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Determinants of supplier-retailer collaboration: Evidence from an

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Article  in  International Journal of Operations & Production Management · January 2006

DOI: 10.1108/01443570610637003

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IJOPM
26,1 Determinants of supplier-retailer
collaboration: evidence from an
international study
24
Chwen Sheu
Department of Management, College of Business, Kansas State University,
Manhattan, Kansas, USA
HsiuJu Rebecca Yen
Department of Information Management, National Central University, Jhergli,
Chung-li, Taiwan, Republic of China, and
Bongsug Chae
Department of Management, College of Business, Kansas State University,
Manhattan, Kansas, USA

Abstract
Purpose – This paper aims to increase the understanding of social and technical factors contributing
to successful supplier-retailer collaboration. The objective is to identify the necessary supply chain
architecture for supplier-retailer collaboration, and demonstrate how it influences supply chain
performance.
Design/methodology/approach – Five pairs of suppliers and retailers in Taiwan were studied
with each pair serving as a unit of analysis. In each case, data pertaining to eight relationship variables
critical to collaboration between supplier and retailer were collected and analyzed. A comprehensive
supplier-retailer relationship model is developed with five specific research positions: supplier-retailer
business relationship (interdependence, intensity, trust) affects long-term orientation; supplier-retailer
business relationship affects supply chain architecture (information sharing, inventory system,
information technology capabilities, coordination structure); long-term orientation affects supply chain
architecture; supply chain architecture affects the level of supplier-retailer collaboration; and
supplier-retailer collaboration enhances supplier-retailer performance.
Findings – Overall, with the exception of duration, all variables are found to be critical to
supplier-retailer collaboration. It is the intensity, as opposed to the duration, of the relationship that
influences the retailer-supplier relationship.
Originality/value – The proposed model demonstrates how eight critical social and technical
variables are directly and/or indirectly related. This knowledge will enable the management of
supplier-retailer networks to produce better supply chain collaboration and performance.
Keywords Supply chain management, Suppliers, Retailers, Retailing, Case studies
Paper type Research paper

Introduction
Traditional relationships between suppliers and retailers are often described as
International Journal of Operations & “arm’s-length” market relationships, characterized by nonspecific asset investments,
Production Management minimal information exchange, and separable technological and functional systems
Vol. 26 No. 1, 2006
pp. 24-49 within each firm (Dyer and Singh, 1998). Recent studies indicate the need for shifting
q Emerald Group Publishing Limited
0144-3577
the view of interorganizational relationships from arm’s-length to long-term,
DOI 10.1108/01443570610637003 collaborative relationships (Handfield and Bechtel, 2002; Johnson and Sohi, 2003;
Liker and Choi, 2005). Supply chain collaboration can deliver some powerful Determinants of
advantages to participating organizations (Mentzer et al., 2000), and the collaboration supplier-retailer
process is worthwhile, with coordination efforts and investments leading to enhanced
profit performance and the realization of competitive advantages over time (Jap, 1999). collaboration
Stank et al. (2001) indicate that collaboration contributes to excellent supply chain
performance by reducing a firm’s logistical service-related costs and enhancing cash
flow. Simply stated, “being opposed to collaboration these days is a bit like being 25
against quality, or maybe even profitability” (Prahalad and Ramaswamy, 2001, p. 2).
The issues related to collaboration in a specific supplier and retailer
interorganizational relationship have been of great interest in the literature. Some
studies (Lee et al., 1997; Lummus et al., 2003) support the importance of collaboration
between suppliers and retailers in reducing the bullwhip effect in supply chains.
Collaborative interorganizational relationships have been found to be beneficial in
buyer-supplier dyads. For example, Dyer and Singh (1998) suggest that firms can
create the potential for achieving competitive advantage by moving away from an
arm’s-length relationship through tangible investments in relation-specific assets,
substantial information exchange, complementary resources and capabilities, and
effective governance. A survey-based study (Larson and Kulchitsky, 2000) concludes
that closer, more cooperative buyer-supplier relationships are well worth pursuing.
This finding concurs with other studies that suggest buyers and suppliers have much
to gain by working together toward shared goals in an environment of mutual trust
and open communication. From a transaction cost perspective, collaborative
interorganizational relationships promise gains in two areas (Grover et al., 2002).
First, partners can achieve an advantage by incurring lower transaction costs. Second,
such trust-based relationships allow partners to make relationship-specific
investments, share proprietary information, and engage in value-added activities.
While the benefits of supplier-retailer collaboration have been well documented,
several studies point out that developing collaboration is a challenging task for supply
chain partners and there are several difficulties associated with it (McHugh et al., 2003;
Simatupang and Sridharan, 2002). Mclvor and Humphreys (2002) contend that
collaboration is described in simplistic terms, thus making the potential benefits
appear easy to achieve when, in actuality, they are difficult to achieve. For instance,
Emiliani (2003) claims that conflict between suppliers and retailers is inevitable.
Considerable antagonism exists among retailing supply chain members due to mutual
distrust and relationship difficulties before and during collaboration (Simatupang and
Sridharan, 2002).
In summary, both the popular press and academic research emphasize the
importance of collaboration (Stank et al., 2001). There is little doubt that collaboration
is critical for a successful supply chain and optimal organizational performance;
however, what is needed for achieving interorganizational collaboration is not fully
understood. The literature has been somewhat fragmented in that it often focuses on
studying a small number of factors within a specific functional discipline. For instance,
studies in marketing and organizational science have tended to focus on social factors
such as commitment and trust (Ganesan, 1994; Handfield and Bechtel, 2002), studies in
operations management have focused on factors such as inventory systems and
information sharing (Srinivasan et al., 1994), while studies in information systems have
focused on information technology (IT) capabilities and software (Grover et al., 2002;
IJOPM Larson and Kulchitsky, 2000). In addition, a growing body of literature on
26,1 collaboration has been rather prescriptive, with very limited empirical support
(Anthony, 2000; Mentzer et al., 2000; Simatupang and Sridharan, 2002). Consequently,
what is required for achieving interorganizational collaboration is not fully
understood.
This paper intends to increase the understanding of factors contributing to
26 successful supplier-retailer collaboration. The objective is to identify the necessary
supply chain architecture (e.g. technical components and interorganizational
arrangements) for supplier-retailer collaboration, and demonstrate how it influences
supply chain performance. Through case study research, we investigate the following
research questions:
RQ1. What is the architecture of a collaborative supplier-retailer network? In other
words, under what conditions are suppliers and retailers willing to
collaborate? What variables are critical to the development of
supplier-retailer collaboration?
RQ2. What are the relationships among those critical variables?
Answering these two questions would empower the management of supplier-retailer
networks and, as such, would lead to better supply chain performance.

