International supplier characteristics associated with successful long-term buyer/seller relationships

There is a trend in logistics management toward long-term relationships between buyers and sellers. This trend is a departure from the traditional relationship, which is based on individual orders.(1) The greater stability afforded by long-term relationships encourages suppliers to invest in improvements in product quality and customer service. Strict product quality and customer service standards are increasingly required by buyers adopting tight inventory management policies and production planning schedules.(2)

This research extends the logistics literature on long-term buyer/seller relationships to the context of international sourcing. The importance of this extension is substantiated in Robeson,(3) who identified International sourcing as a major trend in logistics management. Long-term relationships with foreign suppliers allow U.S. buyers to take advantage of locational economies provided by low-wage areas or by proximity to sources of raw materials.(4)

The current literature reflects these trends. A growing number of articles address the issue of long-term relationships. Wagner examines the role of carrier service on buyer/seller relationships,(5) while two recent articles explore issues related to supply chain management.(6,7) young(8) and Hellberg and Engh(9) discuss the importance of buyer/seller relations on materials supply effectiveness.

The literature on international logistics also is expanding. Bowersox and Sterling,(10) and Anderson(11) encourage integration in international distribution, while comprehensive models in international logistics are available in Stock and Lambert(12) and in Cook and Burley.(13) Obstacles to International distribution are discussed in Mary(14) and in Nelson and Toledano.(15) A recent paper by Fawcett and Closs(16) demonstrated the importance of firm perception of economic globalization as key to taking advantage of global resources in the logistics and manufacturing processes. Interestingly, these researchers revealed that this perception is typically heightened by competitive threats in their particular industries, rather than by a general awareness of economic globalization.

However, with two notable exceptions, little has been published on long-term relationships with foreign suppliers. Houlihan(17) investigated international supply chains, while Ellram(18) examined the reasons why firms enter into a formal international strategic alliance. The latter article also explored the main characteristics of International strategic alliances.

Specifically, this research identifies factors that help predict whether a long-term relationship with a foreign supplier is likely to succeed. The premise of the research is that a relationship with a foreign supplier is more likely to succeed if the foreign supplier is already exporting successfully. Successful exporters have already overcome many of the hurdles related to the development of export programs and hence are more likely to fulfill a long-term contract.

Identifying the characteristics of successful exporters also allows astute buyers to seek out relationships with potential suppliers who currently lack but want to acquire some of those characteristics. The buyer may then cement a long-term relationship by providing the necessary assistance to prospective foreign suppliers. This has been the policy of some pioneering global firms, such as Sweden's Ikea.(19)

This research identifies six predictors of export success that may be employed by U.S. buyers seeking to establish successful relationships with foreign suppliers. The six significant predictors account for a greater percentage of the variance in export success than reported in previous studies. The predictors underscore the paramount importance of exporter attitudes, rather than of any specific business policy or other set of company characteristics. By focusing on suppliers from developing countries, the research points to sources whose importance for many U.S. industries is likely to continue to increase in years to come.

Since the data for this study are cross-sectional, it may be argued that the analysis could not directly test the actual process of development of long-term relationships over time. However, the predictors in this study correspond to factors found in prior logistics studies explaining the development of long-term International relationships involving U.S. firms. More specifically, Ellram's(20) results indicate that logistics, operational, and marketing reasons are fundamental to the establishment of enduring relationships. The results presented in the present study confirm that these three dimensions are also important to explain export success, Thus the existing literature suggests that these three dimensions constitute the ingredients of both long-term relationships and of export success.

STRATEGIES FOR SELECTING POTENTIAL FOREIGN SUPPLIERS

Buyers have two basic options for long-term relationships with foreign suppliers. First, they may look for local suppliers and help them build an export capability. This option, however, often entails significant investments of time and capital before a supplier is capable of consistently delivering the required level of product quality and customer service. This option also is risky because it is difficult to anticipate whether the supplier will eventually develop as expected.