Managing Material and Logistics Embeddedness: Material Buyers' Perspective

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1li-manager’s Journal o Management, Vol. No. 4 ln 11 March - May 2017

*-** Professor, Eastern Michigan University, Michigan.

ABSTRACT

Because an organization's visibility and decision-making abilities in a supply network is limited by its embeddedness,

managing the embedded activities may be affected by non-contractual forms of governance and capability.

Whatever the organization cannot see, it can't efficiently control. In this paper, the authors have studied non-contractual

governance, dependence, and reliance in a manufacturer-vendor dyad in light of logistics, spill-over customer-centric

service, and performance. Relational norms (information sharing and flexibility), trust, commitment, and bilateral

dependence were hypothesized to explain manufacturers' logistics capability and customer-centric services. Using

SEM-PLS (Structural Equation Modeling using Partial Least Squares) approach, all the hypothesized paths were proven 2 2with adequate R explained for each construct; R for financial performance was low.

Keywords: Material Transaction, Embeddedness, Dependence, Reliance, Performance.

HARASH SACHDEV * RUSSELL MERZ **

By

MANAGING MATERIAL AND LOGISTICS EMBEDDEDNESS: MATERIAL BUYERS' PERSPECTIVE

INTRODUCTION

It is common knowledge among procurement

professionals that the percentage quantity of material 1purchased by manufacturers over making them in-house is

high enough to deserve consistent managerial attention

(Supply Chain Quarterly, 2015 & 2016). Although several

research studies have focused on material management

issues (e.g., Jap, 2001), limited attention has been paid on

manufacturers' logistics that is embedded in this material

transfer, which has performance implications for material

exchange. Since supply-chain organizations are complex

adaptive systems (Mena, Humphries, & Choi, 2013), in this

empirical study, the authors have explained manufacturers'

adaptiveness through the embeddedness and resource-

based view (RBV) lens. How improving a manufacturer's

overall logistics capability and its customer-centric services

with its downstream customers may improve supply-chain

performance?

1 The manufacturer buys processed or component material from a vendor

(industrial distributor / supplier) while contemplating its spill-over effect with

downstream customers (vendors).

The logistics transaction that is embedded in this material

transfer from the vendor to the manufacturer deserve

special attention because logistics and customer-centric

services may be used as strategic differentiating tools

(Skjøtt-Larsen, 2000). To that extent, RBV proponents

suggest that the more such resources are valuable, rare,

immobile, and non-substitutable, the more an

organization's strategic competitive advantage and

performance value. These resources include knowledge

and capability and organization processes that give it an

identity in the market place (Barney, 1991; Sachdev,

2012). Since a supply-chain solution for each customer's

needs is generally situation-specific, complex, and

difficult to imitate, any transaction convolution should be

identified and understood to avoid loss of sales,

profitability, and dissatisfied customers (Tuli, Kohli, &

Bharadwaj 2007).

However, logistics efficiency studies have focused on cost

reductions and customer delivery improvements over

inept control practices and tension that may lead to the

demise of a business (Chen et al., 2015).One of the

Date Received: 25/07/2016 Date Revised: 18/01/2017 Date Accepted: 17/04/2017

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2 i-manager’s Journal o Management, n l lVol. 11 No. 4 March - May 2017

reasons maybe that such studies are being understood

from logistics service providers or their customers’

(shippers) perspective rather than the material buyer's

perspective. Furthermore, researchers have pointed out

that logistics providers primarily focus their managerial

efforts on interpreting contracts, leveraging pricing, and

discussing service failures instead of improving the logistic

transactions (Halldo’rsson & Skjøtt-Larsen, 2006). Since

such material and logistics transactions are on the rise,

manufacturers and vendors will need to learn how to

improve and sustain themselves in this embeddedness, or

face inefficiencies that will defeat the purpose of material

exchange.

Embeddedness refers to an organization's dependence

and reliance on its supplier and customer in its supply

network (Ghoshal & Bartlett, 1990; Gulati, 1998). However,

dependence may only sow the seeds for non-contractual

attributes to exist (e.g., relational norms, trust,

commitment) rather than having a direct impact on them

(Sachdev, Bello, & Verhage, 1995). Hence, it may be

interesting to know how dependence and non-

contractual governance play out in improving logistics

and customer-centric services for this form of

embeddedness. Organizations may then reduce

committing to wasteful energy in overanalyzing

contractual agreements. Had Mattel Toys, Inc. practiced

non-contractual governance in improving logistics and

customer-centric services, would they have experienced

such fallacies (e.g., Wisner, 2011)?

“…Whenever one addresses the supply chain for a

particular agent (i.e., a company), one would have to

specify the referent (e.g., Apple iPod touch, Intel 3rd

Generation Xeon processor) for that agent as the unit of

analysis” (Carter, Rogers, & Choi, 2015, p 91). Marketing

channel theorists suggest that clarifying a business

exchange from a channel captain's viewpoint (the party

that has the expertise and creates the channel) may be

an initial step in improving its performance (e.g., Mehta,

Dubinsky, & Anderson, 2003). Based on these arguments,

the authors study this embeddedness from the

manufacturer's perspective (initiators and receivers of the

material transaction).

1. Objectives of the Paper

Because an organization's visibility and decision-making

abilities in a supply network is limited by its embeddedness

( the way the embeddedness under analys is

isconfigured), managing the embedded activities may

be affected by non-contractual forms of governance

(Mena et al., 2013). Whatever an organization cannot

see, it can't efficiently control. Empirical studies or meta-

analysis are still needed to explain embeddedness for the

different sets of supply-chain configurations and their

performance contributions (Choi & Kim, 2008; Carter et

al., 2015). If differences in the sets of buyer-seller

exchanges are expected, studies should be conducted

to determine the necessary managerial adaptations

(Kumar, Scheer, & Steenkamp, 1995; Lusch & Brown 1996).

Through empirical research, the authors illustrate why

interdependency differences exist in a manufacturer-

vendor logistics and material transaction, and ways of

managing it towards improved performance.

Since the role and posit ion predetermines a

manufacturer's structure (power, control, and information

flow) in its supply network (e.g., Zafeiropoulou &

Koufopoulos, 2013), the authors study non-contractual

governance, dependence, and reliance for this

embeddedness in light of logistics and customer-centric

services (Figure 1). Because of the high frequency of

adjustments made to logistics transactions, which are

time-based, information sharing and flexibility are two

major non-contractual governance discussed in isolated

ways in purchasing and logistics (Vickery, Calantone, &

Dröge, 1999; Sohail, Bhatnagar, & Sohal, 2006; Fawcett,

Calantone, & Smith, 1997). Trust and commitment are the

typical forms of reliance among trading partners

(Halldo´rsson & Skjøtt-Larsen, 2006; Zafeiropoulou &

Koufopoulos, 2013). In addition, since capability and

customer-centric services are necessary contributors to

this embeddedness, the authors have studied these

constructs.

