Buyer–Supplier Relationships and Customer Firm Costs

Abstract

Academic literature and business practice are directing increased attention to the importance of creating value in buyer–supplier relationships. One method for creating value is to reduce costs in commercial exchange. The authors develop a model that explains how supplier behaviors and the management of suppliers affect a customer firm's direct product, acquisition, and operations costs. The model proposes that these costs mediate the relationship between buyer–supplier relationship behaviors and the customer firm's intentions to expand future purchases from the supplier. The model is tested on data collected from almost 500 buying organizations in the United States and Germany. The results indicate that increased communication frequency, different forms of supplier accommodation, product quality, and the geographic closeness of the supplier's facilities to the customer's buying location lower customer firm costs. In addition, customer firms intend to increase purchases from suppliers that provide value by lowering each of these costs.