African Journal of Business Management Vol. 6(1), pp.

306-312,11 January, 2012

Available online at http://www.academicjournals.org/AJBM
DOI: 10.5897/AJBM11.2197
ISSN 1993-8233 2012 Academic Journals

Full Length Research Paper

Managing supplier relationships to improve public

procurement performance
Redges Mandiyambira
Central Services Department, Great Zimbabwe University, Box 1235 Masvingo, Zimbabwe.
E-mail: redgesmandy@gmail.com. Tel: +263773 906 642.
Accepted 19 October, 2011

The study sought to determine the strategies of managing supplier relationships that engender value
for money in public procurement. An extensive literature study was conducted to examine the key
converging and diverging views of different authors in terms of supplier relationship management
strategies and trends in public procurement. The study revealed that long term relationships with few
suppliers are the best way of managing supplier relationships as there are more benefits to be gained in
long term relationships than adversarial approach. Nine State Universities in Zimbabwe were sampled
out for the study, with the sample size being 180. Policy implications and recommendations for future
study were highlighted.
Key words: Adversarial relationships, long term relationships, public procurement.

INTRODUCTION
A lot has been written in the relationship management
literature about the paradigm shift from adversarial
relationships to mutually beneficial relationships. Public
procurement is one area that lags behind in terms of
change especially in least developed nations. Most public
sectors in least developed nations uses a traditional
procurement system which is purely based on adversarial
relationships with many suppliers. Bid and bash approach
(Welch, 2003) is used in the tendering process which
focuses on the lowest bid and arms length relationships
with many suppliers. The contracts awarded to suppliers
have a fixed expiry date, which means that their relationships end on the expiry date of the contract and a new
tendering process will be triggered where potential
suppliers are prompted to compete between them again
(Christopher and Juttner, 2000). There is no attempt to
engage into mutually beneficial long term relationship
with a selected number of suppliers. This increases procurement costs such as multiple contracts administration,
monitoring many suppliers performance, continuous
education of suppliers on an institutions processes and
requirements. More time is consumed in the continuous
solicitation of potential suppliers each time the same
need to be fulfilled arises. There is limited utilization of
suppliers total resources as suppliers are kept at arms

length. Suppliers are seen as vendors and not as

external resources that the public sector can benefit more
from besides the procured products and services.
Cannon and Perreault (1999) argued that, transactional
relationships do not provide best-value solutions as they
do not make full use of suppliers total resources.
Wynstra et al. (2001) argued that suppliers are sources of
ideas, technologies, and savings in time and money.
Ellram (1990) argues that when dealing with multiple
suppliers, it is costly to coordinate the procurement
process and to monitor the quality consistency of many
different suppliers.
Erridge and Nondi (1994) found that the extreme form
of competitive bidding is, on the whole, incompatible with
successful achievement of value for money. Erridge and
Nondi (1994) further argues that extreme forms of
competitive bidding are detrimental. These forms involve:
rigid application of tendering procedures for low value
items regardless of on-costs; too many suppliers; shortterm contracts and the absence of cooperation from suppliers. The adversarial approach to supplier relationship
management does not engender value for money, the
core
principle
governing
public
procurement
(Commonwealth Procurement Guidelines, 2005). Officials
buying goods and services need to be satisfied that the

