Supply base structure and company performance

Abstract

One important decision in supply base management is the structure of supply base. Since the supply base has become the core competence in global competition, the supply base structure, which largely determines reliability and sustainability of supply base, attracts more and more attention in business practice. Gaining a suitable supply base structure could not only improve the purchasing effectiveness, but also contribute to a better profitability of whole company. Unfortunately, very little literature deals directly with how supply base structure determines the company performance with the empirical method. Thus, the supply chain managers are confused about the correlations between supply base structure and performance, and they lack conceptual support while adjusting to the supply base structure. Drawing on literature streams in supply base structure and purchasing portfolio management, along with structured interviews with practitioners, this research attempts to fill this void by validating a framework and tests many conceptual ideas from existing literatures. Using data from 219 supply chain managers, we test the relationship between supply base structure and company performance. Additionally, we test how three dimensions of supply base structure, including supplier heterogeneous, supplier development and asset-specific investment affect both the operational and financial performance. Furthermore, the moderation effect of purchasing portfolio management on the relationship between supply base structure and performance are tested. Our empirical results show that heterogeneity of the same type of suppliers has a negative impact on company financial performance but an inconspicuous influence on operational performance. Supplier development and relation at specific investments are both beneficial to the improvement of enterprise performance. As a moderation factor, supply risk in purchase portfolio management plays a role in regulating the relationship between supplier development and enterprise performance.