s length‟ relationship‟ introduced by Dyer, Sung Cho and

Chu (1998) differs from a traditional arm’s length relationship such as the supplier

selection requires a more long-term approach where capabilities are benchmarked to

determine the lowest cost over a longer period of time, not necessarily for one purchase

as a traditional arm’s length relationship would suggest. Furthermore, two or three

suppliers can be selected as long-term suppliers and be price benchmarked once in a

while to maintain a price competition between the given group of suppliers. A strategic

partnership is sufficient when sourcing strategic items. These items tend to be highly

value adding and differentiating product of local company competitors.

Furthermore, strategic items can sometimes be customized for the buyer and therefore

require a higher grade of dexterity among buyers, suppliers and other channel partners.

For example, for a customized item, the design engineers from the buyer and the supplier

must exchange information to ensure a perfect product fit and a smooth interface.

Furthermore, the buyer’s manufacturing engineers must coordinate with supplier

engineers to make sure that the supplier is capable of assembling the component at their

plant. In other words, strategic items naturally needed higher level of coordination

between supplier and customers. Therefore, cooperative relationship is preferable in such

situations to ensure quality and supply of a given component. However, the buyer has to

benchmark supplier capabilities effectively to ensure that the best possible partners are

chosen.

Supply Chain Flexibility and Service Level Agreement Supply chain flexibility is a way to react rapidly to the increasingly shifting needs and

wants of the customers. In this regards making close and strong relationship with

suppliers who provide important inputs to the organization, which are used in the

production of specific products to cater the requests and wants of the customers. If the

relationship with supplier is strong and committed, the suppliers will provide customize

goods and services in accordance with the needs of specific customers.

Logistics supply chain flexibility is also necessary for achieving the needed customer

satisfaction. Flexibility is necessary because forecasting is never completely accurate, and

risks overcapacity or lost sales. Variability in demand has always been a problem for

many businesses and is only growing as customer needs are changing and product life

cycles are shortening. A key issue for companies is how to deal with this growing

variability problem.

Logistics service providers are under pressure due to increasing service level

requirements and increasing consumer wishes. The logistics companies must render

quality services to customers to make people satisfy. An increasing importance of details,


and also of achieving high level of quality services had forced logistics companies to

reform the structures of relationship with customers. The new way of structuring

relationships between supplier and customers is called Service Level Agreement (SLA).

SLA can be defined as a document in which supplier and customer make written

agreement to specify what customer may expect and what the suppliers and/or logistics

providing company will provide in terms of services. SLA had been considered as a

useful document because the quality of the service can be enhanced through clearly

defining, and focusing on main services to meet up customer and business requirements.

The main services that the customers expect from the supplier were called KPIs which

are quantifiable measures that logistics service providers use to determine and contrast

performance of the organization in achieving the day to day and strategic goals.

Although SLAs are implemented in business relationships in various sectors, SLAs are a

recent phenomenon for the logistics sector. SLAs are only implemented by a couple of

logistics service providers and they are only implemented in a couple of business

relationships. There are probably a couple of explanations that prevent them to

implement SLAs in business relationships. How could these explanations be identified?

Is the logistics sector such a different sector in implementing SLAs in business

relationships compared to other sectors? And is it possible to standardize SLAs in

business relationships in the logistics sector? These questions are still too answered by

the research practitioners.

Mentzer and DeWitt, et al,(2001) argued that there are many relationships within supply

chains and it is of the interest to manage these multiple relationships among the actors

involved for optimizing supply chain performance. The relationships among these actors

vary from simple transactional relationships to complex interdependent relationships.

Ganesan (1994); Berry and Parasuraman (1991) argued that value creation in the supply

chain had been achieved through long lasting relationships between customers and

suppliers, and that’s why many companies are moving closer towards long term

relationships with suppliers.

The role of information technology sector in this regard cannot be ignored when talking

about development of the modern economic development throughout the world (Kramer,

Jenkins, & Katz, 2007). It is one of the faster growing sectors with a great influence on

everyday life of the people. However, the industry is facing various problems related to

supply chain management including supplier and buyer relationship. Many of the biggest

ICT corporations have been criticized because of unethical practices of their suppliers.

