Improving Performance in Supplier Relationship Management with Lower- Tier Supplier Visibility and Management

Abstract

1.IntroductionIn today's business reality, what we now have are the continuous and rapid growths and transformations of regional/national supply networks to complex global supply systems (e.g., Lambert & Cooper, 2000; Pilbeam et al., 2012; Wilhelm et al., 2016). Companies are interconnected and interdependent on each other across regions and countries. For example, Ford Motor Company maintains over 50 plants worldwide, which annually utilize 35 billion parts to produce six million cars and trucks with up to 10 tiers of suppliers between itself and its raw materials (Simchi-Levi et al., 2015). What is happening in one company may have profound and domino impact on other companies along supply chains. In other words, supply chains, in reality, involve multiple tiers, beyond the dyadic structure in most papers (e.g., Lambert & Cooper, 2000; Pilbeam et al., 2012; Wilhelm et al., 2016).The first-tier suppliers directly supply materials and services to the purchasing company while they also buy supplies from their own suppliers. These first-tier suppliers' suppliers are, to be specific, second-tier suppliers of the original purchasing company. Due to the obvious encompassing nature of supply chains, a supplier may impact others across multiple tiers (e.g., Simchi-Levi et al., 2015; Wilhelm et al., 2016). Recent incidents ranging from toys contaminated with lead paint and salmonella risk in peanut butter to sticking accelerator pedals in some cars indicate that consumers and firms are vulnerable to many quality and other risks that may occur in a global supply chain or in any of its multiple tiers (e.g., Simchi-Levi et al., 2015; Wilhelm et al., 2016).Supplier relationship management (SRM) has received significant attention from both industry and academia (Lambert & Cooper, 2000; Humphreys et al., 2001; Day et al., 2007; Atkinson, 2009; Monczka et al., 2009; Lambert & Schwieterman, 2012). Companies can achieve various benefits from SRM including higher quality, lower costs, quicker delivery, improved forecasting, better collaboration, and win-win relationships with suppliers. Plentiful research on SRM with respect to supplier identification, supplier evaluation, supplier selection, supplier performance management, information sharing, and collaboration can be found in Avery (2007), Day et al. (2008), Atkinson (2009), Monczka et al. (2009), Olorunniwo & Li (2010), and Lambert & Schwieterman (2012). However most of them are limited to the first-tier suppliers.Briscoe et al. (2004) indicate that quality could be improved if the purchasing companies would know about the capabilities of their lower-tier suppliers. Christopher and Lee (2004) point out that the visibility is one of the key components to enhancing supply chain confidence, thus mitigating the risks. Lambert & Schwieterman (2012) also show eight macro business processes across multiple tiers. Jolayemi et al. (2013) develop a composite process for establishing and for effectively and continuously maintaining end-to-end visibility in multiple multi-tier supplier network (MMTSN) systems. They reason that end-to-end multi-tier supplier visibility has to be established and continuously maintained before supply chain integration, collaboration, and risk reduction/elimination. Carter et al. (2015) theorize that a supply chain is bounded by the visible horizon of the focal company, subject to attenuation, where distance is based on factors including physical distance, cultural distance, and closeness centrality.A recent empirical research conducted by Olorunniwo et al. (2014) reveal six approaches to engender lower-tier supplier visibility. These are lower-tier supplier certification, dual function, strict contract with lower-tier supplier, multiple function oversight, empowerment with tightened control, and deep-down multi-tier probing and intra supplier collaboration (Olorunniwo et al., 2013). Olorunniwo et al. …