Literature review
This section offers a brief review of several critical variables found in the literature on
a broad range of interorganizational and inter-party relationships, including
supplier-retailer relationships.
One essential factor found to be critical for interorganizational relationships is
interdependence between parties. The dependence of one company on a partner refers
to the firm’s need to maintain a relationship with the partner in order to achieve its
goals (Heikkilä, 2002). Interdependence exists when one party does not entirely control
supply chain operations. Acknowledging dependence is a prime force in the
development of supply chain solidarity. High interdependence motivates willingness to
negotiate functional transfer, share key information, and participate in joint
operational planning (Handfield, 1993; Heikkilä, 2002). Interdependence is positively
related to firms’ long-term relationship orientation.
Several studies have emphasized the importance of duration as a predictor of
interorganizational collaboration. Heide and John (1990) and Mohr and Spekman (1994)
suggested that the historical length of a relationship increases continuity expectations,
which, in turn, increases the level of cooperation in terms of coordination, participation,
and joint problem solving, which are good indicators of a successful partnership. The
duration of an existing relationship is likely to affect a buyer’s long-term orientation
(Ganesan, 1994) and relationship-specific investments (Bensaou and Anderson, 1999).
Trust plays a key role in any organizational relationship (Morgan and Hunt, 1994;
Ring and Van de Ven, 1992). Trust exists when a party believes that its partner is
reliable and benevolent (Heikkilä, 2002). In management literature there has been a
noticeable increase in the importance of trust in different forms of interorganizational
relationships (Sahay, 2003), and the need for trust between partners has been identified
as an essential element of buyer-supplier relationships (Anderson and Narus, 1990).
Interpersonal trust facilitates coordination efforts, and complementary capabilities Determinants of
facilitate both effort and investments ( Jap, 1999). supplier-retailer
Studies recognize long-term orientation or commitment as predictors for successful
interorganizational relationships. Long-term orientation refers to a party’s willingness collaboration
to exert effort in developing a long-term relationship. It is frequently demonstrated by
committing resources to the relationship, which may occur in the form of time, money,
facilities, etc. Studies have shown that successful partnerships result when both buyers 27
and suppliers demonstrate a willingness to commit a variety of assets to a set of future
transactions (Dyer, 1996). Productivity gains in supply chains are possible when firms
are willing to make transaction- or relation-specific investments, which are important
indicators of commitment. Thus, transaction-specific investment should enhance
coordination and cooperation between partners (Bensaou and Anderson, 1999;
Dyer, 1996).
Information sharing is recognized as a key requirement for collaborative
interorganizational relationships. Several studies (Bowersox et al., 2000; Cannon and
Perreault, 1999) suggested that successful buyer-supplier relationships are associated
with high levels of information sharing. Mohr et al. (1996) recognized the importance
of communication in interorganizational relationships, and increased levels of
communication have been found to be associated with commitment (Morgan and
Hunt, 1994).
Related to information sharing, studies indicate that a firm’s organizational
structure associated with supply chain-related activities, or what may be called
“interorganizational or supply chain coordination structure”, influences its level of
collaboration. Some of the most successful firms utilize a combination of centralized
and decentralized operations to accomplish both integration and flexibility (Sabath
et al., 2001). Centralization is necessary for firm-level integration and coordination,
while decentralization is needed for flexibility. Centralization at the supply chain level
provides focus and allows long-term thinking/planning while decentralization of
selected areas (e.g. purchasing, logistics, inventory management) can improve
operational efficiency and enhance responsiveness (Sabath et al., 2001). Additionally,
decentralization increases the involvement of the supplier in the buyer’s supply
chain-related decisions.
Related to the above issues, another specific issue that is found in the management
science/logistics literature is inventory systems. Many firms have shifted from reliance
on forecast-driven push systems to response-based “partnering initiatives” aimed at
improving cross-firm supply chain efficiency. The response-based approach relies
upon extensive sharing of information between supply chain members to pull products
through the channel based upon actual consumer sales. Still, inventory management
systems, which decide how much product is needed and where it is needed, represent
one of the toughest supply chain challenges (Sabath et al., 2001). One explicit example
is vendor-managed inventory (VMI). A retailer using a VMI system delegates
inventory decisions to the manufacturers; and the manufacturer determines both order
and production quantities (Kulp, 2002). A system like this can improve the efficiency of
material flows in a supplier/retailer partnership (Holmstrom, 1998) and lead to
collaboration.
IT capabilities appear to be another crucial factor for collaborative relationships
(Sabath et al., 2001). Previous studies suggested the significant, positive role of IT in
IJOPM interorganizational collaboration. For example, IT use in buyer-supplier exchanges
26,1 leads to closer cooperative relationships (Bakos and Brynjyoolfsson, 1993). Sriram and
Banerjee (1994) support the view that electronic data interchange (EDI) could develop
closer partnership between buyers and suppliers. Bowersox and Daugherty (1995)
highlight accuracy and timeliness as important elements of logistics information
quality.
28 Overall, the current literature is somewhat fragmented. Researchers from different
academic fields tend to focus on narrow areas in supplier-retailer relationships, and
these studies are developed relatively independent of each other. Marketing and
management literature is likely to focus on economic and organizational issues such as
relationship-specific investment, trust, and commitment, and operations management
literature is likely to focus on inventory management, while information systems
literature is likely to focus on interorganizational information systems. In this
situation, Choi and Liker (2002) suggested that more socio-technical studies in the
supply chain arena are needed to examine the interactions among various factors and
issues, including power and control. In other words, a comprehensive model including
diverse (economic, social, and technical) constructs is needed to better understand the
supplier-retailer relationship (Grover et al., 2002). Therefore, this study aims at
investigating the interactions of those eight critical variables and their effects on
supplier-retailer performance.

Research design
Case selection
Case study research is chosen to increase the understanding of the supplier-retailer
demand chain. Our study is directed toward development of testable hypotheses that
could be further investigated with regard to this particular collaboration relationship.
We believe that through direct observation and systematic interviewing, the case study
methodology allows us to build new supplier-retailer collaboration theories. While case
study research has been frequently criticized for its lack of rigor, we have closely
followed suggestions from previous studies (Eisenhardt, 1989; Miles and Huberman,
1994; Voss et al., 2002; Yin, 1994) to ensure the validity of this study.
We identified five pairs of suppliers and retailers in Taiwan for the purpose of
on-site interviews and data collection. Each pair serves as a unit of analysis. Table I
summarizes company profiles consisting of products, sales volumes, numbers of
employees, IT systems, supply chain systems, supply chain coordination structures
and competitive strategies. Johnson & Johnson (J&J) in Taiwan is the supplier in this
study. J&J is a global company with headquarters located in the US. It is one of the
leading suppliers of baby products and personal care products in Taiwan. J&J-Taiwan
(JJT) has more than 100 employees who are primarily responsible for sales, customer
service, distribution, and accounting activities. It has no manufacturing facilities in
Taiwan. J&J headquarters coordinates production with factories in Malaysia, China,
and New Zealand to support the demand in Taiwan. The entire J&J Corporation has
implemented an enterprise resource planning (ERP) system to achieve integration with
worldwide facilities. JJT’s demand chain includes more than 60 traditional grocery
stores, convenience stores, wholesalers, and large discount retailing stores. Those
customers include organizations of different sizes, IT capabilities, inventory systems,
and strategies. As one of the JJT’s managers described the variety of retailers:
Supplier: Johnson & Johnson, Taiwan (JJT)