The contributions of this research are the following: First,

since an organization allocates its resource and

capabilities based on its embeddedness, drawing from

several research literature, this research flushes the

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importance of dependence, trust, commitment, and

non-contractual governance by integrating these

concepts through the eyes of a manufacturer in material

and its accompanying logistics transaction. Second,

researchers generally sum, subtract, or multiply the

individual items of dependence from each side of the

dyad to form a composite dependence scale. Based on

the objectives of this study, bilateral dependence is

measured as a second order construct comprising

separate buyer and seller's dependence scores. This

second-order approach may better portray the

importance of dependence in logistics and material

convolution. Third, the authors extend marketing channel

literature (Sachdev & Merz, 2012) to material transactions

by composing flexibility and information sharing as

second order construct. These actions may reduce the

probability of such buyer-seller exchanges to be

ineffective or terminated.

To explain these contributions, the theoretical aspects of

embeddedness (logistics convolution with material

transaction) and RBV are first explored. Next, the

hypotheses are developed linking the constructs

contained within this embeddedness. Then, the

methodology for this study is unfolded. Subsequently,

using SEM-PLS, the hypotheses are tested and the results

are presented. Finally, the findings and managerial

implications are addressed.

2. Vendor-Manufacturer Embeddedness

The conceptual framework was developed using supply

chain literature in line with organization structure-

behavior-performance, where behavior emanates from

an organization's structural embeddedness (e.g., Gulati,

1998).Drawing from the above research studies, the

authors treat the manufacturer as the fundamental driver

of its network. The network is controlled by adding

manufacturing content to the purchased material while

considering its spill-over effect with the next set of buyers in

the supply network (Jap, 2001). The manufacturer buys the

material and implements its logistics activities (e.g. order

processing; MRP, DRP) using its upstream vendor.

“Logistics is not merely a primary driver of time and place

utilities but also a core enabler of form and possession

utilities” (Fawcett, Waller, & Closs, 2011, p.116).

To explain embeddedness, Granovetter (1985) states that

“… the behavior and institutions to be analyzed are so

constrained by ongoing social relations that to construe

Figure 1. Research Hypothesis


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them as independent is a grievous misunderstanding”

(p.482). Extrapolating this comment, researchers visualize

supply-chains as configurations comprising sets of

organizations (Mena et al., 2013). Each organization is

positioned as playing a physical and/or supportive role

while contributing to its supply-chain network. Moreover,

the visibility and perceptions of reality of each

organization depends on its position and role,

necessitating understanding the governance and

capabilities of these organizations in enhancing

performance (Carter et al., 2015).

The principal difference between material transaction

and its accompanying logistics activity is that the bundle

of goods, services, and resources transferred are unique

to their situations. First, the manufacturer buys the material

to achieve its target growth and implements logistics while

contemplating customer-centric services with its

downstream customer. The logistical activities may

include MRP, DRP, packaging, transportation, storage,

handling returns, and the work-in-process inventory. The

change of material possession between the vendor and

manufacturer may require activities such as gathering

market intelligence, providing market coverage, and

changing the form of a material by the manufacturer.

Second, the accounting practices for the logistics and

material buying may be different. For example, the

inbound logistics cost are rolled into the purchase price

for the manufacturer, but its outbound logistics cost is

considered a delivery expense. Third, the reasons for

bilateral dependence for material and logistics

transactions may be different because of the dissimilarity

in the division of labor and activities to achieve

economies of scale and scope for adequate

performance. For logistics consummation, dependency

arises because of service issues (e.g., timely loading and

unloading of cargo; inventory count); in the material

buying, dependency arises because the purchased

material gets integrated into the manufacturer's product.

Thus, the manufacturer needs to determine whether this

change in the form of the product performs functionally

well. Therefore, from a complex adaptiveness

perspective, how logistics capability and customer-

centric service interact within this material transaction

may need to be understood.

Whereas the material sales process may be isolated and

understood, the logistics transactions get submerged

during the interaction (since multiple logistics tasks are

performed using several organizations and government

agencies). These tasks may need trucking, warehousing,

packaging, homeland security, and infrastructure, and

the logistics inefficiencies (e.g., receiving wrong parts and

documentation) may easily get diffused. Thus,

understanding logistics capability may be necessary.

3. RBV and Embeddedness

RBV proponents suggest that organizations conduct

business through the bundle of resources they control. The

more a resource is valuable, rare, immobile, and non-

substitutable, the greater the chances for an organization

to obtain a strategic competitive advantage, which has

performance-bearing implications. These resources may

be classified into physical, human, and organization

capital. Physical capital is an organization's control over

items such as technology, plant, location, and raw

materials. Examples of human capital are knowledge,

training, experience, and skills of the employees.

Organization capital encompasses the organization

structure and assets for running the organization (Barney,

1991; Dyer & Singh, 1998).

The RBV proponents use capabilities and resources

interchangeably (Ray et al., 2004). In this research, the

following authors' suggestions are followed. Capabilities are

an organization's skills, knowledge, and processes that are

used to conduct business in the supply chain (Makadok,

2001). Moreover, these capabilities are entrenched in an

organization's routines and practices and act as a glue to

integrate and advantageously utilize organizational assets

(Day, 1994). These capabilities have causal ambiguities

that are complex and situation-specific, and, therefore are

not only difficult to replicate but are also time-based that

make their transferability difficult to other exchanges

(Barney, 1991). Logistics is a capability for order fulfillment

filling and service delivery, which includes placing and

receiving an order (Day, 1994).


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In summary, logistics may be an unnecessary but

required capability to fulfill the needs of the material

transfer, and, therefore, it should have its own identity in

material buying-selling studies. The manufacturer is

passing on the levels of relational norms, trust, and

commitment built with its upstream supplier to its

downstream customer. In this context, the manufacturer

needs to coordinate its upstream buying and logistics

capabilities with its downstream customer-centric

activities to manage the vendor-manufacturer dyad.

Mena et al. (2013) compared three different supply-chain

configurations (one set each from the pork, beer, and bread

industry) in suppliers' suppliers, suppliers, and buyers'

embeddedness. Using a case study and examples, they

illustrate that relationship stability (trust, commitment, and

communication) and inter dependence grow from less to

more as these sets of supply-chains move from an open (one

way link to form the chain) to closed (the three organizations

linked through a closed loop) system. Since embeddedness

was only discussed for the goods exchanged, they suggested

to conduct relational embeddedness studies across other

sets of supply-chain activities.

