Post-implementation analysis: dependence and trust in VMI context

Abstract

PurposeMore than two decades long technological improvements in information sharing have not yet ensured a flawless execution of vendor managed inventory (VMI) and left interested parties wondering about the reasons of poor results. Although VMI is a collaborative tool, the relational factors in a VMI setting have not received enough attention due to challenges in obtaining relational buyer-supplier data in addition to extant focus on analytical approaches. The purpose of this paper is to investigate post-implementation relational factors in order to extract relevant insights.Design/methodology/approachAccounting for the duration of the VMI relationship, the authors focus on two dimensions of VMI often ignored post-implementation: dependence of the buyer on the VMI-supplier and trust of the buyer in the VMI-supplier. Cross-sectional data were collected using a survey collected from distributors mostly in auto and electrical supply industries, which have their inventories managed by manufacturers through VMI arrangements. The sample was obtained from a leading third-party VMI-platform service provider that serves thousands of distributor-manufacturer locations with billions of dollars in sales orders. Multiple ordinary least squares regression has been used to test the hypotheses.FindingsThis paper provides empirical support that in the post-implementation stage, longer VMI relationships are associated with higher distributor dependence on the manufacturer. In addition, too much dependence could actually hurt the distributor’s trust in the manufacturer.Practical implicationsThe authors propose that distributors maintain some of the purchasing and inventory management skills in house to limit their dependencies on the manufacturers. Manufacturers should also invest in trust-building activities, such as regular communications with distributors.Originality/valueThis is the first study providing empirical evidence on the positive association between length of VMI relationship and buyer dependence on the supplier, and curvilinear dependence-trust link in a post-implementation VMI context.