1. Business: service and Personal (skin and oral) care products, baby products
product
2. No. of employees 100
3. Sales (last 3 years) US $20 (Year 3), $19 (Year 2), $19 (Year 1) million
4. Supply chain systems 1. J&J owns no manufacturing facilities in Taiwan. J&J’s headquarters in the US has a global manufacturing and logistics
center that makes delivery to Taiwan based on the information produced by the ERP system
2. J&J’s channel includes approximately 50 retailers, a few wholesalers, and hospitals outlets
3. In general, retailers have more power in this industry
5. IT capability 1. An ERP system has been implemented for 3 years
2. JJT has appropriate IT capability to work with its suppliers, but the degree of integration with retailers varies from retailer to
retailer
6. Org. structure 1. Headquarter: US, Taiwan branch office: general manager
2. Logistics Dept. coordinates with overseas manufacturing facilities for delivery. Customer Service Center communicates with
customers for shipment
3. Majority of operating decisions (e.g. sales promotion) are decentralized to account managers
7. Integration 1. ERP has helped the integration of logistics, sales and planning
3. External integration is more difficult to achieve due to the power of retailers
8. Competitive strategy 1. Leading brand name, quality, fill rate, and product variety
2. Customer service
Retailer ST (specialty PY (specialty SE (convenience WS (specialty store) CF (Hypermarket)
store) store) store)
Corporate headquarters Taiwan Taiwan Taiwan Hong Kong France
Number of employees 35, 4 stores 200, 15 stores 4,000, 2,000 1,000, 220 stores 3,000, 25 stores
and stores stores
Sales US $5 million US $70 million US $2,200 US $1,100 million US $1,800 million
million
Competitive strategy Price, location, Price, variety, Location, Price, variety, availability Price, variety, location, parking
variety availability availability,
fashion
Org. structure Centralized, Centralized, Decentralized, Centralized, moving toward Centralized, moving toward
family family team decision decentralized in operating decentralized in operating
business enterprise decisions decisions
supplier-retailer
collaboration

background information
Supplier and retailers
29

Table I.
Determinants of
IJOPM . . . every individual retailer has its own unique way of doing business with JJT; some are
outdated and some are more advanced. Take inventory systems as an example. Some
26,1 retailers estimate order size visually, while some rely on a computer system to place orders
automatically.
The retailing industry in Taiwan consists of retailers of various sizes ranging from
small family-owned stores to big multinational retailers (e.g. Tesco, Carrefour, and
30 Seven-Eleven). The traditional relationship between retailers and vendors is described
as “splitting up a profit pie” (Jap, 1999), as each party is most concerned with its own
interests. However, some retailers and vendors have made great strides in developing
strategic partnerships since foreign retailers brought in the concept of the supply chain
partnership in the last few years. We included five of JJT’s retailers (ST, PY, SE, WS,
and CF) in this study because they represent a wide variety of business relationships,
sizes, supply chain operations, inventory systems, and levels of collaboration. With
such variety, the selected companies offer a good mixture of scenarios for the purpose
of this study. Methodologically, each supplier-retailer pair is treated as an individual
“case”. In each case, the eight variables that are considered critical to collaboration
between supplier and retailer are studied.
The second part of Table I displays background information for these five retailers.
ST is a small traditional retailer with four stores located in four major cities in Taiwan.
Its products include baby items, personal care, cosmetics, and grocery. It is a
family-owned business and is operated without using much IT. Its primary strategy is
offering a broad product variety at low prices. PY offers cosmetics, personal care and
apparel products. Since its establishment in 1985, its sales have grown consistently,
and it currently has 15 stores with more than 300 employees. It competes on price and
product availability. Its business relationship with JJT has grown steadily over the
years to the point where it has become one of JJT’s top ten customers. SE is the largest
retailer in Taiwan with more than 2,000 convenience stores. It is the first retailer to
introduce the concept of convenience stores in Taiwan, which represents the fastest
growing retailer type in the last few years. Its business philosophy is to offer a
comprehensive product selection capable of satisfying the varying consumer needs.
WS is a retailing giant based on Hong Kong with more 3,000 outlets in 16 countries in
Asia and Europe. It opened its first store in Taiwan in the late 1970s and has become a
leading health and beauty retailer with over 220 stores in 2000. Many credit its success
to the understanding of the local consumers, who seek a bargain and new products in
the stores. CF is a leading international retailer with more than 7,000 stores located in
over 28 countries. Headquartered in France, it started its operations in Taiwan in late
1980s. Over the next 20 years, it opened 25 hypermarkets that offer a broader selection
of food and non-food merchandise at much lower prices than previously available from
local retailers. More information pertaining to each retailer’s supply chain operations
will be presented in the analysis section.

Data collection
Data collection for this study utilized structured interviews in a field setting to ensure
that the same data were collected at all sites. A case study protocol was designed and
used to guide the structured interviews and data collection (Yin, 1994). It consists of
questions pertaining to the eight factors reviewed earlier, company background, and
business environment information. The protocol was reviewed by two university
marketing researchers who are familiar with the retailing business in Taiwan. It was Determinants of
then pre-tested by two senior managers in JJT and two retailers. We also conferred supplier-retailer
with this group of experts to ensure no critical variables were ignored in this project. A
pilot study conducted to review the research propositions improved the conceptual collaboration
understanding of the research issues. Based on the results of the pilot study, several
protocol questions were rephrased to improve clarity. The interviewees also made
several suggestions to enhance the interview method. 31
On-site interviews and observations were conducted after the pilot case study was
concluded. Prior to each interview, the protocol questions were shared with the
interviewees for the purpose of their preparing and gathering necessary information.
The respondents were also informed of the purpose of the study. In all cases, we met
once with two interviewees, including account managers and salesmen in JJT, in order
to reduce confirmation bias. The first researcher wrote up notes from the visit and the
second researcher verified those notes. Disagreements were handled by follow-up
telephone calls. Sources of data collection included interviews, direct observation,
documentation, and archival records. While most of the data were qualitative in nature,
quantitative data (e.g. fill rate, return rate, inventory level) were also collected to verify
the findings. The use of multiple sources of evidence enhanced both the reliability and
validity of this study (Voss et al., 2002).

Research findings
Data analyses were performed at two levels: within-case analysis and cross-case
analysis. Within-case analysis is central to the generation of insights into each case,
because it helps to deal with the analysis of the large volume of data (Eisenhardt, 1989).
In this study, within-case analysis involves the description of individual
supplier-retailer pairs regarding the constructs used in data collection. Such
description allows the unique patterns of each case to emerge before generalized
patterns across cases are created. Table II summarizes the findings from our
within-case analysis. Column no. 1 describes the measures used for the variables
studied. The results of five pairs of relationships are presented.
Using the information in Table II, we then performed cross-case analysis to search
for cross-case patterns pertaining to supplier-retailer collaboration. Each case
represents a supplier-retailer pair with specific level of collaboration gauged by the
eight dimensions: interdependence, duration, trust, long-term orientation, inventory
systems, IT capabilities, supply chain coordination structure, and
communication/information sharing. We designated the first supplier-retailer pair,
JJT and ST, as the base case and looked for potential factors or characteristics critical
to cooperation between supplier and retailer, and the positive outcomes of such
cooperation. This base-case analysis helps to sharpen the research constructs and to
focus the data analysis in other cases. Note that case no. 1 (JJT-ST) and case no. 5
(JJT-CF) represent the two extremes in the level of supplier-retailer collaboration. The
first case, JJT-ST, represents the most primitive type of cooperation between supplier
and retailer. The last case, JJT-CF, has the highest level of collaboration. The remaining
cases were used for reinforcing or rejecting patterns emerging from the first and last
cases.
The remainder of this section discusses the findings of the cross-case analyses. In
the discussion of research findings, we grouped the eight variables into three
 32
26,1