Wu, Choi, and Rungtusanatham (2010) surveyed an

aerospace-related manufacturer to understand

collaborative synergies and market efficiencies of co-

opetition (two suppliers of goods simultaneously

collaborating and competing). The authors concluded

that as supply managers promoted the use of business

social interaction, supplier co-opetition (information

exchange and joint participation) improved. However,

supplier co-opetition negatively affected overall

performance, leaving the authors to conclude the need

for other forms of embeddedness empirical studies in

order to reinforce their study.

Surveying forty-two logisticians, Large, Kramer, and

Hartmann(2011) concluded that customer-specific

adaptations (behavior and asset specific) improved their

client's loyalty and relationship performance; however,

adaptations reduced satisfaction although loyalty and

relationship performance improved it. The focus of the

study, however, was only on logistics service providers

rather than the logistics synergies needed in material

transaction. The authors recommended conducting

additional studies in the purchasing area to demonstrate

the importance of logistics and customer-centric service.

Wang et al. (2006) demonstrated the importance of

focusing on strategic logistics issues that improve long-

term contracts between parties over short-term, cost

cutting approaches. “It is interesting to note again that all

companies believe improving service quality and

customer service are very important for the future, with

ranks of 1 and 3” (Wang et al., 2006, p.809).

The recommendations from these embeddedness

supply-chain studies along with Carter et al.'s (2015) call

for launching logistics studies that support physical supply

chains corroborate the purpose of this research. An

organization's role and position sets its visibility within its

supply-chain network. Embeddedness sets an

organization's dependence on other organizations in the

network; organizations need to rely on each other to

managing their capabilities within their configuration.

Thus, it is important that the manufacturer needs to

recognize, understand, and admit its perceptions of

reality of visibility; a manufacturer and its vendor should

realize how each one of them is fulfilling its prophecies

without over-pushing its agendas. How should they grow

material and logistics transactions in this embeddedness

while improving performance? Reliance, non-contractual

governance, dependence and their ties with logistics and

customer service provide an answer.

3.1 Reliance

Although an organization's supply-chain network

establishes the way it participates, reliance through trust

and commitment makes the exchange open and fair

(Zafeiropoulou & Koufopoulos, 2013). Since superior

benefits are highly desired from an exchange,

organizations in the supply chain are inclined to commit

themselves to maintain the relationships. Gundlach,

Achrol, and Mentzer (1995) argue that commitment is an

energizing force that motivates organizations to make

relatively long-term focused decisions, which strengthen

their involvement in future transactions. It defines the

closeness of a relationship and the willingness of partners


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to make short-term sacrifices for long-term, stable

relationship (Morgan & Hunt 1994). Manufacturers need

both pre and post-sales service over the duration of the

warranty period, which are long-term.

Trust is a state rather than something fluid, which is tied

with the conditions emanating from trustful over

mistrustful forms of governance (Nooteboom, 1996).

The presence of trust acts as an informal form of control,

which demotivates parties from overanalyzing

contracts in inter-organizational transactions (Lui & Ngo,

2004). In addition, trust makes parties keep their business

secrets intact, be overly cautious about competitive

interference, and thickens their bonds (Katsikeas,

Skarmeas, & Bello, 2009). High trust minimizes

vulnerability, increases cooperation, and long-term

orientation of a relationship (Zhao & Cavusgil, 2006).

Trust is defined as a manufacturer's belief that its

vendor/shipper is honest, fair, and reliable in its dealings

(Bloemer, Pluymaekers, & Odekerken,2013).

Trust is a condition that directly and indirectly affects an

exchange through commitment. “The strength of this belief

may lead the firm to make a trusting response or action,

whereby the firm commits itself to a possible loss, depending

upon the subsequent actions of the other company”

(Anderson & Narus 1986, p.326). Moreover, when trust and

commitment partake in the same transaction, they

contribute to productive over tension behaviors as well as to

the confidence and belief that the parties will not callously

destroy an exchange (Lui & Ngo, 2004).

By committing to utilize the material properly while

changing its form, the manufacturer trusts that the vendor

will release the material in the agreed-upon form. The

vendor needs to provide reliable information about the

material's properties, availability, future design, or price

change. The manufacturer is committed to track the

material, worker productivity, safety practices, actual

versus documented reasons for delays, type of pilferage,

and type of cargo and packaging in close contact with

the material.

Hypothesis 1: The greater the vendor's trust, the greater

the manufacturer's commitment.

3.2 Non-Contractual Governance

The term governance “is a shorthand expression for the

institutional framework in which contracts are initiated,

negotiated, adapted, enforced, and monitored” (Palay,

1984, p.265). Inter-organizational governance may be

envisioned as occurring along a hierarchical continuum.

The polar ends of this continuum are arms-length

transaction and hierarchical governance. Operating

within this continuum are different forms of non-

contractual governance. Interpreting contracts in inter-

organizational relations, Macneil (1980) suggests that the

sole purpose of contracts is to implement a set of norms

which guide the exchange. From a governance

perspective, these norms envelope contracts (Macneil,

1978), simulate hierarchical governance (Grossman &

Hart, 1986), and provide governance value for

implementing strategies that have competitive

advantages (Ghosh & John, 1999).

When the focus is relationships, the reference point for

disagreements is not the original contract but “the entire

relation as it had developed to the time of the change in

question” (Macneil, 1978, p.840). Moreover, even though

contracts contain written clauses for performing

exchanges, certain normative behaviors operate within the

relationship to control for the unforeseen not specified in the

contracts. Adjustments are made to preserve the longevity

of the relationship. Relational norms help the manufacturer

manage a non-integrated channel as its own subsidiary.

Higher levels of relational norms imply higher levels of

governance (Noordewier, John,&Nevin, 1990).

However, norms have their attached motivation and

coordination costs for inter-organizational transactions

(Castaldi et al., 2015). Motivation costs refer to imperfect

information sharing and commitment between parties.

Coordination costs arise from operational difficulties such

as the final delivery (e.g., the last mile), change of

possession, and final price (Baudry & Chassagnon, 2012).

Unlike corporate governance where the management

styles are preserved even if an employee exits (Castaldi et

al., 2015), the time and resources for inter-organizational

relationship is lost if the exchange is terminated (Palmatier,

Dant, & Grewal, 2007; Hartmann & Grahl, 2011).


