Buyer and Seller Relationship in the retail industry Essay
Buyer and Seller Relationship in the retail industry
For many years buyers and sellers in the clothing retail sector have been battling to answer the question as to why it is difficult to build a steady relationship with one another. This can be due to the knowledge gap that there is in a lack of understanding on the issue. We aim to thoroughly associate the concepts of Collaboration, Information Sharing, Joint Relationship Effort, Dedicated Investments, Commitment and Trust, Satisfaction and Performance with the different buyer – seller relationships that exist in the clothing retail sector. Thus the problem being investigated is the unsteady relationship that exists in the clothing retail sector between buyers and sellers.
The study will be using a survey consisting of 37 questions that will be issued to buyers in the industry. A sample size of 500 clothing companies will be used in Cape Town, South Africa which was selected to answer the surveys. The research method is quantitative in nature. Thus the study aims to carefully examine how buyers and sellers interact within the supply chain relationship. Some papers have touched on supply chain relationship issues, but have not done the association with these particular concepts our study aims to use. The main objective of our research is to provide buyers and sellers with the necessary information to assist them as to why there are certain imperfections in the relationship.
2. Literature Review
Some research has be done on the concepts collaboration, information sharing, joint relationship effort, dedicated investments, commitment and trust, satisfaction and performance, which gave an insight to how these variables develop, change and how they are maintained in the context of buyer-seller relationship. Therefore for the purpose of this study twelve (12) articles written in the context of buyer and seller relationship will be used to define and explain the above mentioned concepts and how it is used throughout our research study.
Collaboration can be defined as latest development in supply chain management which involves the process of working together with your suppliers, business partners or clientele in achieving a common goal that benefits all parties (McLaren, Head & Yuan, 2002). Ellinger, Daugherty & Keller (2000) observed what exactly links marketing and logistics within a company’s integration, as well as measures of performance that are both objective and subjective in nature. They found and identified collaboration as a variable that impacts a relationship in a progressive way in that it increases sharing information and ideas and leads to partners functioning together.
McLaren, Head & Yuan (2000) has identified information sharing as the exchange of important company information with your supply chain partner for purposes that would assist each partner in the future. McLaren et al. (2002) discusses how a partnership between the buyer and seller can be beneficial for both parties where information sharing is of key importance. Their findings were that, creating partnerships between buyers and sellers were beneficial for both parties and that the success of information sharing depends on the type and size of the company as well as which mechanism they used for information sharing.
Joint relationship effort
Joint relationship effort refers to the combined determination and drive that is put into collaboration between buyers and sellers. Monczka, Petersen, Handfield & Ragatz (1998) argued for example that when task organisation is performed between buyers and sellers, the buyer can then form a perceptive trust in their partner’s abilities which will later form a solid trust in their relationship.
Knemeyer, Corsi & Murphy (2003) defined dedicated investments as particular resources and goods that are transferred to another party that is highly important towards producing services and products. They tried to prove that there are different levels of partnership development in logistics management by research done by previous researchers who have also done research on the existing topic and if there is in fact a difference between these levels. Their findings were that the more trust there is within the relationship, the more partners invest in the relationship which directly increases dedicated investment.
Commitment and trust
Commitment refers to buyers and sellers engaging themselves and maintaining a working relationship in a way that will benefit both their own organisation and the company they have an association with. Trust refers to the reliance, surety, confidence or ability in a person or thing. In this case, it is having the reliance, surety, confidence or ability in the working relationship of one or more organisations. Mohr and Spekman (1994) was the first to find that trust and commitment are of utmost importance in a buyer – seller relationship, and that these factors lead to the success of the relationship.
Satisfaction and Performance
Satisfaction can be defined as referred to Mohr & Spekman (1994) as the completion of a task by which the involved party is pleased with the quality and degree of work carried out and it meets the standard set by the partners. Performance on the other hand can be defined as the completion of a task by a degree higher than specifications set out by the individual involved. Mohr & Spekman (1994) argued that the buyer-seller relationship is a partnership which generates satisfaction when performance expectations have been achieved. A study had been conducted and showed that commitment and co-ordination are positively associated with satisfaction and an increase in profits would bring about satisfaction among those parties involved in the supply chain
3. Research Hypotheses
The hypotheses are constructed with a purpose of assisting in answering the research question, which is seeks to find The Nature of Buyer-Seller Relationships in the Retail Sector. Based on the review of the relevant literature, our hypotheses are based on some of the important variables that exist in the supply chain relationships. The relationship variables focused on are: commitment and trust, performance, satisfaction, joint relationship effort and collaboration, and will be shown using the relevant hypotheses. These relationships form the basis of the research propositions that will be tested in the duration of this study. H1: Commitment and trust has a positive impact on collaboration. Since committed partners make an effort to achieve the goals of their business relationship, high levels of commitment are most likely to produce a good collaborated relationship. H2: Performance has a positive impact on collaboration.