Table II.
IJOPM

Case study results

Critical variable ST PY SE WS CF

1. Supply chain Rating: low Rating: low Rating: medium Rating: high Rating: high
interdependence JJT is critical to ST, but ST JJT is critical to PY but PY SE has more power since WS is JJT’s biggest CF is JJT’s second biggest
(Degree of dependence on accounts for only a small is less important to JJT’s there are many alternative retailer retailer
this relationship regarding volume of JJT’s sales sales suppliers Each side appreciates and Both appreciate and
profit and sales volume; JJT considers terminating It is a profitable JJT needs PE’s business understands the understand the importance
availability of alternative the relationship relationship and channel importance of this of this business
suppliers.) A profitable relationship business relationship relationship
2. Duration and supply Rating: long Rating: long Rating: long Rating: long Rating: long
chain employee stability 14 years; stable 10 years; stable 18 years; some changes 23 years; stable 14 years; very stable
3. Trust Rating: low Rating: low Rating: medium Rating: medium Rating: medium/high
(Benefit/risk sharing; Experience of late Experience of late Top management uses Top management uses Rarely breaks contractual
partners’ reliability and payment and pricing payment and forward contract to establish contract to establish agreement
benevolence.) disagreement buying mutual trust mutual trust No ris-sharing plan
Trust exists in low-level Trust exists in low-level Occasional conflicts in Occasional conflicts in
employees employees shelf displays return goods
4. Long-term orientation Rating: low Rating: low Rating: medium Rating: high Rating: high
(Resource investment; top JJT plans to terminate the low resource investment JJT wants to establish Both stores want to Both sides are willing to
management commitment relationship and focus long-term relationship but establish long-term establish long-term
and support.) Lack of effort in Lack of effort in SE shows less relationship relationship
developing long-term developing long-term commitment
relationship relationship
5. Communication and Rating: low Rating: low/medium Rating: medium Rating: high Rating: high
information sharing Very little information Share sales and promotion Share promotion plan and Share promotion, Share promotion,
(Amount, content.) sharing information payment information inventory and sales inventory and sales
No policy to back up or information information
support the sharing Top management meets to Top management meets to
ensure the sharing of ensure the sharing of
information information
6. Inventory systems Periodic ordering – once a Periodic ordering – once a SE has auto replenishment JJT accesses WS’s A
(Order replenishment; week week system but JJT is not inventory records and vendor-managed-inventory
degree of JJT suggests order size on JJT suggests order size on allowed to access its makes replenishment (VMI) system is installed
computerization.) site and ST top site and PY top system suggestions to WS
management confirms and management confirms and SE has QR capability WS uses EDI and Internet
places order via phone faxes JJT order to communicate
No computer used No computer used
(continued)
Critical variable ST PY SE WS CF

7. Information technology Rating: very low Rating: low Rating: medium/high Rating: medium/high Rating: high
capabilities Both sides possess proper Both sides have proper IT Both sides have high IT
(Table III) IT capabilities but have capability to support the capability to support the
not made effort to work current supply chain current supply chain
together operations operations
8. Supply chain Centralized Centralized Centralized moving Centralized moving Centralized moving toward
coordination structure ST is a family-owned PY centralizes most of its toward decentralized toward decentralized decentralized
(Degree to which authority business and centralizes supply chain operations Centralized contract, Centralize contract, Centralize contract, pricing
for supply chain-related all decisions pricing and promotion pricing and promotion and promotion decisions.
decisions is delegated to decisions. Replenishment decisions. Replenishment Replenishment is
corporate.) is decentralized is decentralized decentralized
9. Supplier-retailer Rating: low Rating: low Rating: medium Rating: medium/high Rating: high
collaboration No joint planning or No joint planning or Limited to sales promotion Have conducted joint Have conducted joint
(Type and number of problem solving problem solving planning and forecasting planning, forecasting, and
collaboration projects and Have teams to work on category management
problem solving special supply chain Have teams to work on
activities.) projects special supply chain
projects
10. Supplier-retailer Rating: low Rating: low Rating: medium/high Rating: medium/high Rating: high
performance Neither side is pleased Neither side is pleased A fair degree of Both realize the potential The new VMI system and
(Manager’s subjective with the current with the current satisfaction; both are benefit for working more category improved
evaluation, 1-10; relationship relationship frustrated with a few closely together inventory and profit
10 ¼ best.) Satisfaction: 4 Satisfaction: 6 unsettled conflicts Satisfaction: 8 performance
(Inventory, fill rate and Satisfaction: 7 Satisfaction: 9
return goods.)
Inventory: 67.2 days Inventory: 66.3 days Inventory: 42.3 days Inventory: 55.9 days Inventory: 19.5 days
Fill rate: 93 percent Fill rate: 94 percent Fill rate: 97.5 percent Fill rate: 96.8 percent Fill rate: 98.2 percent
Percentage of return: 0.3 Percentage of return: 0.04 Percentage of return: 0.02 Percentage of return: 0.01 Percentage of return: 0.0
supplier-retailer
collaboration

