Non-contractible value creation in buyer-supplier networks - a case study

Abstract

The investigation of buyer supplier networks has been popular in both information systems and supply chain management literature. This study first discusses the background of how and why the buyer-supplier network structure and size changed with increased adoption of information systems in purchasing. Then it focuses on how supplier consolidation can lead to the initiation of vendor value management programs, which presents opportunities for the co-creation of non-contractible value for both the buyer and supplier. The study explores the relevance of the key sources of non-contractible value, i.e., non-contractible quality, supplier technological investments, information exchange, responsiveness, trust, and flexibility; through a case study. While exploring theses sources for non-contractible value, the focus has been limited to the context of direct sourcing only. This descriptive study was conducted in one of the largest steel manufacturers, in close liaison with the vendor value management team within the procurement practice of the firm.