Bad working conditions, long working hours, limited or missing health and safety

regulations, child labor, and violated human rights are among the most common issues

occurring in suppliers of ICT companies (FLA, 2012).

Besides this, the manufacturing processes and waste streams in the IT sector have an

essential impact on environmental pollution (Chen, Lai, & Wen, 2006; Dawkins, 2005;

Wu, 2013). Another problem refers to data security and usage of information by the

parties throughout the supply chain. For example, suppliers who provide one organization

with input materials are the suppliers of various companies in the region; therefore, they

can manipulate and share the product information with other competing firms.

Supply chain strategy development is to determine the order winning criteria, the object

being to define, prioritize and eventually weight the customers' critical purchasing

(customer oriented) factors. Managing a supply chain included mobilizing all the diverse


operations and actions that may adjoin worth to consumers and simultaneously to

organizations (Lummus, 1998).

Supplier Lead Time Reduction The suppliers comprise of just about 70% of lead-time troubles (Burton, 1988). In the

environment of lean production just in time (JIT) buying needs supplying companies to

make delivery of raw materials frequently in small batches. This would be possible if

there is perfect coordination between buyer and supplier

Heikkila (2002) argued that in order to make supply chain more responsive and to keep it

away from uncertainty, organizations must work on reducing lead time.

If the lead time decreases it minimizes the possible predicament of delivering inventories

and removes quality issues related to keep buffer inventory.

Organizations which share information with supplier helped to reduce lead time. (Larson

& Kulchitsky, 2000) The research also indicates that logistic relationship between

supplier and buyer under just in time method had vital role where supplier must respond

to the needs of customers regarding both quantity and quality.

Competitive Performance

There has been an extensive literature written on supplier relationship and the

performance of the company. The key performance taken by most research practitioners

are cost reduction, quality improvement, lead time, just in time inventory, flexibility in

operations and delivery. However, these alternative structures must prove to be

beneficial; otherwise they will not deliver a competitive advantage. Additionally to these

actions, the product launching at the right time is also resulting in company’s

performance (Phan, and Matsui, 2011).

Research Hypotheses

The following hypotheses have been developed for this study:

H1: Development of the supplier significantly affects organization performance

H2: Building a relationship of trust with supplier significantly affects organization

performance

H3: Supplier lead time significantly affects organization performance

H4: Information sharing with Supplier significantly affects organization performance

CHAPTER 3: RESEARCH METHODS

The chapter of Research Methods covers the detailed information regarding sources of

data, techniques for sampling of data, size of sample taken from population, data

collection instrument such questionnaire and finally the development of the research

model for this thesis. This chapter also covers detailed explanation of the variables both

independent variables (i.e. Information Sharing with Supplier, Supplier Lead Time, Trust

with Supplier and Supplier Development) and dependent variable (i.e. organization

performance) and calculation of the variables and discussion of different measures of the

variables. In research method part of this thesis, the details about the statistical test or

technique that was applied to test the possible study hypotheses had also been explained.

The statistical test was applied through SPSS software.


Method of Data Collection

Because this study purely was a qualitative in nature, therefore, the primary source for

Data collection had been used. To achieve this objective a comprehensive survey

questionnaire had been prepared to ask relevant respondents to provide rational answers

to the questions provided in questionnaire.

Sampling Technique The simple random technique for sampling of the data had been applied in this thesis for

the purpose of collecting data from the relevant sample.

The Sample Size

This study contained the sample of 315 observations or respondents for the purpose of

analysis. The respondents included employees of the different organization, Supply Chain

Managers, students specializing in Supply Chain Management, and owners of the

business.

Instrument of Data Collection

A well-furnished research questionnaire was developed to receive possible responses

from the selected sample size for the purpose of collecting data. The questionnaire

included 15 questions (3 questions for each independent and dependent variable)

prepared at Likert Scale containing 5 options such as Strongly disagree, Disagree,

Neutral, Agree, Strongly Agree.