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3.2.1 Relational Norms - Information Sharing and

Flexibility

Timely information sharing or flexibility towards consumer

response, continuous replenishment, and delivery are

crucial supply-chain practices (Vickery et al., 1999; Bello,

Lohtia, Sangtani, & 2004; Fawcett et al., 1997). These

norms are communicative, non-evaluative, and promote

the shared interest in the exchange that prevent intruders

from interfering using genuine or malicious competitive

intent (Sachdev & Merz, 2012).

How much should organizations trust each other in order

to be comfortable with the visible and invisible portion of

the material buying and logistics tasks that occur along its

chronological, cost calculus journey? Meaningful

communication between organizations is a prerequisite

for trust (Anderson & Narus 1990). Moreover, trust is

enhanced if interactions between partners are influenced

by non-evaluative means (Klimoski & Karol, 1976).

Manufacturers build a vendor's trust by sharing

information and flexible manufacturing to improve

forecast accuracy. Vendors and manufacturers may

need to plan safety stock at their respective locations to

meet uncertainties, which require flexibility and

information sharing. One of the reasons for their alliance is

that the motivation and coordinating cost to build trust is

less than the in-house monitoring cost. Petersen et al.

(2008) found manufacturers' supplier integration (buyer's

information exchange and degree of strategic

partnership) to positively affect relational capital (trust,

mutual respect, and interaction).

Hypothesis 2: The higher the relational norms (information

sharing and flexibility) between the manufacturer and its

vendor, the greater the vendor's trust.

A committed organization espouses its willingness to

pursue self-disciplined shared governance and interests

(Anderson & Weitz, 1992). A manufacturer primarily

commits to change the form and possession of the

material by providing the time and place utility functions

to complete the logistics movements. The manufacturers'

buying and logistics role make them strongly tied to

material management at the vendors and manufacturers'

site. Based on a sample of U.S. export manufacturers and

their distributors, Sachdev and Merz (2012) concluded

that manufacturers' relational norms (information sharing

and flexibility) increased commitment. Relationship

practices enhance mutual understanding and

commitment to plan and implement logistics activities

(Wong & Karia, 2010).

Hypothesis 3: The higher the relational norms (information


vendor, the greater the commitment.

3.2.2 Relational Norms and Logistics Capability

In material transactions, logistics service is a capability

since it is crucial, strategic, and reflects the vendor and

manufacturer's brand value. Its consistent presence is a

primary reminder to the manufacturer of material sales

between procurement cycles. By being present up to the

last point in a material's journey, a capable logistics

service resolves the time and place utilities for a customer

and may be viewed as a resource (Sohail et al., 2006;

Adams et al., 2014). In addition, it is an enabler for form

and possession of the material transfer. It is not easy to

mimic logistics processes to create similar brand value.

For example, Fawcett et al., (2011) cite companies such

as UPS, Toyota, Wal-Mart, Frito-Lay, Zara, and IKEA to

illustrate the power of logistics capability as a sustainable

competitive advantage. In particular, they emphasize

that it is not tangible resource in itself but the skill-based

(intangible) resource that provides the logistics value.

Furthermore, logistics skills are developed through

learning-by-doing and cannot be identified, imitated, or

transferred across industries (Adams et al., 2014).

Manufacturers expect flexibility from their vendors to

support order releases, emergency orders, after-sales

service, and unforeseen supply-chain risks. “A firm's

logistical competency is directly related to how well it is

a b l e t o a c c o m m o d a t e s u c h u n e x p e c t e d

circumstances” (Bowersox et al. 2013, p. 62). To financially

manage its material/ logist ics convolution, the

manufacturer rolls its logistics cost into its material cost to

make it part of its asset management. Purchasing cost

may need to be adjusted to improve each other's


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balance sheet and /or income statement, which brings

information sharing and flexibility in the forefront. Flexibility

may be regarded as a potential driver of competitive

advantage for a logistics strategy (Fawcett et al., 1997).

Hypothesis 4: Greater relational norms (information


vendor lead to greater logistics capability.

3.2.3 Relational Norms and Customer-Centric

Customers do not buy products and services but the

utilities derived from them. The service-dominant logic

(SD-L) literature also suggests that organizations should

collaboratively identify and cultivate value-added

activities, gauge market feedback, and evaluate

performance (Lusch, Vargo, & Malter, 2006). Therefore,

customer-centric service needs to be incorporated as

part of the value-creation activity in any line of business.

Moreover, customer-centric service affects the brand

image of the organization and/or its product.

Logistics service tied with customer service reflects how

well an organization utilizes logistics activities in retaining

its customer (Oflaç, Sullivan, & Baltacioğlu, 2012).

Studying one without the other may not capture the

overall serviceability of the organization. In addition, in

order to understand the spill-over effect, customer service

is important to manufacturers. Furthermore, if logistics is

not partitioned from material transaction, “…failure

situation can create considerable shifts in the responses

of consumers, especially in the attribution behavior for

cause of failure” Oflac et al. (2012, p. 51). Therefore, the

authors treat logistics service capability and customer-

centric as two related but separate issues.

Collaborative efforts in relationship development

enhances the chances of differentiating one’s services

(Adams et al., 2014). However, more research is needed

to determine which types of relationship improve

customer-centric service relative to competitors in

different relationship context (Daugherty, 2011). For

supply-chains, continuous acquisition and integration of

information is needed to be customer-centric (Homburg,

Wieseke, & Hoyer,2009; Kumar, Heide, & Wathne, 2011).

Manufacturers develop relational norms after taking the

sales and after sales services requirements into

consideration. The more the manufacturer can socially

identify with its upstream vendor, the higher the probability

of transferring this social identity to its downstream

customers (Homburg et al., 2009).

Hypothesis 5: The greater the relational norms

(information sharing and flexibility) between the

manufacturer and its vendor, the greater the

manufacturer's customer-centric behavior.

3.2.4 Commitment, Logistics Capability, and Customer-

Centric Service

The manufacturer contracts and co-creates material

value with its vendorto enhancing its downstream

customer-centric experience. This customer-centric

experience is transferred through the manufacturer to the

downstream customer (Kumar et al., 2011). Hence, the

manufacturer needs to commit to its material

transactions with the vendor before it can provide the

customer-centric experience. A customer-centric

organization focuses on collecting customer feedback

and resolving conflict while playing a strong commitment

role (Bradford & Weitz, 2009). An optimistic post-sales

customer service may be positively affected by

commitment (Challagalla, Venkatesh, & Kohli, 2009).

Hypothesis 6: The greater the manufacturer's

commitment towards his vendor, the greater its

customer-centric service.

