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University of Twente. Initiative of Purchasing Studies. Success factors for managing horizontal purchasing groups: an empirical survey. Presenter Fredo Schotanus Co-authors Jan Telgen Luitzen de Boer. Definitions. Supplier. Supplier. Supplier. vertical alliance.

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Presentation Transcript
slide1

University of Twente

Initiative of Purchasing Studies

Success factors for managing horizontal purchasing groups:

an empirical survey

Presenter

Fredo Schotanus

Co-authors

Jan Telgen

Luitzen de Boer

University of Twente Initiative for Purchasing Studies (UTIPS)

definitions
Definitions

Supplier

Supplier

Supplier

vertical

alliance

horizontal purchasing group

Buyer

Buyer

Buyer

Introduction

1 / 19

University of Twente Initiative for Purchasing Studies (UTIPS)

slide3

An example of a purchasing group

Buyer A

Buyer B

Buyer C

x 4

Introduction

2 / 19

University of Twente Initiative for Purchasing Studies (UTIPS)

slide4

Sounds nice, but problems may occur (‘bears on the road’)

  • Small and intensive groups do not always flourish
  • It’d help if we know what factors influence success

Introduction

3 / 19

University of Twente Initiative for Purchasing Studies (UTIPS)

earlier work
Earlier work
  • General
    • A lot of literature on (forming) alliances
    • No comprehensive theory exists
    • Some study success factors, but hardly any study a broad set (Hoffmann & Schlosser, 2001)
  • Specifically
    • 1 study deals with quite a broad set for purchasing groups (Hendrick, 1997)
    • Not fully consistent with the general literature

Introduction

4 / 19

University of Twente Initiative for Purchasing Studies (UTIPS)

objective contribution
Objective & contribution

Identify success factors for

managing purchasing groups

Contributes by a broad empirical

investigation into success factors for

purchasing groups

Introduction

5 / 19

University of Twente Initiative for Purchasing Studies (UTIPS)

Agenda

slide7

Potential success factors

  • Several theories explain cooperation
  • We build on
    • TCE (general rationale)
    • Social exchange theory (individual fair rationale)
  • 19 success factors categorized by
    • Trust
    • Formality
    • Member uniformity
    • Common goals
    • Communication
  • Allocation of savings
  • Member influence
  • Enforcement of cooperation
  • Member cooperation
  • Commitment & support

Literature review

6 / 19

University of Twente Initiative for Purchasing Studies (UTIPS)

slide8

Category: Interorganizational trust

  • Perhaps the most discussed success factor (e.g., Bakker et al., 2006; Polychronakis and Syntetos, 2007;Vangen and Huxham, 2003)
  • Several empirical studies confirm its importance
  • Reasoning from TCE
    • costs are lower when there is trust
    • as less monitoring & agreements are necessary
  • Potential success factors
    • Members are honest and loyal
    • Members like each other personally
    • Members meet one's commitments

Literature review

7 / 19

University of Twente Initiative for Purchasing Studies (UTIPS)

slide9

Two methods

  • Perceived importance of factors (Hendrick, 1997)
  • Compare differences between (un)successful groups (Hoffmann & Schlosser, 2001)
  • Method 2
    • Not yet used for studying purchasing groups
    • Need to define ‘success’ (no consensus in the literature)
    • We measure it as the perceived success of the group

Literature review

8 / 19

University of Twente Initiative for Purchasing Studies (UTIPS)

slide10

The survey

Group with x members

O1

Ox

Scores:

Properties:

Activities

Potential success factors

Overall performance

Scores:

Advantages

Disadvantages

Method

9 / 19

University of Twente Initiative for Purchasing Studies (UTIPS)

slide11

Sampling

NEVI newsletter (797 org.)

  • The numbers
    • 16% ‘worst case’ response rate
    • 224 respondents
    • 115 groups
    • 74 small and intensive groups (81% successful)
  • Early & late response almost the same (p < .05)
  • We knew most responding groups
  • Data seems to be representative

not active (low response)

a

c

t

i

v

e

Ovia newsletter (620 org.)

