IMPACT OF SUPPLIER RELATIONSHIP MANAGEMENT

(SRM) ON ORGANIZATION PERFORMANCE

This report is being submitted in partial fulfillment of the requirements

for the degree of Master of Business Administration

ii
 Acknowledgments

In the name of Allah the Most Gracious and the Most Merciful Alhamdulillah, all

praises to Allah for the strengths and His blessing in hauling out this thesis work

entitled “Impact of Supplier Relationship Management on Organization

performance”. Special admiration goes to my thesis supervisor, Syed Ghazanfer

Inam, for his direction, mentorship and incessant support. Under his professional

supervision, I found the passion of conducting the academic research and develop

the needed skills. His priceless assistance of productive comments and suggestions

all through the thesis work had added the achievement of our thesis. Our genuine

gratitude goes to my beloved parents for their love, prayers and encouragement,

without which it was not possible to reach the current position in life. We are also

thankful to all those who directly or indirectly contributed in this thesis with their

valuable information, all their support means a lot to me.

iii
 Abstract

Selection of supplier through proper professional selection procedure, supplier

operational integration, supplier development and value management are the

strategies used for strengthening relationship with the suppliers. The supplier

relationship management plays a crucial role in improving organizational

performance and helping in creating a brand image of quality, reliability and

customer satisfaction that gives the focal company’s product or service a

competitive advantage. Supplier selection is the key to a successful relationship.

Selection of an incompetent supplier as a SC partner means doom for any attempt to

build successful relationship. Supplier evaluation must be based on purely

professional basis and follow the RFx and tender or bids document procedure,

Supplier operation integration is another aspect of buyer-supplier relationship. In

this strategy operational information is shared with the supplier. This allows the

supplier to organize supplies to meet the buyer’s requirement. Developing supplier

capabilities to enable it to ensure zero-defect supplies is another benefit of supplier

operational integration. This research project evaluated the variable in supplier

relationship management and the primary data for the purpose showed that proper

supplier selection, supplier development, supplier operational integration and

information sharing and communications are critical to SRM

iv
 Table of Contents
S.NO. DESCRIPTION PAGE
NO.
1. Acknowledgements…………………………………………….. ii

2. Abstract…………………………………………………………. iii

3. List of Tables…………………………………………………..... v

4. List of Figures…………………………………………………… vi

5. Chapter 1: Introduction…………………………………………. 1

1.1 Overview…….…………………………...............................
1.2 Problem Statement………………………………………….
1.3 Background, Objectives and Significance of the Study…….
1.4 Outline of the Study………………………………………...
1.5 Definitions…..………………………………………………

6. Chapter 2: Literature review……………………………………. 5

7. Chapter 3: Research Methods…………………………………… 14

3.1 Method of Data Collection…………………………………

3.2 Sampling Technique……………………………………….
3.3 Sample size…………………………………………………
3.4 Instrument of Data Collection……………...………………
3.4.1 Validity and Reliability test………………………...
3.5 Research Model developed ………………………………...
3.6 Statistical Technique……………………………………….

8. Chapter 4: Results………………………………………………. 17

4.1 Findings and Interpretation of the results………………….

4.2 Hypotheses Assessment Summary…………………............

9. Chapter 5: Discussions, Conclusion, Policy Implications and 21

Future Research…………………………………………

5.1 Discussions.…………………………………………………..
5.2 Conclusion …………………………...………………………
5.3 Policy Implications……………..………….………………….
5.4 Future Research…………………………..……………………
10. References…….................................................................................... 25
11. Appendix.............................................................................................. 27

v
 List of Tables

S.NO. TABLE(S) Page

Number
1. 3.1 Case Processing Summary 15
2. 3.2 Reliability Test Statistics 15
3. 4.1 Model Summary 17
4. 4.2 ANNOVA 18
5. 4.3 Coefficients 19
6. 4.4 Hypothesis Assessment Summary 21

vi
 List of Figures

S.NO. FIGURE(S) Page

Number
1. 3.1 SRM Model 16

vii
 Impact of (SRM) On Organization Performance 1

Chapter 1: Introduction

1.1 Overview

The supply chain management considers working with external firms to

meet the customer service goals as an integral part of achieving efficient and

effective operations. The external firms are the suppliers of goods and services in

their area of core competency and by providing quality inputs help the focal

company meets its objectives. The selection of suppliers and building a relationship

with the suppliers is described as supplier relationship management (SRM).

Selection of supplier through proper professional selection procedure, supplier

operational integration, supplier development and value management are the

strategies used for strengthening relationship with the suppliers. The supplier

relationship management plays a crucial role in improving organizational

performance and helping in creating a brand image of quality, reliability and

customer satisfaction that gives the focal company’s product or service a

competitive advantage.

In order to meet customer requirements and compete in the highly competitive

business, the business entities have to be extremely flexible. This starts with the top

management commitment. If the top management does not acknowledge the

importance of global competition and the requirements of the end-consumer and

suppliers role in meeting the customer requirements, the rest of the company will

suffer the consequences. Of course all flexibility aspects are important for the

business both at strategic and operational level.