Mandiyambira

best possible outcome has been achieved taking into

account all relevant costs and benefits over the whole of
the procurement cycle (Commonwealth Procurement
Guidelines, 2005).
The challenges posed by the use of traditional procurement system in the Public sector procurement calls for a
re-evaluation of the approach to come up with best
strategy for managing supplier relationships that
engender value for money. Public procurement is an area
that is rich for reforms and cost savings opportunities,
increase product and service quality (NASPO, 2010).
Should the Public sector continue to play the market
considering the challenges of such an approach? How
can supplier relationship be managed in order to
engender value for money in Public sector procurement?
What benefits can the public sector gain from long term
relationships with few suppliers? The study sought to
answer the above research questions.
LITERATURE REVIEW
Supplier relationship management strategies
Lindgreen and Wynstra (2005) suggested that two widely
differing supplier management models have emerged
from both practice as well as academic research on the
issue of how to optimally manage suppliers. Literature
generally distinguishes between two basic purchasing
strategies: competitive and collaborative, or in other
words, adversarial and partnership strategies posits
Lindgreen and Wynstra (2005). However, Bensaou
(2000) suggests a hybrid of the competitive model and a
partnership model as another supplier relationship
strategy.
Adversarial approach
Porter (1985) argues that traditional purchasing view,
advocates minimizing dependency on suppliers and
maximizing bargaining power. Porter (1985) suggests
that in order to maintain bargaining power, the buyer
should source from many suppliers, commit short term
contracts with the suppliers; share no information with
suppliers regarding sales, cost, product design; and
make (or receive) no improvement suggestions to (or
from) suppliers. Porter (1985) describes this view of
supplier management as follows In purchasing, then, the
goal is to find mechanisms to offset or surmount these
sources of suppliers power..purchases of an item can
be spread among alternative suppliers in such a way as
to improve the firms bargaining power. Porter (1985)
further argues that the key implication of this model for
purchasing strategy is for buyers to deliberately keep
suppliers at an arms length and to avoid any form of
commitment. Williamson (1975), Harrigan (1985),

307

Shapiro (1994) also concurs with adversarial view citing

that transactional relationships are commonly used in
public procurement settings, where supplier relationships
basically serve to facilitate the exchange process and
fulfill the contract requirements, relationships cannot be
used to intervene with a procurement process that is
supposed to be open and fair to all bidders. Kaufmann
and Stern (1988) commented that in economic theory,
dependence is traditionally regarded as something negative, inhibiting market forces to act in the most efficient
manner, companies should optimize and preserve
bargaining power by being independent. An independent
actor tries to optimize every transaction, and by definition
would not get involved in a long-term relationship
(Kaufmann and Stern, 1988; Donalson and Toole, 2000).
Sarkis and Talluri (2002), comments that to prevent
opportunistic behavior, the conventional sourcing
approach (multiple sourcing) endeavors to establish a
wide supplier base, because constant competition among
suppliers should minimize the purchasing price so that
the organization can purchase goods at their real market
value.
According to a study conducted by Helper (1991), as
quoted in Axelsson and Wynstra (2002), adversarial
relationships were common practice within the US in the
early 1980's. The arms length model was widely
accepted as the most effective way to manage supplier
relationship in the US until the success of Japanese firms
who did not use this model formed a re-evaluation of the
models basic tenants.
Long term supplier relationships
In Contrasting the adversarial approach, Hill (1995) and
Sheard (1996) cites that in this highly competitive market,
the best strategy for winning and retaining business is for
buyers and suppliers to work together, that is, to partner.
Sheard (1996) further comments that essentially, the
concept means using the resources of a supplier to the
maximum benefit possible. Weitz and Bradford (1999)
supports the partnership approach arguing that it looks at
a supplier as an extension of the buying organization
specifically an extension of the purchasers research
capabilities, storage, potentials, financial backing and
manufacturing and quality control needs. Lajara and Lillo
(2004) highlights that the practice consists of selecting
the best suppliers working closely with them and entering into long term relationships based on mutual needs
and trust. This trend was also observed by Hunt and
Morgan (1995) who noticed a tendency among
customers to move from an arms length relationship (a
number of competing suppliers) towards closer
collaborative arrangements.
In support of long term relationships, Burt et al. (2003)
commented that a survey of purchasing managers found
general agreement in the fact that supplier partnering

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reduced the number of suppliers. Burt et al. (2003) further

