Case study of processing firm‐distributor firm outsourcing alliance

Abstract

PurposeThe purpose of this paper is to review and discuss a distribution outsourcing alliance between a small‐to‐medium scale food processor and a national distributor of frozen and chilled food products. The paper discusses the influence of market dynamics, core and differentiated competencies and strategic intents on alliance formation and operations in the small‐to‐medium scale food enterprise sector.Design/methodology/approachThe dyadic relationship of a small‐to‐medium scale food processor and its distributor is investigated through reviewing past studies of processor‐distributor alliances, conducting in‐depth face‐to‐face interviews with senior managers in both firms, and reviewing documents and correspondence between the firms.FindingsThe partners do not complement their core and differentiate competencies to achieve greater customer value creation through a joint enterprise business model. The alliance focuses pre‐eminently on short‐term sales development and cost savings targets. Non‐achievement of these targets adversely influences partners' trust and commitment to the alliance. A significant strength of the alliance is its capacity to identify customer needs and use this knowledge to speedily develop and introduce new products. In its present form this alliance is unsustainable. The partners should adopt a new philosophy and vision to pursue an alliance that will use their core and differentiated competencies more effectively.Research limitations/implicationsTo generalise the findings and inform theory building, the research has to be replicated in other businesses and market environments. The findings are specific to the market environment and strategies of a single small‐to‐medium scale food processor and a single national distributor of frozen and chilled foods. Multi‐case studies in multi‐contexts (capturing varying sizes of business, industry sectors, target market segments, competitive environments and market environments) have to be completed to enable generalisation and theory building.Practical implicationsThis paper demonstrates the disadvantages of pursuing distribution outsourcing alliances with a short‐term and enterprise level perspective. The case study provides real life evidence of the benefits of pursuing distribution outsourcing alliances based on a joint enterprise philosophy.Originality/valueThis paper contributes to knowledge on distribution outsourcing alliances, a topic that several recent studies have identified as not having been explored in great detail in extant supply chain studies.