The strength of collaboration in a supply chain relationship depends on the power of the chain performance: short-term (performance within one year), medium-term (performance over one to three years) and long-term (performance over two to five years). H3: Satisfaction has a positive impact on collaboration.
The extent to which the buyers and sellers in the supply chain relationship are satisfied, determines the strength of their relationship. Thus, when both parties are satisfied with the collaboration, their relationship will produce good results. H4: Joint relationship effort has a positive impact on collaboration. By engaging in a joint relationship effort that involves sharing resources and capabilities, buyers and sellers can achieve a profitable collaboration that they cannot create alone.
4. Research Methodology
An exploratory-descriptive study was conducted to write this research report. The context selected for this study focused on the clothing retail sector. The unit of analysis in this study was the nature of buyer and seller
relationship in the clothing retail sector. We focused on the buyer’s perceptions of the relationship as we were unable to collect data from both buyer and seller. Even though having data collected from both parties would have been more beneficial, time and finances were a constraint and had to be taken into consideration; therefore it resulted in focusing on one side of the relationship. Internet searches of various clothing companies were compiled. Each company was contacted by telephone so that we would be able to speak directly to a clothing buyer. They were notified beforehand as to the purpose of this study and that their participation would be fundamental in completing this research report.
The clothing buyer had the choice as to receiving the questionnaire via email or an interview. Most questionnaires were sent via email as buyers had other commitments as well and preferred this form of communication. A sum of 500 questionnaires was sent to various companies within the clothing retail sector, of which, only 106 (response rate of 21%) responses were received that was used for analysis. This response rate was lower than we had anticipated but we had to work with the data provided and continue the process as it was a busy period for most buyers at that time. The surveys were coded and then uploaded on a spreadsheet as it was simpler to analyse the data and descriptive statistics had been implemented to construct the necessary graphs that would conclude the findings. The following chart was designed to illustrate the response rate of the survey.
Figure 1: Percentage of Responses Coded
5. Data analysis and Findings
In this section of the report there will be a detailed discussion on the data collected in the survey as well as a representation of the findings. There will be a detailed analysis of the hypothesis tested and also an explanation of how the findings were derived. To complete the report 500 surveys were distributed to companies across South Africa. Only 106 of the companies responded but there were a number of biases. With regards to the nature of the relationship with supplier 5 respondents didn’t answer, under the sections joint relationship effort, dedicated investments and commitment and trust there was 1 respondent who didn’t answer the questions. Under the satisfaction section 7 answers were left blank and 2 of the questions were answered with incorrectly. Under the performance section 8 answers were left blank.
The following table was designed to displaying the mean, median, mode and range. Below is the table 1 showing all the data.
NO. YEARS AT COMPANY
NO. YEARS IN CURRENT POSITION
NO. YEARS WITH SUPPLIER
Table 1: Mean, median, mode, range, standard deviation
The first row in the table 1 above illustrates the number of years the respondent has been with the company. This information shows that the average amount of years a respondent has been with the company is 8.738095 years, the middle frequent response was 7 years, the most frequent response was 5 years and the difference between the respondent who has been with the company the least amount of years and most amount of years is 38 years. Since the respondents have a number of years with the company it means that they are familiar with the company’s way of business, how they deal with suppliers, who all the suppliers are and also the type of relationship they have with the suppliers.
The second row illustrates the number of years the respondents have been in the company. It shows that the average amount of years a respondent has been with the company is 6.629482 years, the middle frequent response was 4 years, the most frequent response was 1 year and the difference between the respondent who has been with the company the least amount of years and most amount of years is 37 years. The high number of years that some of the respondents have been in their current positions gives an indication the information given is reliable and that it will aid in answering the question at hand.