Method

10 / 19

University of Twente Initiative for Purchasing Studies (UTIPS)

slide12

Data analysis (based on Hoffmann & Schlosser; 2001)

  • T-tests to identify potential success factors
  • Discriminant analysis to the factors identified in step 1
  • All assumptions are met
  • Assumptions tested with
    • QQ-plots for normality
    • Levene’s (1960) test (p ≤ .05) and the variance ratio for equality of variances (< 2.5)
    • Box’s (1950) test (p ≤ .05) for equality of covariance matrices

Method

11 / 19

University of Twente Initiative for Purchasing Studies (UTIPS)

slide13

Identified potential success factors (t-tests; p ≤ .05; discriminant analysis; 89.3% classified correctly)

  • Enforcement of cooperation
    • No enforced participation
  • Member cooperation
    • Members contribute unique knowledge
    • Sufficient total contribution of efforts
  • Commitment and support
    • Members rarely change representatives
    • Members have internal support
  • Communication
    • Communication (current projects)
    • Communication (new projects)
  • Member influence
    • Members have similar influence
  • Common objectives
    • Members have similar objectives
  • Allocation of savings
    • Fair allocation of savings

Findings and discussion

12 / 19

University of Twente Initiative for Purchasing Studies (UTIPS)

categories without success factors
Categories without success factors
  • Trust and formality (consistent with Hoffmann & Schlosser, 2001)
    • Inconsistent with a.o. Schotanus (2005)
    • Important when establishing, but prerequisites for managing a group
    • Explanation by awareness and the methods used
  • Member uniformity
    • Inconsistent with a.o. Hendrick (1997)
    • Groups with member with (dis)similar cultures and procedures can be (un)successful
    • Similar explanations as for trust plus the specific context

Findings and discussion

13 / 19

University of Twente Initiative for Purchasing Studies (UTIPS)

categories with success factors 1 3
Categories with success factors (1/3)
  • Enforcement of cooperation (consistent with Brockhoff, 1992)
    • Participation should bring savings and attract without enforcement
    • Still, if a member cooperates, it needs to commit
    • Enforcement & influence problems are typical for BU groups
  • Member cooperation (consistent with Hoffmann & Schlosser (2001) and communication (consistent with Laing & Cotton, 1997)
    • Factors such as sufficient total contribution of efforts show that success doesn’t occur as a matter of course
    • Some knowledge and efforts are necessary to coordinate, communicate, etc.

Findings and discussion

14 / 19

University of Twente Initiative for Purchasing Studies (UTIPS)

categories with success factors 2 3
Categories with success factors (2/3)
  • Commitment (consistent with Doucette, 1997) and support
    • If members often change representatives, this may hamper learning effects + not a sign of commitment
    • If a member isn’t committed, then the others may also reduce their commitment (Doucette, 1997)
  • Common objectives (consistent with Laing and Cotton, 1997) and influence of the group members
    • Factors identified are similar goals & all have a similar influence
    • Without similar goals, it costs more to synchronize
    • Without influence, members’ interests may be ‘forgotten’

Findings and discussion

15 / 19

University of Twente Initiative for Purchasing Studies (UTIPS)

categories with success factors 3 3
Categories with success factors (3/3)
  • Allocation of savings
    • Fair allocation is important, but difficult for purchasing groups
    • It may prevent conflicts and members leaving the group
  • Allocation of gains
    • 87% uses Equal Price
    • 13% uses methods that are more beneficial to large members
  • Allocation of costs
    • 30% uses no formal method
    • 29% uses a proportional method
    • 29% uses Equal Amount or a fixed membership fee
  • What’s a fair and successful combination?

Findings and discussion

16 / 19

University of Twente Initiative for Purchasing Studies (UTIPS)

combinations of allocation methods

Equal Price (EP) + no formal cost method

EP + Proportional cost method

total %

uniformity of contr.

uniformity of vol.

27%

2,7

2,5

24%

2,3

1,9

26%

2,7

2,2

successful %

76%

79%

90%

Combinations of allocation methods

EP + Equal Amount cost method

Findings and discussion

17 / 19

University of Twente Initiative for Purchasing Studies (UTIPS)

limitations and further research
Limitations and further research
  • Focus on small and intensive groups
  • Difficult to assess ‘success’
  • Low response rate
  • No distinction between (very) successful
  • Not enough data for method combinations

18 / 19

University of Twente Initiative for Purchasing Studies (UTIPS)

conclusions on managing purchasing groups
Conclusions on managing purchasing groups
  • Quantitative empirical evidence using TCE and SET
  • Found no success factors related to trust, formality, and uniformity
  • Inconsistencies explained by method or context differences
  • Main success factors are
    • No enforcement
    • Sufficient total contribution of efforts
    • All contribute unique knowledge
    • All rarely change representatives
    • Fair allocation of savings
    • Communication
    • (No large differences in motives & efforts)
  • Prediction value of the discrimination analysis is 89.3%

Fredo Schotanus

f.schotanus@utwente.nl

http://www.utips.eu

19 / 19

University of Twente Initiative for Purchasing Studies (UTIPS)