Validity and Reliability Test

The reliability test was applied to verify whether data collected through particular

questionnaire is truly reliable for the analysis or not. The criteria is that if the value of the

test is greater than 0.50, it would be considered that the data is truly reliable. But on the

other hand, if the value is less than 0.50, then it would be considered that the data is not

truly reliable. When the test was applied through SPSS software, the following results

were generated.

The following results had been generated of reliability test.

The table 3.1 mentioned above shows the case processing summary about how many

observations had been used as sample for the analysis of the study and how many cases

are valid and or excluded. The above table shows that N or number of cases or

Table 3.1

Case Processing Summary

N %

Cases Valid 315 100.0

Excludeda 0 .0

Total 315 100.0

a. List wise deletion based on all variables in the procedure.


observations included in this study are 315 and all the cases are valid (100%) and no case

had been excluded from the study analysis.

Table 3.2

Reliability Statistics

Cronbach's Alpha N of Items

.786 15

The Cronbach’s Alpha value (0.786) is greater than 0.50 (i.e. 0.786>0.50), that suggested

that Categorical Data used in this study is truly reliable for Multiple Linear Regression

Analysis. On the basis of Reliability test, now the Regression analysis would be applied

to explore that how supplier relationship management affect performance of the

organizations.

Research Model Developed

Following Research model was developed for the study

Figure 3.1

SRM Model (Source: Self-made)

Statistical Technique

In this study the Multiple Linear Regression (MLR) test had been applied to analyze the

possible hypotheses of the study. The MLR test was applied through SPSS (Statistical

Package for Social Sciences) software.

CHAPTER 4: RESULTS This chapter of Results covered up research findings and interpretation of the results. The

objective of this chapter was to analyze the data and found and extract some possible

results of this thesis. The key aim of the thesis was to examine that how supplier

Choice to Switch

Information Sharing with Supplier

Supplier Lead Time

Trust with Supplier

Organization Performance

Supplier Development


relationship management (i.e. Information Sharing with Supplier, Supplier Lead Time,

Trust with Supplier and Supplier Development) affect organization performance. To

achieve this objective a comprehensive survey questionnaire was developed to gather

data. As for as statistical test was concerned the Multiple Linear Regression (MLR) test

had been chosen for inspecting supplier relationship management effect on performance

of the organization. The MLR test was applied through SPSS software.

Findings and Interpretation of the results

Below was the output or results that were generated through SPSS software. Onwards the

interpretation of the results was discussed and hypothesis was analyzed.

Table 4.1

Model Summary

Model R R Square

Adjusted R

Square

Std. Error of the

Estimate Durbin-Watson

1 .574a .330 .321 .4442510 1.690

a. Predictors: (Constant), Information Sharing with Supplier, Supplier Lead Time, Trust with

Supplier, Supplier Development

b. Dependent Variable: Organization Performance

The model summary mentioned above in Table 4.1. The R in the above table is

coefficient of correlation between the variables which is 57.4% which is greater than 50%

that means the correlation between study variables both independent and dependent was

statistically strong and significant. The R Square in above table is coefficient of

determination. The value of R square (0.330) shows that independent variables (i.e.

Information Sharing with Supplier, Supplier Lead Time, Trust with Supplier and Supplier

Development) explained 33% variation in Organization Performance (i.e. dependent

variable). The value (0.330) of the model is close to 0.50, therefore, data shows that study

model is almost fit as per data provided by the respondents.

Along with R square, the multiple regression analysis also gives us value for Durbin

Watson. The test values can vary from 0 to 4. In this study the value of Durbin Watson is

1.690 which is less than 2 (1.690<2), therefore, study found positive correlation between

the adjacent residuals.

Table 4.2

ANOVA

Model

Sum of

Squares Df Mean Square F Sig.

1 Regression 30.101 4 7.525 38.130 .000a

Residual 61.181 310 .197

Total 91.283 314

a. Predictors: (Constant), Information Sharing with Supplier, Supplier Lead Time, Trust with Supplier,

Supplier Development

b. Dependent Variable: Organization Performance


The ANOVA matrix had been mentioned above in table 4.2. The sig value (0.000) in the

table is less than 0.05 (α=0.05), (0.000<0.05), hence, the study rejected the null

hypothesis and failed to reject (i.e. accept) alternate hypothesis that supplier relationship

management significantly affect organization performance.

