Socialization: An Important Dimension of Supply Chain Relationships

The ability to capture value from your business relationships is increasingly seen as critical differentiator in firm success (Cousins et al., 2006). Much of the strategic purchasing literature addresses the role of spend analysis, supplier selection, leveraging, negotiation, and contract management – yet there is a critical element of strategic supply management that occurs after these elements:  relationship management. Some of the prior empirical work I’ve done with my colleagues at Manchester Business School showed that it is not enough for a firm to possess a strategic purchasing orientation; they must also create conditions that allow the buyer and supplier to contribute and develop the relationship

Much of the existing research has focused on the importance of and causal relationships between relationship variables such as trust, commitment, dependency, relational norms, joint action, communication, and performance. To a far lesser extent, academics have focused on varying intensities of relationship management, and the use and accumulation of different types of interaction between business partners and the value that is generated through that relationship. This ‘social process’ between individuals of different organization is an interesting and relatively new perspective in research on effective management of supplier relationships, from an academic as well as a managerial perspective. How to balance between formal and informal ways of interacting? How to anticipate and refine your socialization mechanisms to rapidly changing standards for communication and information sharing? To what extent is the maturity of business relationships important in understanding the required interaction for effective coordination in the relationship? Is there sufficient understanding of the process of building relationships across different cultures?

There is also evidence that socialization takes time to occur, driving a need to further the understanding of influence of relationship lifecycle and socialization: is it because in later stages of relationships trust, commitment and other relationship variables tend to be somewhat lower, that the use and effectiveness of socialization decreases as well, or the other way around: because socialization is “forgotten” or not the right balance of socialization is used in the relationship, the relationship is likely to move quicker through the relationship life cycle?

For example, a semiconductor firm we interviewed decided to outsource its production to a contract manufacturer in China.  The initial process of strategic purchasing and supplier selection was simple.  However, once production began, quality problems became rampant, until the firm formally committed to establishing on-site operational personnel to resolve these issues.  Relationship management thus played a critical role in cementing the benefits associated with the outsourcing decision.  Increasingly, supply chain managers need to be thinking more about relationships management as a strategic element in their sourcing relationships, and not just base them on financial business plans based on numbers (which are often using assumed values that fail to capture the true underlying dynamics associated with the underlying relationship that exists!)