 Impact of (SRM) On Organization Performance 2

The pre-selection process of suppliers contains two steps: criteria formulation and

supplier pre- selection based on the criteria. The two criteria used in literature are

dependent and independent criteria. The independent criteria are used when

screening for eligible suppliers. These relate to a supplier’s organization and its

prosperity (Boer,Labro, &Morlacchi, 2001). They are classified into four groups:

general business environment and financial issues, organization and strategy,

technology, and other factors. The first two groups relate to the suppliers’ financial

well-being, management capabilities, and future plans and possibilities. The third

group covers the technical issues that are linked directly to the production of the

product or the service. The fourth group of criteria focuses more on sustainability

and risks associated with it. Hence, if criteria from each group are used in the pre-

selection, the buying company can ensure holistic evaluation of the suppliers.

Supplier selection is only the first step to SRM. How the relationship is implemented

and managed are even more important as the management of relationship is what

results in a long term successful association that is in the interest of both the buyer

(the focal company) and the supplier(s).

1.2 Problem Statement

This research project evaluates the impact of supplier relationship

management on organizational performance. The relationship between supplier and

the company has a key role in accomplishment of goals in any organization. When

all stake holders are integrated into supply chain and consider themselves as an

extension of the focal company’s organization in meeting the customer service goals,

the supply chain can create value for all of the stakeholders. The objective of this
 Impact of (SRM) On Organization Performance 3

research is to study the impact of supplier relationship management on SC

performance.

1.3 Background, Objectives and Significance of the study

In the past, companies relied on inspection of supplies to control quality,

while utilizing arm’s length type of relationships with their supplier. However,

relying on mass inspection to control quality is often ineffective and expensive

(Wagner, 2006). Mass inspection simply just sort out the defect, and at that point it

is too late. The supplier has already paid to produce those defective supplies, while

the buyer has wasted time and resources to receive those defectives. Quality results

from prevention of defectives through process improvement, not inspection (Choy &

Lee, 2002). A cooperative relationship between supplier and buyer would suggest a

process improvement simply because the realization of mutual dependence.

Supplier quality improvement can be approached from two different angles

Reactive and Proactive. In Reactive, the buyer reacts to quality problems throughout

the flow of materials, and quality improvement is only initiated to reduce these

problems. On the other hand Proactive approach included working together, with a

larger amount of shared information.

“You cannot manage what you cannot measure” (Chan, 2003). Therefore, it is easy

to see that supplier evaluation and measurement are vital parts of supplier

management. Evaluation can and should take place before anything is purchased
 Impact of (SRM) On Organization Performance 4

from a supplier and continuously during the relationship. The case company of this

thesis is dealing with challenges of how to actually execute these evaluations.

The key objective of this study is to analyze how supplier relationship if managed

effectively affects organization performance. Suppliers are key to the success or

failure of the organization, if suppliers provide quality materials and low lead time,

the organization will have competitive edge against its rivals and vice versa.

1.4 Outline of the Study

This study had comprised of five chapters where chapter number one

contains introduction of the study. An introduction chapter also contains overview

of the study, statement of the problem, background, significant and objective of the

study. At the end of the chapter number one, definitions of the study variables had

also been given to make easier for reader to understand.

The literature review of the thesis in discussed in chapter number two which was

written from more than fifteen research papers to make clear understanding of the

topic under study. As of the literature review chapter end, possible hypotheses of

this thesis research had been discussed. The purpose of this chapter was to

differentiate this study from previous work.

The research method had been discussed in chapter number three. This chapter

contains method of data collection, technique of sampling to collect data from

population, total sample size i.e. number of observations to be analyzed, data

collection instrument such in this study a comprehensive questionnaire had been

developed and statistical technique applied for the purpose of testing research
 Impact of (SRM) On Organization Performance 5

hypotheses. This had been also divided into validity and reliability test. The next

issue was how research model to be developed.

The results, findings and interpretations of the study had been discussed in chapter

number four. At the end of the chapter number four, hypotheses assessment

summary had been shown to see which hypothesis had been accepted or rejected.

In final chapter of the study, discussions, conclusion, implication and future research

had been discussed.

1.5 Definitions

1.5.1 Supplier Relationship Management (SRM).

SRM is a practice where organizations make strategic association with third party

(supplier) who provides inputs that are used to produce something to meet the

demands of the specific customers.

1.5.2 Organizational Performance.

It is the actual results of the organizations’ outputs measured against inputs to

achieve organizational goals.

 Impact of (SRM) On Organization Performance 6

Chapter 2: Literature Review

The cycle view of supply chain considers supply chain as a series of buyer-supplier

relationships cycles linked to form the supply chain. This indicates the importance

of buyer supplier relationship in supply chain.