Table 4.3

Coefficients

Model

Unstandardized

Coefficients

Standardized

Coefficients

T Sig.

95.0%

Confidence

Interval for B

Collinearity

Statistics

B

Std.

Error Beta

Lower

Bound

Upper

Bound Tolerance VIF

1 (Constant) 1.675 .237 7.076 .000 1.209 2.140

Supplier Development .128 .037 .184 3.491 .001 .056 .200 .781 1.280

Trust with Supplier .023 .046 .026 .495 .621 -.068 .114 .800 1.250

Supplier Lead Time .038 .046 .042 .835 .404 -.052 .128 .856 1.168

Information Sharing with

Supplier

.448 .050 .459 8.872 .000 .349 .547 .806 1.241

a. Dependent Variable: Organization Performance

H1: Supplier Development significantly affects organization performance.

In the above table 4.3 the sig value for Supplier Development is 0.001 which is less than

set level of significant (α=0.05), the signs of the confidence interval are the same (+ve),

and the value of the VIF (Variance Inflator Factor) 1.280 which is less than 2, therefore,

the recommended null hypothesis was rejected and HA was accepted that Supplier

Development significantly affects organization performance. Thus study found that if the

organizations strive to develop the suppliers in term of technology, operations etc., then

the performance of the organization will be augmented.

H2: Trust with Supplier significantly affects organization performance

The table 4.3 also shows the sig value (0.621) for 2nd variable (Trust with Supplier) is

greater than set level of significant (α=0.05), (0.621>0.05), the signs of the confidence

interval are not the same (one positive and one negative), therefore, the study failed to

reject suggested null hypothesis. But the value of the VIF (Variance Inflator Factor)

1.250 which is less than 2 is acceptable for the study. Overall, the study found that Trust

with Supplier had not significantly affected organization performance. Therefore, the

study suggested, as per data provided, that no supplier had unconditional relationship and

mutual trust with the organizations and there was the possibility that supplier may share a

secret information of the company with the competitors of the company.

H3: Supplier Lead Time significantly affects organization performance

In table 4.3, the sig value for 3rd variable is 0.404 which is greater than set level of

significant (α=0.05), (0.404>0.05), the signs of the confidence interval are also not the

same (one positive and one negative), therefore, the study failed to reject suggested null

hypothesis, that Supplier Lead Time had not significantly affected organization

performance. But the value of the VIF (Variance Inflator Factor) 1.168 which is less than

2 is acceptable for the study. Overall, the study found that suppliers and organizations


had neither mutual understanding nor organizations panelize suppliers to reduce lead time

and promote Just in Time system.

H4: Information Sharing with Supplier significantly affects organization performance

In table 4.3 exhibited above, the sig value for 4th variable i.e. Information Sharing with

Supplier is 0.000, which is less than 0.05 (α=0.05), also, the signs of the confidence

interval are the same (+ve), and the value of the VIF (Variance Inflator Factor) 1.241 that

is also less than 2, therefore, suggested H0 was rejected and the study accepted the

alternate hypothesis (HA) that Information Sharing with Supplier has significant impact

on organization performance. Thus, the study found that if the company may share

information with their key suppliers in terms of product quality, state of the art

technology, materials etc. then it will enhance the performance of the organization.

Therefore, it suggested that companies should share information with supplier if

organizations desire to increase the performance.

Table 4.4 Hypotheses Assessment Summary

The summary to assess hypotheses had been given below:

Table 4.4

Hypotheses Assessment Summary

S. No Hypothesis Sig Value Empirical Conclusion

1. H1: Supplier Development significantly affects

organization performance. .001 Accepted

2. H2: Trust with Supplier significantly affects

organization performance. .621 Rejected

3. H3: Supplier Lead Time significantly affects

organization performance .404 Rejected

4. H4: Information Sharing with Supplier significantly

affects organization performance .000 Accepted.