33

Table II.
Determinants of
IJOPM dimensions: business relationship, long-term orientation, and supply chain
26,1 architecture. This grouping is based upon the premise that the supplier-retailer
relationship can be understood better through the study of different dimensions, such
as social, economic and technical (Grover et al., 2002). Finally, the level of
supplier-retailer collaboration and the performance outcomes of the collaboration are
presented for each case. These results are summarized as Nos. 9 and 10 in Table II.
34
Business relationship
Interdependence, duration/stability, and trust describe the social aspects of the
supplier-retailer relationship. The findings of these three factors are summarized as
Nos. 1-3 in Table II, and they are grouped together and discussed under the construct
of business relationship.
Interdependence exists when one party does not entirely control all of the conditions
necessary for achievement of an action or a desired outcome (Handfield and Bechtel,
2002). We asked JJT’s managers to assess the level of interdependency with various
retailers based on the sales, profits, and the need for a business relationship. ST and PY
account for an insignificant volume of JJT’s sales, but the business relationship is
critical to their profits and sales. The level of interdependence is low in the first two
cases as compared to the other three companies: SE, WS and CF. WS and CF are JJT’s
largest and second largest retailers, respectively. WS is the largest retailer of cosmetics
and skin care products in Taiwan, while CF is the largest discount retailing chain in
Taiwan. They both offer JJT important marketing channels. In addition, JJT is a
primary supplier to WS and CF and the business relationship has been very profitable
for both retailers. Finally, the case of SE is interesting in many respects. Both the
supplier and the retailer receive satisfactory profit from this business relationship;
however, SE owns more than 3,000 convenience stores in Taiwan and it has numerous
substitute suppliers available to meet its needs. Consequently, SE does not rely on JJT
for its business and there is clear power asymmetry in this relationship. JJT, on the
other hand, values SE’s channel and works harder to maintain the relationship.
Overall, the interdependence of the relationship with SE is lower than that with WS
and CF. Accordingly, the ratings for the interdependence variable are: JJT-ST (low),
JJT-PY (low), JJT-SE (medium), JJT-WS (high), JJT-CF (high).
All pairs have continuous relationships with a minimum ten-year duration. In
addition to duration, we considered the turnover rate of the supply chain employees to
measure the continuity and stability of the relationship. However, stability and
duration do not seem to be critical to the supplier-retailer relationship in this study.
This is different from previous findings. For example, both ST and CF have a 14-year
continuous business relationship with JJT, but the levels of management support and
collaboration are extremely different. Furthermore, the comparison between JJT-ST
and JJT-PY indicates a lacking of correlation between duration/stability and
collaboration. ST has longer duration (14 vs 10 years), but PY works with JJT more
closely because of the sales level.
A more in-depth discussion with industry experts revealed that duration and
continuity might be insufficient to influence collaboration in the retailing industry.
Bensaou and Anderson (1999) and Ganesan (1994) suggest that the “intensity” and
“nature” of the experiences of the parties may matter more than the duration of
supplier-retailer relationship. In that regard, the old but monotonous relationship
exhibited in ST may be worthless in the collaboration. More studies are necessary to Determinants of
confirm whether duration/continuity is a valid factor in supplier-retailer collaboration. supplier-retailer
Our results indicate that “intensity”, defined by the significance of sales volume or
profit, is a more viable variable. It is likely that the more substantial the overall collaboration
business relationship, the more commitment and long-term orientation the partners
develop.
Trust exists when a firm believes its partner is reliable and benevolent (Heikkila, 35
2002). This study measures the level of trust based on the partners’ reliability, and the
belief that the partners stand by their word, fulfill promised obligations, and act with
sincerity. Historically, suppliers and retailers have had rather adversarial
relationships, and mutual trust and collaboration is difficult to develop. Overall,
with the exception of ST, all other retailers exhibit significant amounts of trust as
evidenced by their abiding by mutual contractual agreements. For example, most
retailers would not deliberately reduce retail prices without prior discussion with JJT,
and they are very reliable in on-time payment. An interesting observation is that the
“source” of trust is different among the five cases. In the ST and PY cases, trust is
established through frequent on-site interactions between low-level employees.
Nevertheless, the benefits from this informal, personal level of trust are limited since
ST and PY are highly centralized and low-level employees do not have authority in
making supply chain-related decisions. Furthermore, such trust could be lost if there is
turnover in employees. In contrast, the trust in the SE, WS, and CF cases is clearly
demonstrated by top management and supported by corporate policies. The level of
trust is not significantly affected by the turnover at the lower employee levels.
Therefore, when we take into consideration the source of trust, SE, WS and CF have
more “stable” trust established at top management levels.
We also investigated another aspect of trust exhibited by benevolence outside of the
contractual agreement. For JJT, trust with SE and PY is difficult to develop because of
their “deal buying” and “forward buying” behaviors. SE occasionally removes JJT’s
products from displays without prior notice to promote other suppliers’ products,
which creates great tension between the two parties. Generally, SE pursues its own
interests and does not actively seek either mutual profit or risk sharing activities.
Occasionally, it would charge JJT slotting fees for the right to display its slow
merchandise. WS and JJT encountered an unpleasant situation when WS returned
goods without prior agreement from JJT. Relatively speaking, CF rarely takes
unexpected actions and is more trustworthy and reliable in following contractual
agreement. Overall, none of the current supplier-retailer relationships exhibit a high
degree of benevolence. As described by a senior manager at JJT, the concept of trust is
still relatively new and difficult to accept in the retailing industry in Taiwan where
there are historically adversarial relationships between retailers and vendors
(Euromonitor International, 2004). The ratings for the trust variable are: JJT-ST
(low), JJT-PY (low), JJT-SE (medium), JJT-WS (medium), and JJT-CF (medium/high).

Long-term orientation
In this study, long-term orientation is regarded as the socio-economic construct and is
measured by the relationship-specific investment, top management support, and
willingness to establish a long-term relationship. These findings are summarized as
no. 4 in Table II. In the JJT-ST and JJT-PY relationships, resource investment and top
IJOPM management support to develop a long-term relationship are minimal. For example,
26,1 neither firm has invested in upgrading its outdated inventory systems. Top
management from JJT and the two retailers seldom meet, and most interactions are
between low-level employees. JJT has considered terminating its business relationship
with ST. Meanwhile, JJT displays some interest in working with PY, but has not given
high priority to making investments for improving the relationship. PY has requested
36 help from JJT for upgrading its inventory systems, but JJT is reluctant to make any
further investments. Moreover, JJT’s top management has made little effort to resolve
some of the long lasting business conflicts (such as pricing and a return goods policy)
with PY, and the current business relationship continues to suffer from such
disagreements.
In contrast, both WS and CF display greater willingness and credible commitment
in establishing long-term relationships with JJT. Top management from both sides
meet every week to discuss major collaboration projects, such as new sales promotions.
CF and JJT invested in a new inventory system to improve supply chain efficiency. WS
and JJT are currently in the process of making similar financial commitments to
upgrade their inventory systems. Both CF and WS committed a variety of assets to a
set of future transactions. Somewhere in the middle ground, SE and JJT each
endeavored to improve its own planning capability and operations efficiency, but
insufficient effort was made to achieve integration between the supplier and retailer.
Top management meets once a month to review current contracts, but SE perceives no
need to alter the status quo, since managers are already pleased with the profit from the
current business relationship. They do not believe any additional investment in the
relationship is needed. The data gathered indicate that this business relationship is
indeed mutually profitable and efficient, even with the medium level of commitment to
collaboration. Our ratings for the long-term orientation variable are: JJT-ST (low),
JJT-PY (low), JJT-SE (medium), JJT-WS (high), JJT-CF (high).