Figure 2.1

Cycle View of SC – A series of Buyer-supplier connections (Chopra & Meindl,

2016)

The relationship with supplier helps organizations, reduce risk and improve the

overall performance of the all business activities in which company operates. There

are two elements of supplier relationship management, first, explicit commitment or

promise between buyers and supplier, second, agreement between suppliers and
 Impact of (SRM) On Organization Performance 7

buyers about codifying the ideas exchange. This is the very basis of strategic supply

chain flexibility, and aims to evaluate all the parties directly involved in the firms

market. Those parties include its customers, vendors/suppliers and competitors.

This is done by looking at these parties and surveying them, and documenting the

results to review the company’s existing strategies to focus and direct the supply

chain development effort.

Harrison and Hoek (2011) argued that during the development of the supply chain,

purchasing had gone from being an isolated department from other elements of the

business systems of the company to being integrated with other departments. An

important part of procurement sometimes neglected is the business alignment of

the purchasing department. Business alignment points towards an alignment

around specific business objectives set by top management. If the professional

purchasers are not well informed of the objectives set by the firm, they might be

sourcing from suppliers which are not fully right for business needs.

2.1 Building Supplier Relationship

Before looking at supplier relationship management, the meaning of a

supplier relationship must be understood. To develop the buyer-suppliers

relationship strong the parties involved in supply chain must understand that:

The firm shares knowledge important for decision making to achieve

synchronization amongst supply chain members, by means of a real-time

information sharing system. The ultimate opposite scenario, is that of no

information sharing at all.

 Impact of (SRM) On Organization Performance 8

Suppliers are selected based on their ability to provide quality, reliable delivery,

short lead-time, capability of supplying/processing other jobs in addition to those

for which they are the original supplier. The ultimate opposite scenario is a supplier

chosen solely based on price. So, consequently, the buying company will try to avoid

any long-term agreements as it may weaken their position for negotiating (Cooper &

Gardner, 1993).

The firm has multiple suppliers clustered together sharing information and working

together to deliver the best service to your firm. The worst case scenario is only one

supplier. According to Harrison and Hoek (2011) a supplier evaluation is a

mechanism to develop and advance a supplier relationship, and to center

relationship management on business-relevant improvement opportunities. In

terms of the actual measurement, the main focus is around the three output areas:

costs, quality and delivery reliability. However, with a continuous improvement

focus, no performance is perfect. Therefore, there is always room for improvements

and supplier expectations are always rising.

Jonsson (2008) stated that materials bought as means of production almost

comprise of higher than 50% percent of the total costs of manufacturing. Therefore,

it is crucial to work with the right suppliers for business needs and to meet the

future demands of the customers. Therefore, a comprehensive method of supplier

selection is essential to the buying company. Furthermore, an assessment approach

to acquire reliable results of supplier performance should be established. This

would include an on-site evaluation of the supplier assessing supplier capabilities

and quality system as well as product samples (Yeung & Chin, 2004).
 Impact of (SRM) On Organization Performance 9

Rinehart, Eckert, Handfield, Page and Atkin(2002) argued that literature provides

many different inter-organizational relationships such as alliances, partnerships,

collaborative relationships and transactional relationships. The definitions of the

various relationships are often used interchangeably and that’s why a lot of

confusion is created.Kerlinger and Lee (2000) argued that it may be imperative for

theory to include single, clear definition in order to be validated and advanced.

Literature should be consistent in their use of inter-organizational relationships in

order to prevent ambiguity. This is important for companies since indistinctness

about the relationships terms can lead to disconnects in the expectations between

suppliers and buying companies. A mutual understanding of expectations is

therefore necessary for making the relationship as efficient as possible to meet

upmarket demand for the products. In this regard, the companies had been advised

to make potential agreements with suppliers so that supplier can provide Just in

Time delivery of the needed quality materials. Long term relationships with supplier

also help organizations to mutually understand the problems faced be both.

2.2 Supplier Selection and Procurement Perspective

Supplier selection is the key to a successful relationship. Selection of an

incompetent supplier as a SC partner means doom for any attempt to build

successful relationship. Supplier evaluation must be based on purely professional

basis and follow the RFx document procedure, that is RFI- Request for Information,

RFP- request for proposal and Request for quotation (RFQ) or bids and tender

documents must be obtained from the potential supplier for rigorous evaluation.
 Impact of (SRM) On Organization Performance 10

Once the supplier is selected the relationship building measures and supplier

involvement in operations can begin.

Figure 2.2
Steps to Supplier Selection (Bowersox, Closs, & Cooper, 2009)

An assessment approach to acquire reliable supplier performance should be

established. This would include an on-site evaluation of the supplier assessing

supplier capabilities and quality system as well as product samples (Yeung & Chin,

2004).

The objectives of procurement are an assured continuous supply of strategic inputs

of specified quality, minimizing the investment through just-in-time delivery to

minimize the total cost of ownership (TCO) of the supply. Supplier development is

often used to help supplier develop to meet the buyer requirement.