CHAPTER 5: DISCUSSIONS, CONCLUSION, POLICY IMPLICATIONS AND

FUTURE RESEARCH

This chapter covered detailed discussions of the study which ranging from introduction,

background, data collection, sample size, statistical technique and the findings of the

study. This chapter also covered the conclusion, policy implication and the future

research.

Discussions In recent years, building strong relationships with suppliers have become very important

to sustain competitiveness, customer attractiveness and to achieve larger market share.

Many firms activities directed towards suppliers are uncoordinated, possibly carried out

by different departments and thus not integrated into an overall supplier management.

This stands contrary to growing opportunity concerning effect of the purchasing function

on overall value creation. Different aspects of supplier management provide valuable

insights and approaches. Still an overall framework integrating all these insights into a


SRM framework remains desirable. The performance and past history of the suppliers

help in taking decisions for its selection, as a result selecting the right supplier helps in

getting more improved quality. Quality is a key factor of suppliers by which they can

improve and maintain quality assessment and delivery performance. Therefore the SRM

practices introduced in this research points out its relevance to quality performance. The

key purpose of this thesis was to scrutinize that how supplier relationship management

affects performance of the organization. To achieve this objective, a comprehensive

questionnaire had been prepared containing 15 questions (3 questions for each

independent and dependent variable) from the relevant sample (315 respondents), in

order to gather data. The collected was then evaluated through SPSS software. Finally,

broadly speaking, the study found that supplier relationship management significantly

affects organization performance.

Conclusion

This study concludes that:

There is a significant impact of Supplier Development on organization performance,

because the sig value for 1st variables (Supplier Development) is 0.001 which is less than

set level of significant (α=0.05), the signs of the confidence interval are the same, and the

value of the VIF (Variance Inflator Factor) 1.280 which is less than 2, therefore, the

recommended H0 of study was rejected and the alternate hypothesis (HA) was accepted

that Supplier Development significantly affects organization performance. Thus, study

found that if the organizations strive to develop the suppliers in term of technology,

operations etc., then the performance of the organization will be augmented.

The sig value (0.621) for 2ndvariable (Trust with Supplier) is greater than set level of

significant (α=0.05), (0.621>0.05), also, the signs of the confidence interval are not the

same (one positive and one negative), therefore, the study failed to reject suggested null

hypothesis. But the value of the VIF (Variance Inflator Factor) 1.250 which is less than 2

is acceptable for the study. Overall, the study found that Trust with Supplier did not

significantly affect organization performance. Therefore, the study suggested, as per data

provided, that no supplier had unconditional relationships and mutual trust with the

organizations and there was the possibility that supplier may share a secret information of

the company with the competitors of the company.

The sig value for 3rd variable is 0.404 which is greater than set level of significant

(α=0.05), (0.404>0.05), also, the signs of the confidence interval are also not the same

(one positive and one negative), therefore, the study failed to reject (i.e. accept) suggested

null hypothesis, that Supplier Lead Time did not significantly affect organization

performance. But the value of the VIF (Variance Inflator Factor) 1.168 which is less than

2 is acceptable for the study. Overall, the study found that suppliers and organizations

had neither mutual understanding nor organizations panelize suppliers to reduce lead time

and promote Just in Time system.

the sig value for 4th variable i.e. Information Sharing with Supplier is 0.000, which is

less than 0.05 (α=0.05), the signs of the confidence interval was also the same (positive),

and the value of the VIF (Variance Inflator Factor) 1.241 which was less than 2,

therefore, the suggested H0 was rejected and the study accepted HA or alternate

hypothesis that Information Sharing with Supplier significantly affected organization

performance. Thus, the study found that if the company may share information with their


key suppliers in terms of product quality, state of the art technology, materials etc. then it

will enhance the performance of the organization. Therefore, it suggested that companies

should share information with supplier if organizations desire to increase the

performance.

Policy Implications

According to this study supplier relationship management has a significant influence on

organization performance. Organizations can use this information to align their strategies

to achieve higher degree of performance.

Future Research

For the future, the study can be conducted on different factors which can influence

supplier relationship and organization performance. Also study can be conducted in

overall Pakistan and other countries as this study is confined to Karachi only.

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Impact of SRM on organization performance

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