Supply chain architecture

In this research, supply chain architecture refers to a collection of technical components
and interorganizational arrangements that have directly enabled supplier-retailer
collaboration. Four variables emerged from the data to make up this technical
construct: information sharing (communication), inventory systems, IT capabilities,
and supply chain coordination structure. The findings for these variables are
summarized as Nos. 5-8 in Table II.
Information sharing refers to the extent to which the information exchange is
effective in a partnership and includes the level and the quality of information sharing
(Monczka et al., 1998). In the cases of ST and PY, there is no formal communication
system, and most of the information sharing occurs via informal personal interactions
when JJT’s sales personnel visit the retailers’ stores. Since the store employees or even
the store managers have no authority to give away sales data, the content of the
information sharing is mostly in terms of past sales data that have few strategic
implications. In contrast, the quantity, quality and content of information sharing are
better with SE, WS, and CF. All these retailers share forecasting, inventory, market,
promotion, and consumer trend information. WS and CF display the most willingness
to cooperate as they provide JJT access to real time demand data and coordinate their
order fulfillment policies for the benefit of the supplier. The ratings for the information
sharing variable are: JJT-ST (low), JJT-PY (low), JJT-SE (medium), JJT-WS (high), Determinants of
JJT-CF (high). supplier-retailer
Inventory systems refers to the infrastructure for inventory replenishment
decisions. In the cases of ST and PY, the inventory decisions are made using a very collaboration
primitive approach, namely, JJT salespersons visit stores weekly and suggest order
size to the retailers on the spot. Upon approval from the retailers’ headquarters of the
retailers, orders are confirmed and JJT salespersons inform their customer service 37
center to arrange delivery. No computers are used to reach the decisions; everything is
done manually or by phone.
The other three retailers, SE, WS, and CF, have implemented some sort of quick
response (QR) system; some are fully implemented and others are partially
implemented. For instance, SE uses EDI solely for the transmission of purchase and
shipping information, while WS and CF use QR throughout much of their merchandise
logistics. SE has a computerized system to manage its order fulfillment process. Its
warehouses check inventory levels continuously and send order placement information
to JJT’s customer service center directly. SE’s advanced inventory system enables JJT
to remove retailer-specific inventory, resulting in major improvements in demand
chain efficiency. However, SE maintains and manages its own inventory system
without relinquishing control of key replenishment decisions to JJT. As such, JJT has
no access to SE’s inventory records, and is not involved in SE’s replenishment
decisions. Overall, what separates SE from ST and PY is the direct electronic
communication between SE’s warehouses and JJT’s customer service center.
Both WS and CF have advanced inventory systems. WS provides JJT with its
inventory status and utilizes EDI for order placement. However, JJT does not manage
WS’s inventory system. In contrast, CF has the most advanced inventory system,
co-management inventory (CMI), and utilizes more information technologies such as
EDI, electronic invoicing, and bar coding. The CMI system monitors inventory levels
and automatically places new orders. Replenishment is triggered by sales data,
because JJT has access to CF’s sales and inventory information stored in the CMI
systems. Overall, in a progression from ST to PY to SE to WS to CF, the inventory
system evolves from a forecast-driven push system to a response-based “partnering
initiative” aimed at improving cross-firm supply chain efficiency.
IT capabilities refer to the level of IT competence to support supply chain-related
operations such as inventory systems. Firms may possess sophisticated IT but do not
apply it to improve supply chain operations. Proper usage of IT capabilities allows
supply chain partners to interconnect and reduce transaction costs in and amongst
organizations (Welty and Becerra-Fernandez, 2001). IT use in buyer-supplier
exchanges leads to closer cooperative relationships (Bakos and Brynjyoolfsson,
1993). IT capabilities accelerate and smooth the physical flow of goods through a
supply chain and expand the flow of information (Cachon and Fisher, 2000).
JJT has implemented SAP and developed a high degree of internal information
integration. Table III summarizes the IT capabilities possessed by these five retailers.
Neither ST nor PY was equipped with proper IT systems to support cooperation with
JJT. Manual operations, phones, and fax machines were applied to track stock levels
and manage order fulfillment. At the other extreme, both WS and CF have capable IT
systems and have applied them to improve cooperation with JJT. SE presents an
interesting scenario. SE has an ERP system integrating its sales, accounting, and
IJOPM
ST PY SE WS CF
26,1 Information technology (IT) (years) (years) (years) (years) (years)
pa p p
ERP systems
p. 4 p. 3 p. 7
Electronic data interchange (EDI)
38 p. 11 . 12 p. 14
Electronic point-of-sale (POS) scanners
p p. 2 p p. 6
Electronic payment
p p. 3 p. 5 p. 6 p. 10
Barcoding
. 10 . 10 p. 12 p. 12 p. 12
Automatic replenishment of basic goods
.5 .4 p. 11
Automatic forecasting for fashion/seasonal goods
p p p. 8
Advance ship notices (ASNs)
.5 .3 . 10
Table III.
a
IT capabilities Note: The length of implementation (in years) for a particular information technology

warehouse data. There is a high degree of internal integration. However, SE has made
no effort to apply its IT capabilities to improve supply chain efficiency with JJT. The
implication of this observation is that IT competence does not automatically contribute
to more and better collaboration with a supplier if the retailer is not willing to apply IT
to improve external integration. The ratings for the IT capabilities variable are: JJT-ST
(low), JJT-PY (low), JJT-SE (medium/high), JJT-WS (medium/high), and JJT-CF (high).
Note that Table III also lists the timeline of implementing various IT tools in these five
retailers. In most situations, CF made the necessary IT investments continuously over
time and is clearly the first retailer to set up for advanced supply chain operations.
Supply chain coordination structure refers to the level of decentralization for supply
chain-related decision-making. In this study, we focus on the level of authority
associated with inventory decisions, information sharing, contract signing, and
logistics operations. In general, JJT centralizes important supply chain decisions such
as contracts and pricing, but decentralizes operational level decisions such as logistics
and shelf displays. In ST and PY, most supply chain decisions are made centrally.
While the other three retailers centralized important decisions such as contracts and
pricing, they have decentralized decisions at the operational level.
This observation seems to be consistent with findings from previous studies. Stank
et al. (2001) found that in the grocery products industry, centralization appears to be a
means to an end. Firms, at early stages of developing integration, choose a
decentralized structure. Firms at mid-level of integration are, generally, much more
likely to be centralized. Virtually all of the highly integrated, but decentralized firms
passed through a centralized phase of development along the way to integration.
During this centralized phase, the company’s supply chain processes, measures, focus,
and culture all aligned to a level in which they established a backbone of consistency in
supply chain relationships. The consistency was so integrated that it carried over when
they later moved to a more decentralized system. Consistency building came from
years of centralized control and rigidly standardized processes (Sabath et al., 2001). Determinants of
Apparently, ST and PY are still in the early stage of supply chain relationship supplier-retailer
development, where top management even makes order fulfillment decisions.
Meanwhile, SE, WS, and CF have already standardized and decentralized their collaboration
operational level decisions such as logistics and order fulfillment processes. The
ratings for the supply chain coordination structure variable are: JJT-ST (centralized),
JJT-PY (centralized), JJT-SE (moving toward decentralization), JJT-WS (moving toward 39
decentralization), and JJT-CF (moving toward decentralization).

Supplier-retailer collaboration
Supplier-retailer collaboration is a process of decision making among independent
parties. It involves ownership of decisions and collective responsibility for outcomes.
Stank et al. (2001) suggest that supply chain collaboration is the construct of
coordination, participation, and joint problem solving between supply chain partners.
A degree of cooperation could come from the engagement of joint planning and goal
setting (Mohr and Spekman, 1994). Partners may invest resources on supply
chain-related projects to improve inventory systems, joint forecasting, and possible
strategic planning. A summary of the findings for this variable can be seen in no. 9 in
Table II.
We assessed the level of collaboration by the amount of joint planning (e.g.
forecasting, category management, new product design, promotion campaigns, display
designs, advertising, etc.) and problem solving (e.g. diverted merchandise, price
markdowns, emergency orders, etc.) activities performed by JJT and its retailers.
Accordingly, we found that the level of collaboration between JJT and ST and PY is
very low. Sales personnel and store employees have frequent and high levels of
personal interactions, but could not produce meaningful co-planning activities because
of the lack of support at the corporate level. There is scant coordination of strategic
planning, inventory management, and demand forecasting between JJT and these two
retailers.
The other three retailers have a higher level of coordination with JJT. High-level
managers have frequent meetings to discuss market trends and competition, to resolve
differences in pricing and discounts, and to participate in new-product development or
promotion plans. For instance, CF has invited JJT to participate in its “category
management” project to maximize CF’s sales in three product categories: baby
cleaning, baby hygiene, and facial foam. This project involves multiple departments
from both sides. They must cooperate in activities and decisions related to sales (e.g.
promotion campaigns, sales forecasting, and product package designs), channels (e.g.
store promotion and shelf display arrangements), and delivery. In order to implement
this category management project, CF was “forced” to share more internal information
(e.g. individual store sales, supplier breakdown) with JJT. Apparently, higher levels of
collaboration are possible only through more information sharing.
The collaboration with WS and SE is not as extensive, and it is primarily limited to
solving problems, designing sales promotion campaigns, negotiating exclusive
territories, and developing sales forecasting. As discussed earlier, SE has proper IT
capabilities and is in the position to engage in more collaboration with JJT.
Nonetheless, the relatively low trust and low interdependence appear to be the major
barriers to information sharing, IT applications, and collaboration. Conversely, while
IJOPM current collaboration projects between JJT and WS are few, the high levels of trust and
26,1 interdependence seem to be pushing managers for further collaboration of various
projects. JJT is rather optimistic about future collaborations with WS. Overall, the
ratings for the collaboration variable are: JJT-ST (low), JJT-PY (low), JJT-SE (medium),
JJT-WS (medium/high), and JJT-CF (high).