2.3 Building Supplier Relationship

Traditional businesses treated suppliers as adversaries, making profit at

their expense. Suppliers were not trusted and following the Porter principle

considered effort to dilute supplier power. A firm would use many suppliers to

ensure that suppliers did not acquire an upper hand.

The modern businesses consider supplier as supply chain partner. The relationship

is in mutual interest as both parties benefit from the relationship. Instead of

 Impact of (SRM) On Organization Performance 11

working with many supplier the SC prefers to work with one (or few if justified by

risks) supplier. When one (or few) supplier is used the total requirement of input is

consolidated and supplier becomes interested due to large quantity. Volume

consolidation brings the benefits of economy of scale for the supplier and creates a

willingness to invest in meeting the quality and capacity requirements. The buyer

can leverage its purchasing power to negotiate a good price and quality from the

supplier (Jonsson, 2008)

2.2.1 Strategies for Procurement Relationship

The organization performance can be enhanced by developing right

strategies for procurement of supplies. Volume consolidation discussed above

promises considerable cost reduction in purchasing and lowering the total cost of

ownership by supplies with effectively zero-defects, just-in-time supplies to

minimize investment in supplies.

Supplier operation integration is another aspect of buyer-supplier relationship. In

this strategy operational information is shared with the supplier. This allows the

supplier to organize supplies to meet the buyer’s requirement. Developing supplier

capabilities to enable it to ensure zero-defect supplies is another benefit of supplier

operational integration.

Supplier managed inventory is another strategy that can help improve

organization’s performance. The supplier relationship development gives access to

point of sale (POS) data or inventory position through electronic data interchange

(EDI) to replenish the supply as vendor (supplier) managed inventory (VMI).

 Impact of (SRM) On Organization Performance 12

Seeking strategic supplier’s input in new product development result in improving

operational efficiency as the supplier can help in redesigning the process to reduce

the effort required in operational processes.

Rinehart, Eckert, et al, (2002) state that many different inter-organizational

relationships such as alliances, partnerships, collaborative relationships and

transactional relationships are being used in the literature. The definitions of the

various relationships are often used interchangeably and that causes some

confusion.

Kerlinger and Lee (2000) argued that consistent definition of the type of buyer-

supplier relationship is important to prevent ambiguity. This is important for

companies since indistinctness about the relationships terms can lead to

disconnects in the expectations between suppliers and buying companies. A mutual

understanding of expectations is therefore necessary for making the relationship as

efficient as possible to meet up market demand for the products.

2.4 Supply Chain Flexibility and Service Level Agreement

Supply chain flexibility is a way to react rapidly to the increasingly shifting

needs and wants of the customers. In this regards making close and strong

relationship with suppliers who provide important inputs to the organization, which

are used in the production of specific products to cater the requests and wants of

the customers. If the relationship with supplier is strong and committed, the

suppliers will provide customize goods and services in accordance with the needs of

specific customers.
 Impact of (SRM) On Organization Performance 13

Logistics supply chain flexibility is also necessary for achieving the needed customer

satisfaction. Flexibility is necessary because forecasting is never completely

accurate, and risks overcapacity or lost sales. Variability in demand has always been

a problem for many businesses and is only growing as customer needs are changing

and product life cycles are shortening. A key issue for companies is how to deal with

this growing variability problem.

Logistics service providers are under pressure due to increasing service level

requirements and increasing consumer wishes. The logistics companies must

render quality services to customers to make people satisfy. An increasing

importance of details, and also of achieving high level of quality services had forced

logistics companies to reform the structures of relationship with customers. The

new way of structuring relationships between supplier and customers is called

Service Level Agreement (SLA).

SLA can be defined as a document in which supplier and customer make written

agreement to specify what customer may expect and what the suppliers and/or

logistics providing company will provide in terms of services. SLAhad been

considered as a useful document because the quality of the service can be enhanced

through clearly defining and focusing on main services to meet up customer and

business requirements. The main services that the customers expect from the

supplier were called KPIs which are quantifiable measures that logistics service

providers use to determine and contrast performance of the organization in

achieving the day to day and strategic goals.

 Impact of (SRM) On Organization Performance 14

Although SLAs are implemented in business relationships in various sectors, SLAs

are a recent phenomenon for the logistics sector. SLAs are only implemented by a

couple of logistics service providers and they are only implemented in a couple of

business relationships. There are probably a couple of explanations that prevent

them to implement SLAs in business relationships. How could these explanations be

identified? Is the logistics sector such a different sector in implementing SLAs in

business relationships compared to other sectors? And is it possible to standardize

SLAs in business relationships in the logistics sector? These questions are still too

answered by the research practitioners.

Mentzer and DeWitt, et al, (2001) argued that there are many relationships within

supply chains and it is of the interest to manage these multiple relationships among

the actors involved for optimizing supply chain performance. The relationships

among these actors vary from simple transactional relationships to complex

interdependent relationships. Ganesan (1994); Berry and Parasuraman (1991)

argued that value creation in the supply chain had been achieved through long

lasting relationships between customers and suppliers, and that’s why many

companies are moving closer towards long term relationships with suppliers.

