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Financial
Supplier relations and supply services
chain performance in financial processes
services processes
185
Joy M. Field and Larry C. Meile
Wallace E. Carroll School of Management, Boston College, Chestnut Hill,
Massachusetts, USA

Abstract
Purpose – This paper aims to empirically test the relationship between supplier relations and
satisfaction with overall supplier performance in a services context at a process level of analysis.
Design/methodology/approach – Two hypotheses are developed, one predicting a positive
relationship between a multi-dimensional construct of supplier relations and satisfaction with overall
supplier performance, and one five-part hypothesis predicting positive relationships between the
underlying components of supplier relations and satisfaction with overall supplier performance. Using
a sample of 108 financial services processes, the first hypothesis is tested using regression analysis,
and the second hypothesis is tested using correlation analysis.
Findings – After controlling for supplier efficiency and responsiveness, use of information
technology, electronic information-sharing, supplier type, and firm size, better supplier relations are
associated with satisfaction with overall supplier performance. However, while the “partnering”
components of the relationship (i.e. cooperation and long-term commitment) are correlated with
satisfaction with overall supplier performance, the “operational” components of the relationship (i.e.
high degree of coordination, information-sharing, and feedback) are not.
Research limitations/implications – Limited informant population, primarily single respondents,
some single-item variables.
Practical implications – The research results suggest not only the importance of improving overall
supplier relations, but also the particular benefits of building partnerships within the service supply
chain through co-operation and long-term commitment in order to increase satisfaction with overall
supplier performance.
Originality/value – Unlike most empirical supply chain management studies, which use data from
manufacturers at the strategic business unit or firm level, and recognizing that services and
manufacturers differ in certain respects that are salient for supply chain management, this study uses
data from a services industry (i.e. financial services) collected at the process level and provides unique
insights into services and process level supply chain management.
Keywords Supply chain management, Supplier relations, Financial services
Paper type Research paper

Introduction
Supply chain management has increasingly been recognized as a key driver of overall
operational and financial performance (Hammer, 2001) and an emerging subject within
operations management research (Pilkington and Fitzgerald, 2006). As such,
researchers have been examining various aspects of supply chain management, International Journal of Operations &
including managing supplier relations. Arguably, better supplier relations should Production Management
Vol. 28 No. 2, 2008
result in improved supply chain performance. However, research has shown that this pp. 185-206
“obvious” relationship between supplier relations and supply chain performance is, q Emerald Group Publishing Limited
0144-3577
in fact, nuanced and depends on what is being done under the umbrella of DOI 10.1108/01443570810846892
IJOPM “supplier relations” and how it is being done (Baker and Faulkner, 1991; Lambert and
28,2 Knemeyer, 2004).
In this study, we empirically examine the relationship between supplier relations
and supply chain performance with a sample of 108 financial services processes. The
study is unique because supplier relations and supply chain performance have
previously been examined at the strategic business unit (SBU) or firm level rather than
186 at the process level. This is particularly important for service processes because, unlike
manufacturing, services are often not procured and managed centrally (Ellram et al.,
2004), which supports making the process a more appropriate level of analysis. In fact,
Silver (2004) specifically calls for process level studies of supply chain management in
the operations management literature. He argues that supply chains are really the
integration of processes across boundaries of different organizations with many
different supply chains within a firm managed at the process level. Studies conducted
at the SBU or firm level are likely to mask the supply chain dynamics that occur at the
process level within firms.
In addition, most empirical supply chain studies have been done in a manufacturing
context (Narasimhan and Jayaram, 1998; Peterson et al., 2005; Saeed et al., 2005;
Sanders and Premus, 2005), while this study examines satisfaction with supplier
performance in a service (i.e. financial services) context. Because the “product” in
financial services tends to be information rather than something more tangible
(thereby, greatly impacting the ability of service processes to respond to demand
uncertainty through the use of inventory), and specifications and performance criteria
for intangible products are typically more ambiguous (Ellram et al., 2004, 2007),
supplier relations management and its relationship to supply chain performance may
not be generalizable from manufacturing to services. Baltacioglu et al. (2007)
emphasize the need to recognize the differences between manufacturing and services
and develop models and empirical studies that focus specifically on service supply
chains.