added that the following reasons were cited for these
reductions; supplier development is expensive and
cannot become cost effective unless limited to the
supplier with which they do sizeable business with; close
working relationships requires restricting the number of
suppliers; and a small supplier base ensures that the
supplier who commits to partnering and quality
improvements receives rewards of substantial business.
Xerox reduced the number of suppliers from 5000 to 400
and AT and T reduced its number of suppliers from 300
to 75 according to Razzouk (1996).
Partnerships in public procurement:
Researchers such as Lawther and Martin (2005)
questioned the traditional way of public procurement and
suggested moving towards public procurement
partnerships, the complexity of procuring information
technology, software and IT-services being one of the
reasons for such a move. Lawther and Martin (2005)s
analysis contrast the assertion made by Harrigan (1985)
and Porter (1985) stating that, adversarial relationships
are effective in public procurement settings, where
supplier relationships basically serve to facilitate the
exchange process and fulfill the contract requirements,
relationships cannot be used to intervene with a procurement process that is supposed to be open and fair to
all bidders. Lawther and Martin (2005) further explains
that the relational approach, based on the advantages of
cooperation, centers on shared resources, joint product
development, and process redesign, which improve
efficiency (in production and value creation) for both the
buyer and the seller. In public procurement, networking
with private sector organizations is posited to be more
efficient than traditional governance structures according
to Kamarck (2002). In the same vein, Kelman (1990)
posits that Governmental agencies and suppliers are now
advocating partnerships between governmental buyers
and business sellers to facilitate the implementation of
contracts. Thus, public sector solutions to dealing with
turbulent environments have been to shift policy towards
greater competitiveness in the public sector and to apply
private-sector style management practice to the public
domain (Hood, 2000). In support of this view,
Palaneeswaran and Kumaraswamy (2000), argued that
public sector agencies need to incorporate most of the
modern management tools and technologies to cope with
the procurement industry, to remain competitive and
make maximum use of scare resources.
Laurent (2000) concurs with the above mentioned
views citing that with the increasing procurement of hightech systems and services, collaborative and relational
exchanges will be required to realize the strategic goals
for both government agencies and private business.
Laurent (2000) further stresses that, facing downsizing

and declining budgets, federal agencies are strongly

motivated to find new ways of doing business focused on
faster, better, cheaper. Linscott (1999) highlights that
growing interests in the facilitator role of government/
business relationships, agencies are reforming their pure
transaction-based purchasing and attempting to explore
the benefits of partnering with commercial entities.
Burman (1999) comments that government agencies are
changing their traditional uncooperative attitudes and
developing partnerships with contractors. Major General
Robert Armbruster, the USA Armys deputy head, said
we (the armed forces) need to start working in a more
synergistic manner with industry according to Book
(2001). Linscott (1999) calls it civil-military integration.
21st Century governance is a non-competitive form of
cooperative interaction between government and the
private sector designed to combine and harness the
collective energies and expertise of all the sectors
(Salamon, 2002).
Resource based view of the firm and resource
dependency theory:
Resource-Based View of the Firm and the Industrial
Marketing and Purchasing approach supports relationship building unlike adversarial approach. The resourcebased view defines resources as the tangible and
intangible entities available that enable a firm to produce
a market offering that has value for some market
segment(s) (Hunt, 1997). Resource dependency and
competence theory stress that, one of the main reasons
for a firm to form relationships with other firms is to gain
access to the resources that the firm does not possess
contends (Stern and Reve, 1980; Prahalad and Hamel,
1990; Heide, 1994; Sousa, 2003). The survival and
growth of organizations largely depend on the ability to
secure critical resources from the external environment
according to Casciaro and Piskorski (2005). Lawther and
Martin (2005) stated that, the collaboration across public
procurement functions provides opportunities for better
utilisation of procurement skills and resources; (thereby
providing value for money); maximising benefits; and the
spread of best practice. Barney (2000) concurs with
cooperation approach positing that firms are no longer
able to develop major product or service innovations
alone because of the dispersion of knowledge and
technological resources driven by organisational
specialisation. In addition, Barney (2000) further notes
that the growing need for greater effectiveness in their
operation has forced more companies to engage in
partnerships leading to increased dependence on each
other's resources and capabilities. According to Arino
and de la Torre (1998), the increasing complexity of
markets makes it difficult for firms to possess all the
resources to compete effectively, and exchange leads to
relational interdependency. Storey et al. (2006) argues
that the performance and the internal efficiency of a