The third row depicts the number of years the company has spent with the supplier. It shows that the average amount of years a respondent has been with the company is 12.016 years, the middle frequent response was 10 years, the most frequent response was 10 years and the difference between the respondent who has been with the company the least amount of years and most amount of years is 60 years. The high number of years with same supplier shows that the information collected depicts a mature relationship between the buyer and the seller. Seeing that the relationship is matured the main focus of both the buyer and the seller would then be to continue to build on the relationship so that they can be in business for even more years to
The following chart illustrates the position of the respondents which in turn goes with the number of years the respondents have been in their current position. It shows that 5% are CEO’s, 1% COO’s, 7% directors, 10% sales manager’s or supervisors, 12% other employee’s and 48% buyer’s. The fact that such a high number of the respondents are buyers displays that the questions answered are quite accurate since they have a good understanding of the relationship with the supplier. The buyer’s best understand the relationship with the supplier and since the study at hand is looking at the collaboration of buyers and sellers, the information gathered will have a great impact in answering the given hypothesis. Figure 2: Current position
Commitment and Trust
Figure 3: Degree of respondents to questions about commitment and trust
The above data represents responses pertaining to questions about commitment and trust amongst buyers and their suppliers in supply chain relationships in the clothing sector. The graph illustrates whether the buyers agree or disagree to the extent of commitment they have with their suppliers. The x-axis of the graph represents the scales between strongly disagree and strongly agree. Meanwhile, the y-axis of the graph represents the response scores of the buyers.
When assessing the data, it is evident that seven hundred and forty one (741) responses were obtained in the commitment and trust section of the questionnaire. Taking a closer look at the responses, it is evident that 4% of the respondents strongly disagree that commitment and trust have a positive impact on collaboration. Meanwhile, 6% of the respondents have a neutral opinion, and 90% of the respondents strongly agree to the questions.
The low 4% might have been supported by the fact that their companies are in business on a short-term basis. Thus, they do not foresee the business relationship continuing for a long time, very little investment has been injected to their relationship, thus commitment is very low. The slowly rising 6% response rate could have been due to the fact that buyers are not certain where their loyalties lie with that certain supplier. Another factor could be because they are still in early business with the supplier, so the supplier’s commitment and trust to the buyer’s company have not reached maximum levels yet. The very high response rate of 90% can be influenced by various factors.
The supplier is genuinely concerned that the buyer’s company succeeds; buyers expect the business relationship to continue for a long time; the buyers are committed to their supplier; effort and investment have been made to build their relationship; they expect the relationships to strengthen over time, etc. These factors prove that these buyers support the hypotheses stated, that commitment and trust have a positive impact on collaboration. Therefore, this data proves Mohr and Spekman (1994) correct when they found that trust and commitment are of utmost importance in a buyer – seller relationship, and that these factors lead to the success of the relationship.
Figure 4: Degree of respondents to questions about performance
The graph depicts the responses of clothing buyers to four questions relating to performance being a factor of a successful collaboration among buyer and seller relationships. The horizontal axis(x – axis) illustrates the Likert scale from 1 – 7 which ranges from strongly disagree to strongly agree. The vertical axis(y – axis) depicts the score, which is the cumulative responses received from the clothing buyers. The above graphical representation shows the movements of responses to a set of questions aimed at performance and just by glancing at the graph; one can already notice that most respondents (about 74%) strongly agree that performance has a positive impact on collaboration. Analysis
When assessing the data it can be seen that four hundred sixteen (416) responses were received that answered this section of the questionnaire. However on a scale of 1 – 3, 12% respondents strongly disagreed with the notion of performance enhances collaboration, 14%(scale 4) were neutral and 74 %( scale 5 – 7) strongly agreed on most of the questions that had been asked. The reasons that may have led to a 12% response rate could be that the buyers never had one focal supplier or were not in a long business relationship to determine if the relationship affected the business’s overall performance.
Furthermore, the 74% response rate may have led to buyers agreeing with H2: performance has a positive impact on collaboration, as their relationship with the seller may have contributed to the increased performance of the overall relationship and company. Other factors contributing to the 74% response rate might have been that the relationship, reduced cycle times, improved order processing accuracy as well as punctual delivery of goods, this in turn increased the accuracy of forecasts that may have been conducted. According to Ellinger, Daugherty &Keller (2000) performance may be conceptualized as the extent to which the firm’s goals are achieved, and as illustrated in the above graph the percentage of respondents that strongly agreed already indicates that performance aids in positive collaboration which in turn would allow firms goals to be met effectively.