3.3 Dependence and Commitment

Dependence sows the seed for distribution and logistics

management (Sachdev et al., 1995). “The dependence

of actor P upon actor O is (1) directly proportional to P's

motivational investment in goals mediated by O, and (2)

inversely proportional to the availability of those goals to P

out-side of the O-P relation” (Emerson, 1962, p. 32-33). This

dependence definition focuses on two factors:

commitment and alternatives available to the parties

being influenced (Beier & Stern, 1969).Dependence is

tied with goal accomplishment, replaceability issues, and

longevity of the relationships to recover the motivational

investment and not a principal driver of trust between

parties (Katsikeas et al., 2009).


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A manufacturer becomes dependent on his vendor to

complete the buying process. The dependence to

commitment path arises because the vendor needs to

accept the purchase order and may provide financial

incentives. The vendor's dependence lies on how well the

manufacturer transforms the purchased material before

shipping it to the next set of customers.

When bilateral dependence between organizations is

low, there may be little reason to build commitment. The

interests of such parties are divergent and the motivation

to conduct business is pure arms-length. The

manufacturer may shop around for emergency orders to

meet its short-term goals of storing and moving inventory

and may delay or cut back on vendor material purchase.

In the case of high bilateral dependence, each party has

an economic stake in the outcome, and convergence of

self-interest to pursue opportunities prevails. In addition, if

partners value the benefits from each other's resources,

they are less likely to replace each other and instead be

motivated to increase the on-going partnership.

Commitment will replace reasons for generating

vulnerability. High levels of bilateral dependence

between partners result in less likelihood for negative

sentiments (Kumar et al., 1995). It also encourages the

formation of normative compliance and extendedness

to a relationship (Lusch & Brown, 1996).

Hypothesis 7: The higher the bilateral dependence

between the manufacturer and its vendor, the higher the

manufacturer's commitment.

4. Performance Hypotheses

Through performance one distinguishes successful from

unsuccessful B-S relationships. Moreover, positive

outcomes ensure that valuable resources flow

appropriately through one's supply chain for extended

periods (Chen, Daugherty, Landry, 2009). Performance

should be measured from both the buyer and seller's side

(Kumar, Stern, & Achrol, 1992). In addition, performance

may be measured through hard, contribution to profit

measures or soft, perceptual measures such as the

degree of success with a partner. Hard measures of

performance are more closely linked with the product

and the attached services sold than soft measures (Large

et al., 2011). The manufacturer is interested in improving

its financial statements through appropriate B2B pricing

strategies, adjusted for logistics cost.

Although resources and capabilities strengthen an

organization's competitive advantage, they become a

relational rent for the giver (Dyer & Singh, 1998). The

manufacturer aligns its order processing and inventory to

match its DRP with its MRP. Efficient logistical interactions

and activities reduce costs and enable the participating

organizations to better utilize their assets and improve

performance (Lynch, Keller, & Ozment, 2000).

Hypothesis 8: As a manufacturer's logistics service

capability improves, its financial performance improves.

How well an organization attracts new customers or retains

existing ones is determined by its service-quality (Oflaç et

al., 2012). “Value is not produced in the supplier's factory

but in the buyer's use of the goods, services, information

and other inputs the seller provides. Customer relationship

marketing involves getting close to customers,

understanding their agendas, determining how to

profitably facilitate those agendas, then working

collaboratively with customers to accomplish their goals”

(Fung, Chen, & Yup, 2007, p.167).

The manufacturer needs to coagulate its downstream

customer experience as well as its own, learn from it, and

share the knowledge with its vendor. It is through gauging

market feedback that one improves performance (Vargo

& Lusch, 2004).

Hypothesis 9: As a manufacturer's customer-centric

service improves, perceived performance with its vendor

improves.

4.1 Commitment and Performance

It is through commitment, exchange partners simulate the

benefits, avoid the bureaucratic inefficiencies, and

realize the economies of scale of vertical integration

(Gilliland & Bello, 2002). Bloemer et al. (2013) state that

commitment motivates an entire organization to develop

the skills and competencies, which are necessary for its

success.

If a manufacturer foresees a committed relationship with


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its vendor, it may hedge its business activities over a longer

duration. The manufacturer may better contemplate its

spill-over effect through the continued availability of its

vendor's brand, and plan strategies and generate

potential sales without the fear of losing future business.

A committed relationship may integrate each

organization's expertise in creating and delivering value

and enhancing supply-chain performance. Organizations

are less fearful of being exploited and are more willing to

share their capabilities and resources (Wallenburg et al.,

2011). Moreover, committed buyers and sellers may

readily access market information needed for creating

and delivering value. It also encourages a partner to

allocate more time to the relationship and increases

performance (Anderson & Weitz, 1992). In addition,

commitment signals by one party motivates the other to

efficiently engage in the role requirements for the

exchange (Kim & Frazier, 1997). Commitment increases

the chances of a party to be less short-run focused,

knowing that the overall performance balances in the

end (Bello, Chelariu & Zhang 2003).

Hypothesis 10: As a manufacturer's commitment

improves, its perceived performance with its vendor

improves.

5. Methodology

A survey was distributed via email to pre-identified

manufacturers using the services of a market research

firm (an Internet-based provider that had access to a

panel comprising a variety of U.S. manufacturers). To

qualify for the final sample, the key informant needed to

be a decision-maker for a manufacturer purchasing

processed materials and or/component parts from

vendors. Based on the resources set aside for data

collection, a list of 200 randomly selected purchasing

managers, who worked for a manufacturer, were

contacted by the marketing research firm. The first 150

manufacturers who respond to this survey were included

in the sample. Considering the time, effort, and

complexity in gathering data from supply-chain

professionals, several research studies have used the

assistance of a data collecting agency with the

involvement of the principal researcher (e.g., Zacharia,

Nix, & Lusch, 2009).

All questionnaire items were borrowed from supply-chain

literature: Commitment from Palmatier et al. (2007);

information sharing from Zhao, Dröge, and Stank (2001);

flexibility from Noordewier et al., (1990); logistics service

and financial performance from Lynch et al. (2000);

customer-centr ic ser v ice f rom Khong (2005);

dependence and perceptual performance from Jap

and Ganesan (2000); and trust from Judge and Dooley

(2006).Wordings were adjusted to ensure that the

manufacturer was focusing on its primary vendor. Each

questionnaire item was measured on a 7 point Likert

agree/disagree scale.