Mandiyambira

business is viewed as dependent on its ability to develop

resources through relationships rather than its ability to
exploit resources in isolation from other companies, and
resource development is seen as taking place between
companies rather than just within companies. However,
Sanchez et al. (1996) warn that organisations should
collaborate to achieve these benefits where it makes
logical and commercial sense to do so.
IMP Project Group (1982), Hakansson and Snehota
(1995) and Gummesson (2006), comments that in the
IMP literature, relationships are seen as a companys
most important assets, because without them it cannot
gain access to the resources of others, acquire the
supplies that it needs, or solve its problems and thus
generate revenue. Ford et al. (2003) adds that relationships are in many ways the assets that bind together all
of the other assets of a company and convert them into
something of economic value. In the same vein, Hunt and
Morgan (1995) classified the types of resources that a
firm can access in this manner through relationships.
These resource types are: financial, legal, physical,
human, organizational, relational, and informational
resources as suggested by Hunt and Morgan (1995).
Hayes et al. (2005) in support of Hunt and Morgan (1995)
defines resources that can be shared as tangible and
intangible inputs into the value creation process and
include, but are not limited to, equipment, skills of
employees, and technology. Hakansson and Prenkert
(2004) also supported the idea of resource sharing citing
that the reason why parties cooperate is that they are
dependent on each others resources and the resources
can only be utilized through cooperation.
Supply partnerships are also supported by the market
orientation and organizational learning views (Jaworski
and Kohli, 1993; Slater and Narver, 1995) that resources
are heterogeneous rather than homogeneous. Slater and
Narver (1995), argues that as companies possess
heterogeneous resources, it makes a difference with
whom you interact and how you interact. Interacting with
the partner with the resources that are most valuable and
doing it in the most sensible way makes sense. Slater
and Narver (1995) further explains that no single
resource is of any value if you cannot make use of it,
interacting with the right partner and being able to use the
partners resources in a meaningful way becomes the
key issue.
A Portfolio approach
management:

to

supplier

relationship

In contrasting the adversarial and partnership view,

Kraljic (1983) and Bensaou (2000) stressed that no single
approach to relationship management is inherently
superior, successful supply chain management requires
the efficient management of a portfolio of relationships.
Bensaou (2000) even goes further with his analysis
saying that every company, when deciding which

309

relationship style to adopt, should consider three factors:

the product exchanged and its technology, the
competitive conditions in the upstream market, and the
capabilities of the suppliers available. In this regard
Websters (1992) notes that each company needs to
assess each of their suppliers and decide if a supply
alliance would be appropriate or not.
Smart and Harrison (2003) cites that the best
purchasing strategy depends on the circumstances, such
that a competitive strategy of playing suppliers against
one another in one situation will achieve the lowest price,
whereas another situation calls for a collaborative strategy that emphasizes partnership relations to guarantee
the same outcome. According to Dwyer et al. (1987) the
buyer-seller relationship portfolio is situated on the axis
between two extremes, namely, discrete transaction and
vertical integration, such that the strength of a relationship depends on environmental effects and competitive
market. Dwyer et al. (1987) further notes that supply
alliances, today seem to be the best way to do business,
they are not suitable for every company and its market
place.
An article by Zineldin and Philipson (2007) provides a
research of marketing practices in the contemporary
environment which was done in 1997 by Brodie et al.
(1997) in the University of Auckland in New Zealand. The
results did not support the concept of a total paradigm
shift that is the movement away from adversarial
approach to collaborations with suppliers. Instead, the
findings in several companies confirmed that the transaction marketing is still relevant and currently used with
some types of relationship marketing. Brodie et al. (1997)
quoted in Zineldin and Philipson (2007), concluded that
the importance of transactional marketing should be
recognized and estimated, their studys results contradict
the trend of academics and practitioners of the so-called
relationship marketing paradigm shift.

RESEARCH METHODOLOGY
Survey design, sample and response
According to Burns and Bush (2001), it is common that researchers
utilize multiple research designs and in this case the researcher
used exploratory and descriptive research designs. Exploratory
research was conducted to develop initial insights and to provide
direction for any further research needed (Malhotra, 1999). Public
procurement is a complex area with a set of processes, procedures,
regulations and objectives that are different from the private sector
procurement. Interviews and semi-structured questionnaires were
used as the research instruments to gather the research data. The
total population for the nine State Universities in Zimbabwe is 180
and it encompasses all members who are involved in the State
Universities procurement function. A total of 180 questionnaires
were mailed to procurement officers of the nine state universities
with a requested return date and a stamped return envelope. This
was based on the total design method (TDM) recommended by
Dillman (1978) that guidelines for mail survey structure, cover letter,
pre-survey notification, initial survey mailing and post-survey
reminder are to be followed. Only 97 questionnaires were

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Afr. J. Bus. Manage.

arm's
length
Arms length
relationship
relationship

Long term
relationship

Both
bothstrategies
strategies

Figure 1. Responses of the best strategies for managing supplier relationships.

completed and returned, all were usable because they were

complete. 54% response rate was achieved. A total of twelve
telephone interviews were successfully conducted with the Central
Buyers of the nine State Universities under the study using a check
list to guide interviewees during the interview process so that
uniformity and consistency could be assured. The average lengths
of interviews were 12 min.