This study contributes to addressing the need for process-level research focused
specifically on service supply chain management. The importance of developing a
better understanding of service supply chains is clearly shown by a CAPS Research
study in which a majority of respondents indicated that buying services is more or
much more difficult than buying goods (CAPS Research, 2003; Ellram et al., 2004,
2007). In this study, we focus on supplier relations, including the “soft” people-centered
social aspects that have not been investigated in sufficient depth in the supply chain
literature (Burgess et al., 2006), and explore whether supplier relations overall, and its
individual components are important levers for effectively managing service supply
chains. Taking both an overall as well as a deconstructed view of supplier relations at
the process-level results in a more in-depth and direct examination of the relationship
between supplier relations and supply chain performance. More broadly, our findings
provide some insights for understanding and addressing the perceived difficulties in
service supply chain management.
The organization of the paper is as follows: we first discuss the literature related to
supplier relations and supply chain performance and develop the hypotheses that will
guide our study. Next, we describe our sample, data collection, and hypothesis testing
procedure. We then present our results and discuss them in the context of our hypotheses.
Finally, we state our conclusions, implications for managerial practice, and limitations.
Literature review and hypotheses Financial
The operations management literature has a number of studies examining the services
relationship between supplier relations and supply chain performance. While supplier
relations are often discussed as a general concept, most of the empirical studies look at processes
specific aspects of managing supplier relations, such as collaboration and cooperation,
with few looking holistically at the relationship between the supply chain partners. In
this section, we review this literature stream as a basis for the hypotheses we then test. 187
Liker and Choi (2004) suggest that strong partnerships are critical to successful
supply chain management. Successful supply chain relationships also require
the supervision of the suppliers, the development of compatible technical capabilities,
and sharing information intensively but selectively. However, Lambert and Knemeyer
(2004) suggest that good results often can be achieved without investing the extra
human resources to form tight relationships with every supplier. For example,
Wendy’s consolidated its buying to 225 suppliers, but only the top 40 were worked
with to create particularly strong partnerships (Lambert and Knemeyer, 2004).
A number of researchers have stressed the importance of collaboration (including
supply chain coordination, cooperation, and information-sharing) among supply chain
partners to achieve the benefits of supply chain integration (Barratt and Oliveira, 2001;
Bowersox et al., 2000; Vereecke and Muylle, 2006; Xu and Beamon, 2006). Collaborative
planning activities and information-sharing have been found to have a positive effect
on supply chain performance, but the quality of information shared and the level of
trust between the firms must be considered as well (Monczka et al., 1998; Peterson et al.,
2005). Similarly, Mohr and Spekman (1994) find that coordination, commitment, trust,
communication quality, and information-sharing are associated with the success of the
partnerships between firms. Lee (2004) describes the best supply chains as agile,
adaptable, and aligned, requiring a collaborative relationship and information-sharing
among supply chain partners.
On the other hand, Tan et al. (2002) find no relationship between supply chain
information sharing and various measures of performance. Vereecke and Muylle (2006)
find only weak relationships between supplier or customer collaboration and
performance improvement, although they do find stronger support for better
performing companies having higher levels of collaboration than other companies.
However, despite the potential benefits of establishing collaborative supply chain
relationships, the implementation of coordination mechanisms is often difficult,
time-consuming, and expensive (Hammer, 2001; Xu and Beamon, 2006). In addition, the
design of inter-organizational information systems for supplier coordination must be
aligned with the organization’s supply chain strategy to achieve operational
performance benefits (da Silveira and Cagliano, 2006).
In another empirical study comparing USA and Japanese supplier relations in the
automotive industry, Bensaou (1997) finds that the supply chain relational climate (i.e.
goal compatibility and perception of fairness) is the best predictor of
inter-organizational cooperation. Similarly, Prahinski and Benton (2004) demonstrate
the importance of the relational climate. While they find that feedback between the
buying firm and supplier positively influences the buyer-supplier relationship, they do
not find that feedback positively impacts the supplier’s performance. In addition, they
find that increased cooperation and commitment by the buying firm improves supplier
performance through their effect on supplier commitment.
IJOPM While the supply chain literature is dominated by studies of manufacturing firms
28,2 (Baltacioglu et al., 2007; Burgess et al., 2006; Sengupta et al., 2006), a limited number of
studies specifically address service supply chains. Because manufacturing and service
operations differ in certain respects that are salient for supply chain management, we
next discuss the implications of these differences for service supply chain management
and findings from the service supply chain literature.