The role of information technology sector in this regard cannot be ignored when

talking about development of the modern economic development throughout the

world (Kramer, Jenkins, & Katz, 2007). It is one of the faster growing sectors with a

great influence on everyday life of the people. However, the industry is facing

various problems related to supply chain management including supplier and buyer

relationship. Many of the biggest ICT corporations have been criticized because of
 Impact of (SRM) On Organization Performance 15

unethical practices of their suppliers. Bad working conditions, long working hours,

limited or missing health and safety regulations, child labor, and violated human

rights are among the most common issues occurring in suppliers of ICT companies

(FLA, 2012).

Besides this, the manufacturing processes and waste streams in the IT sector have

an essential impact on environmental pollution (Chen, Lai, & Wen, 2006; Dawkins,

2005; Wu, 2013). Another problem refers to data security and usage of information

by the parties throughout the supply chain. For example, suppliers who provide one

organization with input materials are the suppliers of various companies in the

region; therefore, they can manipulate and share the product information with other

competing firms.

Supply chain strategy development is to determine the order winning criteria, the

object being to define, prioritize and eventually weight the customers' critical

purchasing (customer oriented) factors. Managing a supply chain included

mobilizing all the diverse operations and actions that may adjoin worth to

consumers and simultaneously to organizations (Lummus, 1998).

2.5 Supplier Lead Time Reduction

The suppliers comprise of just about 70% of lead-time troubles (Burton,

1988). In the environment of lean production just in time (JIT) buying needs

supplying companies to make delivery of raw materials frequently in small batches.

This would be possible if there is perfect coordination between buyer and supplier
 Impact of (SRM) On Organization Performance 16

Heikkila (2002) argued that in order to make supply chain more responsive and to

keep it away from uncertainty, organizations must work on reducing lead time.

If the lead time decreases it minimizes the possible predicament of delivering

inventories and removes quality issues related to keep buffer inventory.

Organizations which share information with supplier helped to reduce lead time.

(Larson & Kulchitsky, 2000) The research also indicates that logistic relationship

between supplier and buyer under just in time method had vital role where supplier

must respond to the needs of customers regarding both quantity and quality.

2.6 Competitive Performance

There has been an extensive literature written on supplier relationship and

the performance of the company. The key performance taken by most research

practitioners are cost reduction, quality improvement, lead time, just in time

inventory, flexibility in operations and delivery. However, these alternative

structures must prove to be beneficial; otherwise they will not deliver a competitive

advantage. Additionally to these actions, the product launching at the right time is

also resulting in company’s performance (Phan, & Matsui, 2011).

2.7 Research Hypothesis

The literature review discussed above identifies the issues for this research

project. These issues have been converted into the hypotheses below:

H1Development of the supplier significantly affects organization performance

H2Building a relationship of trust with supplier significantly affects organization

performance
 Impact of (SRM) On Organization Performance 17

H3Supplier lead time significantly affects organization performance

H4Information sharing with Supplier significantly affects organization performance

 Impact of (SRM) On Organization Performance 18

Chapter 3: Research Methods

3.1 Method of Data Collection

Two different types of data collection sources are available for the purpose of

doing research, Secondary data collection method and primary data collection

method. For this study, primary data collection method was used. Primary data was

collected by a questionnaire-based survey. The questionnaire was designed on a 5-

point Likert scale with 1- corresponding to strong disagreement and 5 to strong

agreement with the statements. This kind of data is new and original. The study was

conducted through a questionnaire.

3.2 Sampling Technique

The simple random technique for sampling of the data had been applied in

this thesis for the purpose of collecting data from the relevant sample.

3.3 Sample Size

This study contained the sample of 315 observations or respondents for the

purpose of analysis. The respondents included employees of different organizations,

Supply Chain Managers, students specializing in Supply Chain Management, and

owners of the business were the main respondents.

3.4 Instrument of Data Collection

A well-furnished research questionnaire was developed to receive possible

responses from the selected sample size for the purpose of collecting data. The

questionnaire included 15 questions (3 questions for each independent and

 Impact of (SRM) On Organization Performance 19

dependent variable) prepared at Likert Scale containing 5 options such as Strongly

agree, agree, Neutral, Disagree, Strongly Disagree.

3.4.1 Validity and Reliability Test

The reliability test was applied to verify whether data collected through

particular questionnaire is truly reliable for the analysis or not. The criteria is that if

the value of the test is greater than 0.50, it would be considered that the data is truly

reliable. But on the other hand, if the value is less than 0.50, then it would be

considered that the data is not truly reliable. When the test was applied through

SPSS software, the following results were generated.

The following results had been generated of reliability test.