In supply-chain literature, dependence has been

measured as the sum or difference between each

partner's dependence. However, Peter, Churchill, Jr., and

Brown (1993) exhibit caution when a single respondent

provides his/her perception on attitudinal items pertaining

to both sides of a dyad and the difference computed as

the final measure. They instead offer two suggestions: use

direct comparison (e.g. agree/disagree scale – the

organizations are highly dependent on each other), or

frame the question as a difference in perception. In this

study, the authors have offered a third suggestion:

bilateral dependence is a second-order construct

consisting of the perceptions of each side's dependence

from a single respondent. In addition, since information

sharing and flexibility are general forms of collaboration

for purchase and logistics (Bowersox et al., 2013),the

authors integrate them into a second order construct

(Sachdev and Merz, 2012).

6. Analysis

To test the hypotheses, Structural Equation Model (SEM)

using the partial least squares (LV-PLS) algorithm (Ringle,

Wende, & Will, 2005) and Smart PLS was used. A path-

weighting scheme with initial weights of 1.0, 300 iteration

maximum, and an abort criterion of 1.0E-5 were used to

estimate the model reported here (Hair et al. 2012). In

addition, t-statistics for all the paths, weights, and loadings

were generated by a bootstrapping routine using 5000 re-


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samples of the cases available for modeling (Hair et al.,

2012).

The path model that consisted of ten first-order latent

variables with a total of 48 items (reflective) were subject

to an exploratory factor and reliability analysis. Evaluation

criteria of Eigenvalue greater than one, minimal cross-

loadings, and reliability (coefficient alpha) greater than

0.7 were used (Hair et al., 2010). Of the four perceptual

performance items, two were dropped as they were not

contributing to the success of supply chains. The 10

customer-centric items were loaded on three separate

factors. Two factors, comprised marketing research and

in fo rmat ion gathe r ing /ana ly s i s, re spect i ve l y ;

consequently, they were dropped. Four items related to

the delivery and management of customer-centric

service were retained. The resulting four-item, customer-

centric and two-item,per formance scales had

coefficient alphas of greater than 0.7 for the sample

(Nunnally, 1978).

Table 1 displays the measurement model (LV-latent

variables; MV-manifest variables; item loadings, average

variance explained, composite and Cronbach alpha

reliability). Based on Fornell and Larker (1981) guidelines,

manifest items meet greater than 0.7 loading criteria. The

Average Variance Extracted (AVE) exceeded the 0.5

criteria except the composite reliabilities and alpha

coefficients which exceeded their suggested greater

than 0.7 criteria.

In addition, for convergent validity, the manifest measures

should load greater than 0.6 on their single latent

construct and exhibit minimal cross-loadings. An

examination of the cross-loadings did not reveal any

severe levels of cross correlations among the predictor

constructs, so, overall, the construct validity of the models

is satisfactory. Furthermore, the Average Variance

Extracted (AVE) measures the variance captured by the

indicators relative to the measurement error and should

be greater than 0.5 to justify using a construct (Barclay,

Thompson, & Higgins, 1995).

Discriminate validity is assessed by comparing the square

root of the AVEs for the latent variables against the

correlations of the other latent variables in the model. The

self-explained Table 2 shows the results of this assessment.

The AVEs are larger than the off diagonal correlations with

the other latent variables in the model, demonstrating

acceptable discriminant validity.

7. Structural Model

The structural model was assessed by examining the 2coefficients of determination (R ) as indicators of overall

predictive strength along with the significance levels of

LVs MVs Loadings AVEsComposite

Rel.

Cronbach’s Alpha

Flexibility FLEX1 0.86

0.80 0.92 0.87FLEX2 0.91

FLEX3 0.90

Information Sharing

INTINFO1 0.71

0.63 0.87 0.80INTINFO2

INTINFO3

0.90

0.80

INTINFO4 0.74

Dependence DEP1 0.88

0.73 0.92 0.88DEP2

DEP3

DEP4 0.80

Supplier Dependence

SUPD1 0.91

0.86 0.96 0.95SUPD2

SUPD3

SUPD4 0.93

Logistics Capability

LOG1 0.77

0.70 0.94 0.93

LOG2 0.87

LOG3 0.76

LOG4 0.85

LOG5 0.83

LOG6 0.88

LOG7 0.88

Customer Service

CUSSERV1 0.82

0.71 0.91 0.86CUSSERV2

CUSSERV3

CUSSERV4 0.77

Commitment COMT1 0.93

0.84 0.94 0.91COMT2 0.89

COMT3 0.93

Trust TRUST1 0.92

0.85 0.96 0.94TRUST2

TRUST3TRUST4 0.94

Financial Performance

FINP1 0.88

0.73 0.93 0.91

FINP2 0.86

FINP3 0.87

FINP4 0.83FINP5 0.84

Supplier Performance

PERF10.88 0.94 0.86

PERF3

Relational 2Norms

1Flexibility0.52 0.88 0.841InfoShare

Bilateral 2Dep.

1Dependence0.56 0.91 0.881Supplier Dep.

1 2 First Order LV, Second Order LV

0.79

0.87

0.86

0.87

0.93

0.95

0.89

0.95

0.88

0.90

0.94

0.95

0.87

0.87

Table 1. Measurement Model Summary


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the coefficients for the hypothesized paths. The 2coefficients of determination (R ) (see Table 2) show that

the model explains a substantial part of the variance in

logistics capability (0.351), customer service (0.352),

commitment (0.612), trust (0.234), and vendor/client

performance (0.517). Financial performance is only 2weakly explained with an R of 0.095.

The significance of the path coefficients was evaluated

by t-statistics generated from a bootstrapping routine that

produced sample parameter estimates and its standard

errors (S.E.- Initial estimates - I). The results of this procedure

including the Initial path coefficients (I), bootstrap path

coefficient standard errors (S.E. of initial path - I), t-statistics

(using the initial S.E.), and p values are displayed in Table 3.

All hypotheses are supported (see Table 3).

8. Findings and Implications

Most organizations in the supply chain focus their efforts

on pricing their respective transactions, reasons for

service failure, and complaints of the parties involved

rather than understanding the relational embeddedness

and ways of improving it (Halldo´rsson & Skjøtt-Larsen,

2006). Since embeddedness may vary according to the

nature of the transaction, an organization needs to

analyze its transacting embeddedness to better manage

its exchange(Choi & Kim 2008). The authors explore

mate r ia l and log i s t ics embeddedness f rom

manufacturers' perspective. These manufacturers

purchased processed materials or components from

Manufacturers Latent Variables- Rel Norms Bilat Dep Log Cap CusServ Commit Trust Percept Perf Fin Perf

Relational Norms 0.728

Bilateral Dependence 0.18 0.746

Logistics Capabilities 0.593 0.056 0.835

Customer Service 0.552 0.103 0.557 0.843

Commitment 0.606 0.27 0.349 0.508 0.917

Trust 0.48 0.146 0.344 0.471 0.709 0.924

Supplier Performance 0.469 0.183 0.396 0.538 0.679 0.821 0.938

Financial Performance 0.179 0.135 0.308 0.317 0.104 0.226 0.308 0.853

AVE 0.519 0.557 0.698 0.711 0.841 0.854 0.880 0.728

Composite Reliability 0.882 0.909 0.942 0.907 0.941 0.959 0.936 0.931

R Square 0.000 0.000 0.351 0.352 0.612 0.234 0.517 0.095

Cronbachs Alpha 0.843 0.884 0.927 0.863 0.906 0.943 0.864 0.907

Diagonal elements are the square roots of the variance shared between the constructs and their measurements (AVE). Off Diagonal elements are the correlations among the constructs. Diagonal elements should be larger than the off-diagonal elements in order to obtain the discriminant validity.

