The impact of decision-making sharing between supplier and manufacturer on their collaboration performance

Abstract

Purpose - IThe purpose of this paper is to focus on manufacturers and suppliers who engage in strategic relationships for quality improvement and new product development. Depending on the balance of bargaining power in the relationship, each partner's resource commitment to the activities such as quality improvement and new product development may vary. This has implications for both manufacturer and supplier profitability. Therefore the paper aims to investigate how variations in the structure of the decision-making process (i.e. manufacturer dominated, supplier dominated, or balanced) affect the performance of each partner in strategic collaborative relationship. Design/methodology/approach - In order to answer the research question, the paper uses real data from a telecommunications company to develop a simulation model and conduct a what-if analysis. Findings - The analysis shows that sharing the decision-making process has indeed a significant impact on the collaboration performance: an optimal outcome would have been achieved should the objective function have taken into account both partners' profit maximization at the same time. Although the outcome may be bound by the specific context of the case, the paper puts forth that the supply chain partners could expect better performance from their collaboration when both of their perspectives are accommodated equally. Originality/value - In conducting the research, unlike most of the previous studies using qualitative methods, this paper employed the system dynamics simulation to develop an analysis model by calibrating the real data. Therefore, the paper's conclusions are more analytical and generalizable than others based only on qualitative reasoning.