Validity and reliability of findings

Content of this research was validated by determining the variables
which have been defined and used previously in the literature
(Churchill and Iacobucci, 2004). In this study, the dimensions of
variables were identified from the Marketing, Purchasing and
Supply Chain Management literature. Prior to pre-testing of the
research instruments three purchasing lecturers were asked to
review the questions and give their opinions in the quest for content
validity. Some overlapping questions were detected and corrected.
A pilot study was contacted before full scale data collection to
check the feasibility of questions and to ensure that the questions
elicited the responses required, uncover ambiguous wording or
errors before the survey was full scale launch (Burns and Bush,
2001). Great Zimbabwe University was selected for the pilot study.
All the nine State universities in Zimbabwe were sampled in order to
gain triangulation of results, findings from different sources
increases external validity and reliability of the results. All the
respondents in the nine State universities were sampled out for the
study in order to ensure that sampling errors were avoided thus
increasing reliability of the results.

RESULTS AND DISCUSSION

Best strategy for managing supplier relationship
The research findings indicates that long term relationships with few suppliers came up to be the best way of
managing supplier relationships for both long term and
short term contracts for highly complex products and
lowly complex products as supported by 55% of the
responses (Figure 1). The responses cited that
relationships with suppliers must continue even after the
completion of a transaction an indication of the
movement way from adversarial relationships. They cited

that after sales services and support in terms of technical

products was needed even after the completion of transaction. This view is supported by modern day political
arena where unit governments are being formed moving
from "Counterparties" to Collaboration for instance Britain
and Zimbabwe, where opposing governments merged to
form one unit government an indication of the importance
of collaboration unlike adversarial relationships.
Forty percent of the responses on the contrary favored
a mix of both long term and adversarial relationships
(Figure 1). The responses cited that the two strategies
strength and weaknesses can offset each other, thereby
coming up with a best strategy for managing supplier
relationships. The difference between the majoritys
responses and minoritys responses is minor, an
indication that the use of both strategies should not be
underestimated even though the majority favoured the
use of long term relationships.
There were very few responses (5%) that mentioned
use of adversarial relationships as a strategy to solely
rely upon in all cases whether in procuring highly complex or lowly complex products and services (Figure 1).
Their argument was that that ending of relationships after
the completion of a task was a better way of encouraging
competition among suppliers so that they will keep on
reducing prices in order to gain business, a traditional
view which was put forward by Porter (1985) who argued
that the best purchasing strategy is for buyers to
deliberately keep suppliers at an arms length and to
avoid any form of commitment.
Most responses saw relationships as vehicles for cost
reduction such as reduction of time spent and costs of
searching for new suppliers. They also highlighted that
quality could be achieved as a result of increased
supplier involvement and joint problem solving. The
respondents also cited that limited number of suppliers
improves decentralization of purchasing activities to other
departments as they will be obliged to deal with already
evaluated and selected few suppliers. However few
responses contradicted citing that costs of safeguarding

Mandiyambira

the relationships could also sky rocket. They highlighted

that knowledge transfer is a function of whether the
supplier is interested or not, some suppliers may lack the
motive to do so and may resist use of their resources for
the benefit of the buying organization.
Conclusions
Engaging into long term relationships with few suppliers
is the best strategy of managing supply side rather than
playing off many suppliers against each other as there
are more benefits to be gained when in a long term
relationships with few suppliers than being on the
contrary. Public procurement officials should come up
with an approved supplier list of best suppliers who the
institutions can do business with unlike doing business
with the whole world. This improves the decentralization
of procurement function to other departments. The
purchasing officers can concentrate on other crucial
procurement activities such as supplier development and
continuous supplier monitoring. The approved supplier
list will also reduce corruption as in coming up with the
list of preferred suppliers a number of stakeholders and
cross functional teams will be involved.
Limitations and future research
The study investigated the management of supplier
relationships within the context of State Universities in
Zimbabwe, future research needs also to include a
broader population of government institutions. The study
also focused on the management of supplier
relationships as the factor that could improve public
procurement system further research is should look into
other factors that need to be managed in order to
improve Public procurement performance.
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