40 Supplier-retailer performance
In this study, supplier-retailer performance is measured combining both quantitative
and qualitative data and multiple dimensions of performance were used (Murphy et al.,
1996). Specifically, data related to inventory level, fill rate, and the percentage of
returned goods were collected to assess the efficiency of supplier-retailer collaboration.
Additionally, a subjective evaluation of the overall satisfaction of the relationship with
JJT’s managers was used to measure supplier-retailer performance. All relevant
quantitative and qualitative measures for the five supplier-retailer pairs are presented
in the last row of Table II. The levels of performance and satisfaction are low in the
cases of JJT-ST and JJT-PY. SE displays good inventory and return goods
performance, but fails to score high in subjective satisfaction due to its lack of
participation in co-planning and information sharing. WS’s performance is similar to
SE’s, but managers on both sides demonstrate slightly higher satisfaction with their
overall relationship and express higher confidence in their future collaboration. CF has
the best quantitative performance, mostly due to the success of its inventory systems
with JJT.
Overall, our findings indicate that, with the exception of duration, all variables are
found critical to supplier-retailer collaboration, as has been suggested by the extant
literature. It is the intensity, as opposed to the duration, of the relationship that
influences the retailer-supplier relationship. Referring to the first research question, the
purpose of this study goes beyond confirming the criticality of those eight variables.
We proceeded to the analysis of constructing the architecture of a well-performing
supplier-retailer network. We first confirmed our a priori assumption relative to the
performance of these five supplier-retailer pairs. Figure 1 shows the performance of the
five paired relationships based on their levels of collaboration. Each of the five cases is
plotted on a matrix according to the level of supplier-retailer collaboration and
supplier-retailer performance. JJT-ST and JJT-PY display a lower level of collaboration
that has resulted in lower performance in their relationships. SE does not fully

High
Supply chain performance&

CF

SE WS
satisfaction

PY
ST
Figure 1. Low
Cross-case analysis:
collaboration and
performance Low High
Supplier - retailer collaboration
cooperate with JJT, but still maintains a high-level of supply chain efficiency in terms Determinants of
of inventory levels. We found out that SE’s internal operational efficiency and IT
capabilities (e.g. electronic point-of-sale) produced better forecasting and high internal
supplier-retailer
integration between its distribution centers and stores, which contributed to more collaboration
frequent delivery, fewer stock outs, and lower inventory levels. However, SE neither
does actively pursue external collaboration with JJT in co-management of the
inventory, nor does it show any long-term orientation in the relationship. Levels of 41
satisfaction from managers regarding the relationship are lower as compared with CF
and WS. Combining both subjective and quantitative measures, the performance
ratings are: JJT-ST (low), JJT-PY (low), JJT-SE (medium/high), JJT-WS (medium/high),
and JJT-CF (high).
Given the relative performance of the five cases, we replaced the duration variable
with the intensity variable and returned to the data and investigated the interactions of
the eight variables based on cross-case comparisons. The next section presents a model
that illustrates the relationships among the seven critical variables, collaboration, and
performance.

Toward a supplier-retailer relationship model

The research findings are summarized in Figure 2 as a comprehensive model that
displays five relationships among the various constructs discussed in the previous
section. While some of the relationships in the model are discussed in previous
research, the discussion is fragmented and this model attempts to provide a holistic
view of the supplier-retailer relationship.
R1. Supplier-retailer business relationship (interdependence, intensity, trust)
affects long-term orientation.

R2. Supplier-retailer business relationship affects supply chain architecture

(information sharing, inventory system, IT capabilities, and coordination
structure).
The degree of interdependence, intensity, and trust reflects the social aspect of the
supplier-retailer relationship and they are combined as a single construct. Both
variables seem to influence management commitment for resource investment in
long-term relationships. For example, neither ST nor PY offers sufficient profit and
sales volume to motivate JJT to invest resources in improving supply chain operations.
The lack of trust between the companies’ management never develops a long-term
orientation and discourages information sharing and IT applications. Management in
ST and PY centralized inventory-related decisions and did not allow JJT to get
involved in their order replenishment decisions. In contrast, WS and CF show high
levels of interdependence and trust. The high levels of interdependence and intensity
motivate JJT and the two retailers to continuously invest in the relationship; such as
implementation of more advanced inventory systems. High interdependence also
encourages the two retailers to manage their inventory systems with JJT, to share more
information, and apply IT to improve the efficiency of supply chain operations. High
trust reduces the perception of risk associated with the occasional opportunistic
behaviors by the suppliers. In general, JJT believes that most short-term inequalities
with WS and CF will be resolved as the relationships continue to progress. The mutual
IJOPM
26,1

42

Figure 2.
Supplier-retailer
collaboration model
trust serves as the basis for developing formal policies to decentralize operating Determinants of
decisions for better responsiveness. supplier-retailer
The JJT-SE pair presents a rather interesting scenario. The medium levels of trust
and interdependence prevent the retailer from investing specific resources in this collaboration
relationship, while JJT shows a stronger desire to maintain the partnership due to the
significance of the volume of sales and SE’s channel. It is not that SE management does
not appreciate the sales and profit from working with JJT, but SE does not make a full 43
commitment to the partnership due to the availability of alternative suppliers. In the
meantime, the lack of trust discourages information sharing and the application of IT
to improve the efficiency of the relationship. SE owns high IT capabilities and could
actually implement an advanced inventory system. However, it decided to manage its
own inventory systems with a limited amount of coordination with JJT.
R3. Long-term orientation affects supply chain architecture.
Long-term orientation is positively associated with the enhancement of existing supply
chain architecture. Top management commitment and support to this relationship
affects the quality and quantity of information sharing, the development of advanced
inventory systems, and the application of IT capabilities. For instance, JJT does not
engage in information sharing with PY and ST. In addition, PY and ST have reactive
and primitive inventory systems; their supply chain activities utilize very little IT, and
their coordination is centralized with low response to the partner’s needs. Apparently,
the scant commitment to the relationship has led to resistance to make any
improvement in supply chain architecture. The paring with WS and CT offers
completely different supply chain architectures because of the stronger long-term
orientation. SE decentralized the coordination of its operational activities with JJT, but
it is not willing to develop stronger supply chain architecture (with more information
sharing and a co-managed inventory system) even though it is capable of doing so
from a technical point of view.
This linkage is generally consistent with previous studies. Shah et al. (2002) indicate
that the design of interorganizational information systems is likely to align with the
parties’ orientation toward the relationship. Companies with short-term or arm’s length
orientations tend to have low-level integration, while those with long-term orientations
develop moderate or high integration between the partners. In the context of supply
chain management, “technology not only is an enabler, but also sets . . . limits on what
organizations can efficiently manage on the operational level” (Hoover et al., 2001,
p. 185), but such investments are usually preceded by a long-term orientation (Bensaou
and Anderson, 1999; Handfield and Bechtel, 2002).
R4. Supply chain architecture affects the level of supplier-retailer collaboration.
There is clear alignment between these two constructs in our findings. Supply chain
architecture influences the level and the amount of cooperation between supplier and
retailer. Namely, better communication, more advanced inventory systems, more
decentralized and responsive coordination structures, and greater supply chain IT
capabilities provide a more effective platform for both parties to engage in
coordination, participation, and problem solving activities.
This linkage is partially supported by previous studies. For example, the study by
Kalafatis (2000) indicates there is a positive relationship between better
IJOPM communication (or information exchange) and supplier-retailer collaboration. Also, the
26,1 majority of research on the association between IT and collaboration proposes a
positive link between EDI and buyer-supplier relations (Emmelhainz, 1987; Larson and
Kulchitsky, 2000). Investments in IT to support both the sharing of just-in-time (JIT)
schedules and the establishment of integrated information links are related to
significant reduction in the levels of shipment discrepancies (Srinivasan et al., 1994).
44 R5. Supplier-retailer collaboration enhances supplier-retailer performance.
As expected, higher levels of collaboration result in operational efficiency in supply
chain systems in terms of inventory levels, fill rates, returned products, and levels of
satisfaction. As shown in Figure 1, the relationship between the two constructs is
generally consistent. A slight inconsistency occurs in the SE and the WS cases. While
WS engages in a higher level of collaboration, this relationship does not significantly
outperform the JJT-SE relationship, especially regarding the level of inventory. After
discussing this observation with the JJT managers, we found out that SE owns a very
advanced ERP system. It has allowed for a high-level of internal integration between
its stores, warehouses, and logistics operations. The high internal integration is able to
somewhat compensate for the lack of external integration with the supplier.
Nevertheless, the lack of external integration with JJT ultimately affects the
performance in fill rates.