Table 3.1

Case Processing Summary

N %
Cases Valid 315 100.0
Excludeda 0 .0
Total 315 100.0
a. List wise deletion based on all variables in the
procedure.
The table 3.1 mentioned above

shows the case processing summary about how many observations had been used

as sample for the analysis of the study and how many cases are valid and or

excluded. The above table shows that N or number of cases or observations included

in this study are 315 and all the cases are valid (100%) and no case had been

excluded from the study analysis.

 Impact of (SRM) On Organization Performance 20

Table 3.2

Reliability Statistics

Cronbach's Alpha N of Items

.786 15

The Cronbach’s Alpha value (0.786) is greater than 0.50 (i.e. 0.786>0.50), that

suggested that Categorical Data used in this study is truly reliable for Multiple

Linear Regression Analysis. On the basis of Reliability test, now the Regression

analysis would be applied to explore that how supplier relationship management

affect performance of the organizations.

3.5 Research Model Developed

Following Research model was developed for the study

Figure 3.1

SRM Model (Source: Self-made)

Independent Variables Dependent Variable

Information Sharing with

Supplier

Supplier Lead Time

Organization
Performance
Trust with Supplier

Supplier Development
 Impact of (SRM) On Organization Performance 21

3.6 Statistical Technique

In this study the Multiple Linear Regression (MLR) test had been applied to

analyze the possible hypotheses of the study. The MLR test was applied through

SPSS (Statistical Package for Social Sciences) software.

 Impact of (SRM) On Organization Performance 22

Chapter 4: Results

This chapter of Results covered up research findings and interpretation of the

results. The objective of this chapter was to analyze the data and found and extract

some possible results of this thesis. The key aim of the thesis was to examine that

how supplier relationship management (i.e. Information Sharing with Supplier,

Supplier Lead Time, Trust with Supplier and SupplierDevelopment) affect

organization performance. To achieve this objective, a comprehensive survey

questionnaire had been developed to gather data. As for as statistical test was

concerned the Multiple Linear Regression (MLR) test had been chosen for

inspecting supplier relationship management effect on performance of the

organization. The MLR test was applied through SPSS software.

4.1 Finding and Interpretations of the Results

Below was the output or results that were generated through SPSS software.

Onwards the interpretation of the results was discussed and hypothesis was

analyzed.

Table 4.1

Model Summary

Adjusted R Std. Error of the

Model R R Square Square Estimate Durbin-Watson
1 .574a .330 .321 .4442510 1.690
a. Predictors: (Constant), Information Sharing with Supplier, Supplier Lead Time, Trust with
Supplier, Supplier Development
b. Dependent Variable: Organization Performance
 Impact of (SRM) On Organization Performance 23

The model summary mentioned above in Table 4.1. The R in the above table is

coefficient of correlation between the variables which is 57.4% which is greater

than 50% that means the correlation between study variables both independent and

dependent was statistically strong and significant. The R Square in above table is

coefficient of determination. The value of R square (0.330) shows that independent

variables (i.e. Information Sharing with Supplier, Supplier Lead Time, Trust with

Supplier and Supplier Development) explained 33% variation in Organization

Performance (i.e. dependent variable). The value (0.330) of the model is close to

0.50, therefore, data shows that study model is almost fit as per data provided by

the respondents.

Along with R square, the multiple regression analysis also gives us value for Durbin

Watson. The test values can vary from 0 to 4. In this study the value of Durbin

Watson is 1.690 which is less than 2 (1.690<2), therefore, study found positive

correlation between the adjacent residuals.

Table 4.2

ANOVA

Sum of
Model Squares Df Mean Square F Sig.
1 Regression 30.101 4 7.525 38.130 .000a
Residual 61.181 310 .197
Total 91.283 314
a. Predictors: (Constant), Information Sharing with Supplier, Supplier Lead Time, Trust with
Supplier, Supplier Development
b. Dependent Variable: Organization Performance
 Impact of (SRM) On Organization Performance 24

The ANOVA matrix had been mentioned above in table 4.2. The sig value (0.000) in

the table is less than 0.05(α=0.05), (0.000<0.05), hence, the study rejected the null

hypothesis and failed to reject (i.e. accept) alternate hypothesis that supplier

relationship management significantly affect organization performance.

Table 4.3

Coefficients
95.0%
Unstandardized Standardized Confidence Collinearity
Coefficients Coefficients Interval for B Statistics
Std. Lower Upper
Model B Error Beta T Sig. Bound Bound Tolerance VIF
1 (Constant) 1.675 .237 7.076 .000 1.209 2.140
Supplier Development .128 .037 .184 3.491 .001 .056 .200 .781 1.280
Trust with Supplier .023 .046 .026 .495 .621 -.068 .114 .800 1.250
Supplier Lead Time .038 .046 .042 .835 .404 -.052 .128 .856 1.168
Information Sharing .448 .050 .459 8.872 .000 .349 .547 .806 1.241
with Supplier
a. Dependent Variable: Organization Performance

H1: Supplier Development significantly affects organization performance.

