Using Buyer–Supplier Performance Frontiers to Manage Relationship Performance*

Abstract

ABSTRACTThis article presents a consensus‐building methodology to implement dyadic performance measurement. It focuses on transmuting supplier performance and buyer performance metrics on several important attributes into actionable relationship management plans using Clark's (1996) theory of performance frontiers. Access to the supplier performance management program of a Fortune 100 corporation was granted to the research team. Direct observation of practice and in‐depth discussions with several managers provided a roadmap for investigating both the literature on quantitative evaluation methods and the empirically derived theory on buyer–supplier relationships from several perspectives. This study describes a multiphase, iterative framework that uses current methods and theory on dyadic buyer–supplier evaluation to consider: (i) evaluation criteria and their importance; (ii) whether the improvement focus should be on strengths, weaknesses, or both; and (iii) whether the referent role supplier should be the ideal supplier, best supplier, or best‐in‐strategic‐group supplier in the focal supply base. We illustrate a unifying approach by reporting results from a large buyer and 35 of its key suppliers. This research makes the case for managing supplier relationships through the dyadic performance lens. The outputs from this framework provide individual supplier improvement paths which are actionable prescriptions for each buyer–supplier dyad, as well as recommendations for strategic group formation.