188 Ellram and Krause (1994) find that the duration of buyer-supplier relationships
tends to be longer for non-manufacturing than manufacturing firms. In addition, they
find that non-manufacturers believe that it would be more difficult to replace a supplier
partner than do manufacturers. Together, these findings support the idea that these
relationships tend to evolve into cooperative partnerships over time and require much
effort to develop. However, Baker and Faulkner (1991) suggest that a long-term
commitment is appropriate for only certain types of supplier strategies for professional
services, such as a relational strategy in which products and transactions are linked. In
other types of supplier strategies, such as a transactional strategy, professional
services are considered commodities, with frequent switching of suppliers.
Focusing on the professional services supply chain, in particular, Ellram et al. (2004)
point out that the service sector has less flexibility to deal with uncertain demand (due,
for example, to the inability to inventory services). Thus, information flows in the
supply chain – including information-sharing and feedback – are especially important
in services for managing this uncertainty. In fact, in Ellram et al.’s (2004) services
supply chain model, they identify information flow as critical for coordinating all
activities within the service supply chain. Similarly, Baltacioglu et al. (2007) consider
information flow and technology management to be essential for the successful
coordination of all key functions in the service supply chain. In an empirical study,
Sengupta et al. (2006) find support at the company level for a positive relationship
between information-sharing and operational performance in service supply chains.
Other sources of uncertainty in services relate to the nature of the service product
and the degree of customer contact. Because services are often intangible and produced
after purchasing, actual service characteristics may be highly uncertain (Baltacioglu
et al., 2007; Reimer and Kuehn, 2005). More specifically, service specifications
(including expectations and performance criteria) are often difficult to develop, with
many services agreements executed without clear specifications (Ellram et al., 2004,
2007). In addition, many service processes involve a high degree of customer contact,
and the involvement of the customer in the service creation and delivery process
introduces uncertainty in both the process and product, including differing customer
perceptions and evaluations of the delivered service (Chase, 1981; Harvey, 1998;
Kellogg and Nie, 1995). While the uncertainty inherent in services increases the
importance of managing information flows, it also makes it more difficult to design and
implement effective operational processes at the supplier-customer interfaces of the
service supply chain.
Based on this literature review and other related empirical studies (Carr and
Pearson, 1999; Fynes et al., 2005; Heide and John, 1992; Morgan and Hunt, 1994;
Prahinski and Benton, 2004), we consider supplier relations to be represented by five
key components – coordination, cooperation, commitment, information-sharing, and
feedback. Overall, previous findings suggest that better supplier relations should be
positively associated with supplier performance. However, as discussed in the
literature review, these five components are often, but not always, individually found Financial
to be positively associated with supplier performance. In this study, we further explore services
supplier relations as an overall construct while also considering the components
individually. In addition, we focus on satisfaction with overall supplier performance, processes
which captures not only objective performance but may also include the perceived
value of the relationship in terms of the costs versus the benefits. Since, our data is
from financial services processes, this study provides a unique opportunity to examine 189
these relationships in a little-researched context and level of analysis.
As discussed earlier, certain characteristics of services are likely to result in
differences in service versus manufacturing supply chain management, highlighting
the importance of re-examining previously found manufacturing supply chain
relationships in a service sector environment. However, based on the existing
literature, we initially expect the supplier relations construct to be positively associated
with satisfaction with overall supplier performance. Similarly, while we also expect the
individual components to be positively associated with satisfaction with overall
supplier performance, the sometimes contradictory findings from the literature leave
their relative contribution to supplier performance unclear. Thus, we state the
following hypotheses:
H1. Better supplier relations will be positively associated with satisfaction with
overall supplier performance.
H2a. Supplier coordination will be positively associated with satisfaction with
overall supplier performance.
H2b. Supplier cooperation will be positively associated with satisfaction with
overall supplier performance.
H2c. Long-term supplier commitment will be positively associated with
satisfaction with overall supplier performance.
H2d. Supplier information sharing will be positively associated with satisfaction
with overall supplier performance.
H2e. Supplier feedback will be positively associated with satisfaction with overall
supplier performance.
To test these hypotheses we need to include a number of control variables that the
literature suggests have a bearing on satisfaction with overall supplier performance.