In the above table 4.3 the sig value for Supplier Development is 0.001 which is less

than set level of significant (α=0.05), the signs of the confidence interval are the

same (+ve), and the value of the VIF (Variance Inflator Factor) 1.280 which is less

than 2, therefore, the recommended null hypothesis was rejected and HA was

accepted that Supplier Development significantly affects organization performance.

Thus study found that if the organizations strive to develop the suppliers in term of

technology, operations etc., then the performance of the organization will be

augmented.

H2: There is a significant impact of Trust with Supplier on organization performance

 Impact of (SRM) On Organization Performance 25

The table 4.3 also shows the sig value (0.621) for 2nd variable (Trust with Supplier)

is greater than set level of significant (α=0.05), (0.621>0.05), the signs of the

confidence interval are not the same (one positive and one negative), therefore, the

study failed to reject suggested null hypothesis. But the value of the VIF (Variance

Inflator Factor) 1.250 which is less than 2 is acceptable for the study. Overall, the

study found that trust with Supplier had not significantly affected organization

performance. Therefore, the study suggested, as per data provided, that no supplier

had unconditional relationship and mutual trust with the organizations and there

was the possibility that supplier may share a secret information of the company

with the competitors of the company.

H3: There is a significant impact of Supplier Lead Time on organization performance

In table 4.3, the sig value for 3rd variable is 0.404 which is greater than set level of

significant (α=0.05), (0.404>0.05), the signs of the confidence interval are also not

the same (one positive and one negative), therefore, the study failed to reject

suggested null hypothesis, that Supplier Lead Time had not significantly affected

organization performance. But the value of the VIF (Variance Inflator Factor) 1.168

which is less than 2 is acceptable for the study. Overall, the study found that

suppliers and organizations had neither mutual understanding nor organizations

panelize suppliers to reduce lead time and promote Just in Time system.

H4: There is a significant impact of Information Sharing with Supplieron

organization performance
 Impact of (SRM) On Organization Performance 26

In table 4.3 exhibited above, the sig value for 4th variable i.e. Information Sharing

with Supplier is 0.000, which is less than 0.05 (α=0.05), also, the signs of the

confidence interval are the same (+ve), and the value of the VIF (Variance Inflator

Factor) 1.241 that is also less than 2, therefore, suggested H0 was rejected and the

study accepted the alternate hypothesis (HA) that Information Sharing with Supplier

has significant impact on organization performance. Thus, the study found that if the

company may share information with their key suppliers in terms of product

quality, state of the art technology, materials etc. then it will enhance the

performance of the organization. Therefore, it suggested that companies should

share information with supplier if organizations desire to increase the performance.

4.2 Hypotheses Assessment Summary

The summary to assess hypotheses had been given below:

Table 4.4

Hypotheses Assessment Summary

Empirical
S. No Hypothesis Sig Value
Conclusion
H1: Supplier Development significantly affects
1. organization performance. .001 Accepted

H2: Trust with Supplier significantly affects

2. .621 Rejected
organization performance.
H3: Supplier Lead Time significantly affects
3. .404 Rejected
organization performance
H4: Information Sharing with Supplier
4. .000 Accepted.
significantly affects organization performance
 Impact of (SRM) On Organization Performance 27

Chapter 5: Discussions, Conclusion, Policy Implications

and Future Research

5.1 Discussions

In recent years, building strong relationships with suppliers have become

very important to sustain competitiveness, customer attractiveness and to achieve

larger market share. Many firms activities directed towards suppliers are

uncoordinated, possibly carried out by different departments and thus not

integrated into an overall supplier management. This stands contrary to growing

opportunity concerning effect of the purchasing function on overall value creation.

Different aspects of supplier management provide valuable insights and approaches.

Still an overall framework integrating all these insights into a SRM framework

remains desirable. The performance and past history of the suppliers help in taking

decisions for its selection, as a result selecting the right supplier helps in getting

more improved quality. Quality is a key factor of suppliers by which they can

improve and maintain quality assessment and delivery performance. Therefore the

SRM practices introduced in this research points out its relevance to quality

performance. The key purpose of this thesis was to scrutinize that how supplier

relationship management affects performance of the organization. To achieve this

objective, a comprehensive questionnaire had been prepared containing 15

questions (3 questions for each independent and dependent variable) from the

relevant sample (315 respondents), in order to gather data. The collected was then
 Impact of (SRM) On Organization Performance 28

evaluated through SPSS software. Finally, broadly speaking, the study found that

supplier relationship management significantly affects organization performance.

5.2 Conclusion

It is estimated that 50-70% of the costs of an organization is related to

provision of goods and services for the company. Supplier selection and supplier

relationship management can result in a significant reduction in cost, improvement

in quality of produce and a brand image that means large market share and a

healthy return on investment. The research project has demonstrated the

importance of suppliers relationship management on organization performance.

5.3 Policy Implications

According to this study supplier relationship management has a significant

influence on organization performance. Organizations can use this information to

align their strategies to achieve higher degree of performance.