Table 2. Indicators of Model

Table 3. Model Path Coefficients and Hypothesis Tests


Manufacturer -Bootstrap with 5000 samples of 150 cases

Path Coef-initial (I) Path Coef-Bootstrap S.E (initial) T Stats (I/S.E.) P H

Trust -> Commit 0.534 0.532 0.074 7.248 0.00 1b

RelNorms -> Trust 0.469 0.470 0.096 4.914 0.00 2b

RelNorms -> Commit 0.326 0.329 0.072 4.501 0.00 3b

RelNorms -> Log Cap 0.593 0.594 0.068 8.691 0.00 4b

RelNorms ->CusServ 0.386 0.384 0.112 3.452 0.00 5b

Commit ->CusServ 0.274 0.280 0.100 2.747 0.00 6b

InterDep -> Commit 0.133 0.133 0.057 2.337 0.01 7b

Log Cap ->FinPerf 0.308 0.317 0.087 3.556 0.00 8b

CusServ ->Perf 0.216 0.218 0.074 2.906 0.00 9b

Commit ->Perf 0.539 0.537 0.072 7.504 0.00 10b

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their vendors. Information sharing, flexibility, dependence,

trust, commitment, logistics service, customer-centric

service reflected embeddedness. All the 10 hypothesized

paths were supported.

8.1 Embeddedness

The proven hypotheses indicate that it is important to

study the type and degree of embeddedness. A

manufacturer and his vendor have a choice between

short-term buying and long-term relationship. If the overall

goal of these organizations is disintermediation, a

participant may gradually assume more supply-chain

activities over its trading partners as its business grows. “The

supply chain as a network operates as a complex

adaptive system, where every agent grapples with the

tension between control and emergence” (Carter et al.,

2015, p.91). For instance, Mena et al. (2013) traced food

industries to exemplify open, transition, and closed

systems as a means of an organization to garnish control

within one's immediate set of supply chains.

However, several researchers argue that inter-

organizational transactions may benefit from relationship

techniques to sustain an open over a closed system

through continuous learning to resolve tension and overly

controlling issues (e.g., Macneil, 1980; Noordewier et al.,

1990). Our results attest that by using the relational

embeddedness to one's advantage, supply chains may

co-exist as open systems. Organizations may learn to be

dependent and use non-contractual forms of

governance that fits with one's structural embeddedness

(role and position). In the case of material and logistics

embeddedness in a vendor-manufacturer interaction,

information sharing, flexibility, trust and commitment may

generate the same effect as of a closed system.

8.2 Dependence and Commitment

Bilateral dependence, construed as second-order,

di rect ly affected commitment. As discussed,

dependence may set the stage for collaboration.

Sachdev and Merz (2012) found manufacturers'

dependence to increase commitment with export

distributors although trust was not a part of the model.

Zacharia et al. (2009) found manufacturers and their

collaborative partners' interdependence to positively

affect collaboration (information sharing and joint effort);

collaboration, in turn, affected relational outcome (trust,

commitment, credibility, and relationship effectiveness).

Utilizing a sample of import distributors, Katiskeas et al.

(2009) found overseas manufacturer- importer

interdependence to moderate the effect of trust on

performance.

Therefore, the reasons and degree of each organization's

dependence should be delineated before resources are

developed and deployed in an exchange. These reasons

help to understand the interplay between dependence

and other constructs within a framework. Dependence

may affect exchanges based on how it is measured and

the type of embeddedness (role, position, and

relationship degree between the exchange parties).

8.3 Relational Norms

Since relational norms may not be equally applicable to

every buyer-seller exchange, the results indicate that an

organization should select the norms that will be helpful in

deploying capabilities according to the organization's

position and role. Relational norm (information sharing

and flexibility) affected trust and commitment.

Manufacturers and vendors should empower their

employees to jointly utilize flexibility and information

sharing to improve trust and commitment. Myriad logistics

sub-tasks may need to be performed in order to fulfill each

material transaction. On occasions, more visionary

thinking may be needed. Flexibility and its corresponding

information sharing (second-order) reminds the

manufacturer-vendor of the trustworthiness and

commitment in this line of business.

Morgan and Hunt (1994) found communication

(information sharing and exchange expectations) to

affect tire dealers' trust with their vendors; however,

communication's path to commitment was not

hypothesized in their study. Using sample buyers from

different manufacturing industries, Zacharia et al. (2009)

found higher degrees of collaboration (information

sharing and joint effort) between manufacturers and their

collaborative partners (sellers) to result in higher relational


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outcome (an additive scale comprising trust,

commitment, credibility, and relationship effectiveness

items). The authors illustrate that information sharing and

flexibility jointly affect commitment and corroborate the

reason for contextual-based embeddedness research.

Organizations need to recognize their role in their

respective supply-chains,and establish policies for their

employees to provide the proper category and

combination of relational norms.

8.4 Trust and Commitment

“A positive influence of trust on commitment is at the core

of the commitment-trust theory” Wallenburg et al., 2011,

p. 85).Although trust-commitment are important

parameters and essential for long-term relationships, few

researchers incorporate both constructs in a study and

directly interrelate them (e.g. Morgan and Hunt, 1994;

Wallenburg et al.,2011). Moreover hardly any study

measures commitment's impact on performance in the

presence of trust. For instance, Katsikeas et al. (2009)

found trust to strengthen the density and thickness of

overseas' manufacturer-importers.Skarmeas, Katsikeas,

and Schlegelmilch (2002) found commitment to be

positively related to performance in their manufacturer-

overseas' distributor study. Lages, Lancastre, and Lages

(2008) demonstrated relationship performance to be a

higher-order concept comprising commitment, trust,

mutual cooperation, and satisfaction for B2B e-

marketplace transactions.