Joint Relationship Effort
Figure 5: Degree of Respondents to questions about joint relationship effort
The above bar graph describes the number of respondents (clothing buyers) that disagree or agree that joint relationship plays an important factor in the buyer and seller relationship in the clothing sector. Respondents had to choose between a scale of 1 till 7 by which 1 stipulates strongly disagree and 7 refers to strongly agree. Thereafter the data was grouped together according to the number of individuals that did choose between the scales of 1 till 7. Respondents were asked three questions relating to joint relationship effort. These were as follows , whether the firm and supplier has: 1) joint teams 2) conduct joint planning to anticipate and resolve operational problems and whether they make 3) joint decisions about improving overall cost efficiency. When looking at the results, one can see that 49 respondents had a neutral view regarding joint relationship and 74 of the respondents strongly agrees that joint relationship plays an important role in the buyer and seller relationship.
When assessing the data it can be seen that 307 responses were received that answered this section of the questionnaire. However on a scale of 1-3, 25% respondents strongly disagreed with the notion of joint relationship that enhances collaboration, 16% (scale 4) were neutral and 62% (scale 5-7) strongly agrees on most of the questions that had been asked. The reason that has led to a 25% response rate can be due to buyers and suppliers does not have joint teams and thus do not plan together as a team. Therefore they do not know the benefits of having joint teams.
Therefore this data show case a broad view regarding joint relationship effort as being an important variable as the graph has an upward trend. Furthermore, the response rate of 62% may have led to buyers agreeing with H4: joint relationship effort has a positive impact on collaboration, as their effort and commitment in creating joint teams and planning together might have improved collaboration between buyer and supplier.
Figure 6: Responses to Satisfaction in the Clothing Industry
The above graph describes the number of respondents (clothing buyers) that disagree or agree that satisfaction plays an important factor in the buyer and supplier relationship in the clothing sector. Respondents had to choose between a scale of 1 till 7 by which 1 stipulates strongly disagree and 7 refers to strongly agree. Thereafter the data was grouped together according to the number of individuals that did choose between the scales of 1 till 7. Respondents were asked eight (8) questions relating to satisfaction.
The questions were as followed: whether the buyer was satisfied with the relationship in terms of 1) coordination of activities 2) participation in decision making, 3) level of commitment 4) level of information sharing 5) management of activities 6) profitability 7) market share and 8) sales growth. When looking at the results, one can see that 153 respondents had a neutral view regarding satisfaction and 448 of the respondents strongly agrees that satisfaction plays an important role in the buyer and supplier relationship.
When assessing the data it can be seen that 1508 responses were received that answered this section of the questionnaire. However on a scale of 1-3, 6% respondents strongly disagreed with the notion of satisfaction enhances collaboration, 10% (scale 4) were neutral and 84% (scale 5-7) strongly agrees on most of the questions that had been asked. The reason that led to a 6% response rate can be due to buyers and suppliers having a young business relationship and thus not reaching satisfaction levels as yet. When looking at the data, the response rate of 84% may have led buyers agreeing with H3: satisfaction has a positive impact on collaboration.
This can be due to respondents identifying market share and sales growth as being two of the most important factors being satisfied by the supplier. This relates to a study done by Mohr & Spekman (1994) as they identified the completion of a task by which the involved party is pleased with the quality and degree of work carried out and it meets the standard set by the partners, market share and sales growth being the standard set by the buyer.
As mentioned above the problem being researched was the knowledge gap between buyers and sellers perspective of the nature of the supply chain relationship. The research study conducted on the nature of buyer-seller relationship in the clothing industry was a lengthy procedure that involved plentiful of consultations and analysis of the data obtained. However, we have concluded that our data findings have committed to the hypotheses mentioned in the research report. As previously mentioned time and finances were major constraints for the duration of the study hence the weak response rate of 21%.
Some of the other constraints were the buyers having their own responsibilities because of the short time frame given in which to complete the survey. In addition, 50% of the buyers were reluctant to answer some of the questions as they contained confidential company information. Furthermore, the report only focused on the buyers’ perspective of the relationship. The sellers’ perspective was not taken into account therefore a future study using this report in combination with conducting a survey of the sellers’ point of view can lead to a better understanding of the buyer – seller relationship.
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