5.4 Future Research

For the future, the study can be conducted on different factors which can

influence supplier relationship and organization performance. Also study can be

conducted in overall Pakistan and other countries as this study is confined to

Karachi only.
 Impact of (SRM) On Organization Performance 29

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Impact of (SRM) On Organization Performance 32

Appendix

SPSS Data View

Impact of (SRM) On Organization Performance 33

SPSS Variable View

Impact of (SRM) On Organization Performance 34
 Impact of (SRM) On Organization Performance 35

SPSS Output

Case Processing Summary

N %
Cases Valid 315 100.0
Excludeda 0 .0
Total 315 100.0
a. Listwise deletion based on all variables in
the procedure.

Reliability Statistics
Cronbach's
Alpha N of Items
.786 15

Model Summaryb
Adjusted R Std. Error of Durbin-
Model R R Square Square the Estimate Watson
1 .574a .330 .321 .4442510 1.690
a. Predictors: (Constant), Information Sharing with Supplier, Supplier Lead Time, Trust with
Supplier, Supplier Development
b. Dependent Variable: Organization Performance

ANOVAb
Model Sum of Squares df Mean Square F Sig.
1 Regression 30.101 4 7.525 38.130 .000a
Residual 61.181 310 .197
Total 91.283 314
a. Predictors: (Constant), Information Sharing with Supplier, Supplier Lead Time, Trust with Supplier, Supplier
Development
b. Dependent Variable: Organization Performance
 Impact of (SRM) On Organization Performance 36

Coefficients
Unstandardized Standardized 95.0% Confidence
Coefficients Coefficients Interval for B Collinearity Statistics
Lower Upper
Model B Std. Error Beta T Sig. Bound Bound Tolerance VIF
1 (Constant) 1.675 .237 7.076 .000 1.209 2.140
Supplier Development .128 .037 .184 3.491 .001 .056 .200 .781 1.280
Trust with Supplier .023 .046 .026 .495 .621 -.068 .114 .800 1.250
Supplier Lead Time .038 .046 .042 .835 .404 -.052 .128 .856 1.168
Information Sharing with .448 .050 .459 8.872 .000 .349 .547 .806 1.241
Supplier
a. Dependent Variable: Organization Performance
 Impact of (SRM) On Organization Performance 37

Questionnaire

FILL IN THE BOXES GIVEN BELOW:

Gender
Name:
 Male  Female

Organization: Designation:

Years in
Organization:  Less than 1  1 to 5  6 to 10  More than 10
Contact Info. (Phone, Email,) Phone:
Visiting card if available would Email:
be very much appreciated) Visiting Card Attached Not available

Please indicate your agreement/disagreement with the following statements

using the scale given below:

Strongly Disagree Disagree Neutral Agree Strongly Agree

1 2 3 4 5
 Impact of (SRM) On Organization Performance 38

IMPACT (SRM) ON ORGANIZATION PERFORMANCE

S. No

Disagree
Disagree
Strongly

Strongly
Neutral

Agree

Agree
QUESTIONS

Supplier Development
1 Your organization provides financial support to suppliers to 1 2 3 4 5
develop their production units О О О О О
2 In case the supplier faces shortage of important materials, 1 2 3 4 5
your organization helps them to make available for the О О О О О
production.
3 Your organization invests in developing supplier’s plants, 1 2 3 4 5
equipment and technology to help him update its technology. О О О О О
Trust with Supplier
4 Suppliers fill your organization’s orders without going 1 2 3 4 5
through formal procedure in case of urgency. О О О О О
5 There has been an unconditional relationship of trust 1 2 3 4 5
between Suppliers and your organization. О О О О О
6 You trust your suppliers that they will not share company’s 1 2 3 4 5
information to your competitors. О О О О О
Supplier Lead Time
7 Suppliers in your organization are selected based on their 1 2 3 4 5
ability to reduce lead-time. О О О О О
8 Your organization and supplier has mutual understanding in 1 2 3 4 5
maintaining Just in Time inventory to reduce lead-time. О О О О О
9 You penalize the supplier if he does not provide on time 1 2 3 4 5
delivery of products О О О О О
Information Sharing with Supplier
10 Your firm shares knowledge that is important for decision 1 2 3 4 5
making to achieve coordination between supplier and the О О О О О
organization.
11 Sharing information with supplier lead your organization to 1 2 3 4 5
innovate new product О О О О О
12 Your organization share information with supplier to provide 1 2 3 4 5
forward visibility, improved production planning, inventory О О О О О
management
Organization Performance
13 Strong supplier relationship management improves overall 1 2 3 4 5
performance of your company. О О О О О
14 You want to make strong relationship with your supplier to 1 2 3 4 5
improve future profitability of your organization. О О О О О
15 You have made strong relationship with your supplier to 1 2 3 4 5
reduce transaction and overall costs. О О О О О

Thank you for your help

Impact of (SRM) On Organization Performance 39