8.5 Logistics Service Capabilities

Flexibility and information sharing, in unison, positively

affected logistics services capability. However, in their B2B

study, Palmatier et al. (2007) found manufacturers and

distributor capabilities to be affected by different sets of

governance parameters: Distributors' relationship-

specific investment (e.g., knowledge and special

procedures) was affected by communication but

manufacturers' relationship-specific investment (e.g.,

training and customized support) was affected by both

communication (timely and accurate) and relational

norms (flexibility, solidarity, and mutuality).

Service provided as a result of logistics operations is often

considered an appropriate yard stick for competitive

advantage and an intermediate outcome to

performance (Adams et al., 2014). Because not all

resources or capabilities have a sustainable competitive

advantage and some may be neutral or negatively affect

performance, this study extends RBV by illustrating why

each type of buyer-seller embeddedness may need

different type of capabilities for its sustenance. In addition,

different non-contractual governance may be needed to

guide the different capabilities.

Generally, vendors and manufacturers encounter

dynamic conditions that need accommodative

strategies. Being flexible and disclosing detailed

proprietary and non-proprietary information guide

logistics service capability. Although manufacturers'

logistics service capability was positively affected by

relational norms, they may need to pay close attention to

their tactical logistics service (MRP, inner-plant

transportation systems, etc.) to reap the benefits of time,

place, form, and possession utilities.

8.6 Relational Norms, Commitment, and Customer-

Centric Service

Service Dominant-Logic (SD-L) proponents proclaim that

buyers are more interested in the benefits from an

exchange than the physical assets that contribute to it. In

addition, the co-created value is derived from customer's

perception of these values and the organization's

application of its resources in delivering the value (Vargo &

Lusch, 2004; Adams et al., 2014). The findings of this study

attest that irrespective of the type of transaction, the SD-L

approach holds true. From the material buyers'

(manufacturers) perspective, relational norms (information

sharing and flexibility), positively affected customer-

centric services. Hartmann and Grahl, (2011) research

findings reveal that, from logistics buyers' perspective,

flexibility positively related customer loyalty across

German-based industries.

8.7 Performance

Since performance has been related to several traits in

business literature, researchers generally select the closet

trait within a framework that affects it. As discussed earlier,


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financial performance closely relates with the material

and logistics tied with it, and perceptual, global measures

more closely relate with the customer services received

as a result of the material sales transaction. Based on

these performance-related ideologies, manufacturers

increased their financial performance that emanated

from their logistics capabilities. Being customer-centric

also enhanced thei r percept ive-per formance

assessment of vendors. Commitment had its individual

impact on perceived performance as hypothesized.

Hardly any B2B empirical study has examined

commitment's effect on performance. For instance,

Skarmeas et al. (2002) found importer commitment to

improve performance with its overseas manufacturers. A

few researchers prefer splitting commitment into

attitudinal categories (affective and calculative) to show

each category's direct and indirect effect on perceptual

performance. Bloemer et al. (2013) found calculative

commitment to affect export performance for general

Netherlands exporters. However, these studies do not

include both trust and commitment as part of the model.

The authors found trust to have a direct impact on

commitment and the global measure of commitment to

directly affect perceived performance.

If supply chains are envisioned as configurations of their

larger supply network, then, the organization that

initiates its configuration(e.g. a manufacturer with its

upstream vendor and spill-over effect with its

downstream customer) is accountable to rest of its

supply network for the continued existence of its

configuration. An organization's financial performance

relative to its competitor is one way of demonstrating the

popularity of its configuration. Perceptual performance

is also one of the ways of guaranteeing that an

organization in the configuration will not lose its position

(Mena et al., 2013). Through positive perceptual

performance, the authors of this study illustrated why

and how the vendor will not by-pass the manufacturer or

vice-versa (disintermediation).

9. Limitations and Directions for Future Research

This study is not without its limitations. First, the data was

gathered using the service of an Internet-based

marketing research organization, who had a preselected

set of purchasing managers in their data base. Second, a

key informant was identified in each case and self-

reported measures were gathered of the questionnaire

items. Hence, self-reported bias may not be ruled out

since some questionnaire items captured the self-

informant's perceptions of his/her own organization

whereas others captured his /her perceptions about the

vendor's attributes. Nevertheless, this exploratory study

does contribute to a gap in literature that supply-chain

organization's role and position and transaction

embeddedness should be taken into consideration

before allocating resources.

Although tangible resources were not discussed in this

study, their impact should not be ignored. Future research

should identify tangible resources and study them in

conjunction with the intangible capabilities. For example,

tangible information technological resources may

interact with intangible human resource (skills of using

technology) to explain performance. It is common

knowledge that different employees using the same

machine tools and materials may create different

degrees of quality. In addition, this study focused on a

material buyer's perspective with respect to its exchange

(manufacturer-vendor) and a downstream customer with

whom it would presumably conduct business. This study

did not gather any information about this downstream

customer. Future studies may benefit by gathering

information from the three supply-chain organizations.

Lastly, in this research, supply chain was defined as any

manufacturer (OEM (Original Equipment Manufacture),

component part, processed material) purchasing

material from any type of supplier/vendor (OEM, raw

material, component part). Future research may benefit

from measuring compatible sets of supply chain. For

example, a compatible chain may be processed from

material manufacturers purchasing raw materials from a

mining industry.

Conclusion

The purpose of this study was to elaborate how


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embedded organizations should strive for continuity by

simulating a hierarchical structure of governance. The

authors explored embeddedness efficiency resulting

from the material and logistics transactions in a

manufacturer and vendor dyad. The social adaptive tools

of relational norms (information sharing and flexibility),

trust, commitment, and dependence were hypothesized

to explain the manufacturers' logistics capability and

customer-centric services that are embedded in material

buying between a vendor and a manufacturer. Practicing

such behaviors may prevent supply-chain failures such as

those experienced by Mattel Toys, Inc.

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ABOUT THE AUTHORS

Harash J. Sachdev (Ph.D. in Marketing, Georgia State University) is a Professor of Marketing at Eastern Michigan University, Michigan. He teaches in the areas of Marketing Strategy and Supply Chain Management. His research interests include writing cases and research papers in the areas of Supply Chain Management and Marketing Management.

G. Russell Merz (Ph.D. in Marketing, Michigan State University) is a Professor of Marketing at Eastern Michigan University, Michigan. He teaches and consults in the areas of New Product Development, Brand Management, Marketing Research, and Marketing Strategy. His research interests include Statistical Modeling Applications, Website Interactivity, Brand Management and Customer Satisfaction.


Managing Material and Logistics Embeddedness: Material Buyers' Perspective

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