Limitations
During data collection, we interviewed suppliers but not retailers. Nonetheless, JJT has
kept a complete record of its business with retailers, including meeting frequency,
surveys of retailer satisfaction, inventory records, etc. In all cases, we made efforts to
gather available objective measures and/or specific examples to verify JJT managers’
subjective evaluations for various variable measures. For instance, in judging the level
of interdependence, we collected information regarding the breakdown of sales volume
and profits from both retailers and JJT so that we could estimate the significance of the
business relationship to each party. Finally, in order to generalize the findings, more
case data need to be collected.

Conclusions
Collaboration is critical for successful supply chain and organizational performance.
While there has been increasing interest and emphasis on the topic of supply chain
collaboration, the literature has been somewhat fragmented in that it has often focused
on a small number of factors independently. In addition, studies on collaboration have
been rather prescriptive. What is needed to maximize interorganizational collaboration
is not fully understood.
This paper has investigated this issue by developing a supplier-retailer relationship
model. The model identifies several economic, social, and technical variables that are
essential for interorganizational collaboration. Most of these variables found to be
important for interorganizational relationships are supported by previous studies. This
proposed model is integrative in that it demonstrates those variables that are directly
and/or indirectly related. This knowledge will enable the management of
supplier-retailer networks to produce better supply chain collaboration and
performance.
 The model shows that factors influencing collaboration are both social and Determinants of
technical. Supply chain architecture is like an “information infrastructure” (Star and supplier-retailer
Ruhlender, 1996) that facilitates partners’ collaborative activities. Successful supply
chain collaboration needs the support of technical factors such as inventory systems, collaboration
information sharing channels, and IT capabilities. Developing such infrastructure
requires financial and emotional investments from both partners. The model suggests
that business relationships and management commitments precede and influence 45
supply chain architecture. The architecture for supply chain collaboration needs to be
nurtured by the business relationships and financial commitment between partners.
Companies need to understand they are dealing with partners with different
business relationships and supply chain architectures. Without interdependence,
intensity, and trust, for example, developing supply chain architecture is difficult and
challenging if not impossible. Such an attempt could lead to negative consequences on
partnership, as in the case of EDI implementation (Hart and Saunders, 1997). Lack of
trust becomes a constraint in interorganizational relationships that prevents
improvements in coordination through expanded use of EDI. Both suppliers and
retailers should take a more holistic approach to the management of supply chain
networks by considering both social and technical factors simultaneously and the need
for proper business relationships.
Several potential research issues are derived from the findings of this study:
.
The specific association among variables in the model requires more study. For
example, some of the relationships would be bi-directional, such as that of IT
capabilities and long-term orientation. Some studies imply that IT (Grover et al.,
2002) and information sharing (Anderson and Weitz, 1992) can increase trust or
long-term orientation. Recent studies by Akkermans et al. (1999, 2004) and his
colleagues showed that, in fact, there are self-reinforcing dynamic interactions
among variables such as trust, information sharing and collaboration. Increases
in trust lead to increases in information sharing, which improves supply chain
collaboration. This in turn increases trust. A more thorough study of the
relationships among variables is necessary to understand the complexity in the
nature of the supplier-retailer collaboration.
.
Our study indicates that duration and stability have no significant influence on
collaboration. This finding differs from that of previous studies (Ganesan, 1994;
Heide and John, 1990; Mohr and Spekman, 1994). In a hostile business
environment such as retail in Taiwan, competition between suppliers and
retailers has been extremely fierce and developing supply chain partnership is a
challenging task from social and cultural aspects. It is not surprising that
duration and stability of the relationship do not significantly contribute to
long-term orientation and supply chain architecture. Future studies should
investigate whether the effect of duration depends on the environment or any
other factors.
.
Stank et al. (2001) suggest that both internal and external collaboration are
necessary to ensure supply chain performance. Collaboration is necessary within
and beyond the firm’s boundaries and internal collaboration drives external
collaboration. In this study, SE exhibits a high-level of internal integration
through the creation of cross-functional teams composed of individuals from
IJOPM various areas working with JJT to develop promotional programs. Internal
26,1 collaboration is reinforced by the high degree of information sharing between
departments using an ERP system. However, we found that PE’s internal
collaboration did not automatically translate to external collaboration with JJT
due to its lack of trust and interdependence. Moreover, the performance of the
JJT-SE relationship is less satisfactory than the JJT-WS pair that exhibits a
46 slightly higher degree of external collaboration. A follow-up interview with the
JJT managers revealed that WS might not have the same level of internal
integration that SE has. This observation raises an interesting research question
regarding the function of internal integration in the supplier-retailer relationship.
Is the influence of internal integration dependent on other relationship factors
such as trust and interdependence?
.
When facilities are located in different countries, national differences, such as
national culture, language, management style, and so on can affect “the way of
doing business” (Sheu et al., 2004). In this study, JJT is a US-based company and
the five retailers are from three different countries: Taiwan, France, and the US
Our results confirmed the effect of the social construct on the supplier-retailer
collaboration. Considering the association between national differences and the
social construct, future studies should investigate the influences of the national
differences in the supplier-retailer collaboration. For example, we do not know
how much of the PE’s unique supply chain behavior was related to the factor of
national culture. It is unknown how national differences affect the relationships
among the eight variables. What and how much adjustment should J&J and
international retailers make to foster collaboration when doing business in
another nation? How do those adjustments affect the structure of the proposed
relationship model? Obviously, many research issues related to supplier-retailer
collaboration in the international environment remain to be addressed in the
future.

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Chwen Sheu can be contacted at: [email protected]

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