Effect of purchase volume flexibility and purchase mix flexibility on e-procurement performance: An analysis of two perspectives

Abstract

Despite the widespread adoption of e-procurement by firms in recent years, academic research examining the mechanisms through which e-procurement applications lead to performance has been scarce. Anecdotal evidence points to numerous situations where companies have failed to harness the potential of e-procurement. In this paper, we argue that online purchase volume and mix flexibilities facilitated by these applications play a significant role in the ability of firms to benefit from e-procurement. We examine this tenet from both an economic as well as a social perspective. We propose that increased online purchase volume flexibility as well as online purchase mix flexibility can be facilitated by two mechanisms – supplier customization as explained by transaction costs perspective, and information sharing between supply chain partners using a social exchange theoretical perspective. The increased purchase volume and mix flexibility in turn leads to better performance along the dimensions of cost, quality, and delivery. We present and test a nuanced perspective where we argue that (i) the effect of supplier customization on both purchase volume and mix flexibilities will be moderated by the frequency of transactions conducted online, and (ii) the effect of information sharing on both purchase volume and mix flexibilities will be moderated by trust in the supplier. We estimate our research model using survey data collected from 130 purchasing and procurement managers. We find strong support for our proposed research model with results indicating that purchase volume and mix flexibilities play a vital mediating role in impacting e-procurement performance. Theoretical and practical implications of the findings are discussed.