First, the actual supplier performance, in terms of efficiency and responsiveness
(Fisher, 1997), should have a positive association with satisfaction with overall supplier
performance. Second, researchers have suggested that high-performing supply chains
are information-intensive and that the use of information technology (IT) is essential
for managing supply chain activities (Carr and Kaynak, 2007; Hammer, 2001; Mabert
and Venkataramanan, 1998; Sanders and Premus, 2002). Both Ellram et al. (2004) and
Baltacioglu et al. (2007) consider IT as the key enabler of service supply chain
management. Further, IT use continues to advance in service supply chains
(Baltacioglu et al., 2007; Ruggles, 2005) and financial services supply chains, in
particular (Klein, 2004). However, other findings are less conclusive. For example, Hill
and Scudder (2002) find that firms consider electronic data interchange (EDI) more as a
IJOPM tool for improving efficiencies than as a tool for facilitating supply chain integration. In
28,2 addition, lack of alignment between expectations and EDI capabilities is a source of
dissatisfaction with EDI in the supply chain (Walton and Gupta, 1999). Thus, based on
this literature we control for the use of IT by the respondent’s process and electronic
information-sharing in the supply chain. In addition, IT infrastructure integration has
been found to affect performance (Rai et al., 2006). As such, we include an interaction
190 between electronic information-sharing and the use of IT to control for the effect of
electronic information-sharing on satisfaction with overall supplier performance
depending on the level of IT use.
Service processes may have either internal or external suppliers (Ellram et al.,
2004). It has been argued that the external customer’s satisfaction is related to the
performance of all the internal processes for producing the product (Hart, 1995;
Soteriou and Stavrinides, 2000; Teitelbaum, 1992), implying that meeting the needs of
internal customers helps ensure external customer satisfaction. However, Lee and
Billington (1992) note that discrimination against internal customers occurs because,
unlike external customers, internal customers do not bring in real revenue. As a result,
internal suppliers may consider them less valuable and of lower priority, resulting in
poorer performance. In the vertical integration literature, researchers suggest that
dulled incentives and reduced flexibility to change partners in vertically integrated
firms could result in higher costs, poorer quality, or poorer performance in general
(Mahoney, 1992; Porter, 1980). This argument has been made at the internal process
level as well, with negative performance implications for internal customers (Hart,
1995). This suggests that the customer’s satisfaction with overall supplier
performance may be different for internal versus external suppliers. Thus, we also
include the supplier type (internal to the firm or external to the firm) as a control
variable.
Finally, we control for potential firm-level effects by including yearly sales to
account for resource levels and management that are related to the size of the firm and
may impact process supply chain management (Carr and Pearson, 2002). Because
sample firms’ yearly sales vary over a large range (from less than $1 million to over $40
billion per year), we take the standard approach of including this control variable after
a log transformation.

Methodology
This study is part of a larger project addressing strategic management of processes in
the financial services industry. The discussion of the sample and data collection
procedure pertains to the overall project.

Sample
We selected a random sample of 350 professionals in the financial services industry
(NAICS code 52) from a population of graduates of a university in the Northeastern
region of the USA, who were employed in the financial services industry. Each person
was contacted by telephone and/or e-mail to request their participation. Although 320
people agreed to participate, we eventually received 108 completed surveys from 87
different firms. The financial services professionals who completed the surveys were
acting as “organizational informants” by answering questions about their process
(Rungtusanatham et al., 2003, p. 483). The targeting of a specific population such as this
through a list of alumni is similar to, for example, securing membership directories to Financial
professional organizations (Rungtusanatham et al., 2003). Thus, while any conclusions services
based on our sample can only technically be applied to this informant population, we
later discuss why the associated processes are likely to be representative of a wider processes
population of financial service processes.
While drawing from a broader population of financial services professionals would
make any findings more generalizable, attempts to secure participation within a larger 191
sampling frame were unsuccessful for the following reasons. Because the survey
questions were at the process (rather than SBU or firm) level, identifying a
comprehensive sampling frame of financial services process managers and securing
their involvement was impracticable. While delineating a fairly complete sampling
frame of financial services firms is arguably possible (i.e. lists of firms are available
through trade and government organizations), no lists of financial services processes
within firms are available. In addition, public information at the process level
is lacking, including data often used for control variables at the firm level, such as sales
or assets. All process-level data, including information about the process itself, must be
collected directly from the survey informants. As a result, the survey was long and
required identification of and detailed information on specific processes, both of which
required a significant time commitment. These factors made soliciting responses from
a random sample of financial services process managers virtually impossible.
However, alumni employed in the financial services industry were identifiable and
willing participants.
The represented processes covered diverse processes in small firms to multibillion
dollar corporations. (The distribution of the sample includes 15 firms with sales under
$1 million per year, 38 between $1 and $10 million, 18 between $10 and $100 million,
21 between $100 million and $1 billion, and 17 over $1 billion.) Included are firms from
all three-digit NAICS codes in the finance and insurance sector, approximately
matching the comparable US distribution as a whole. About 75 percent of the processes
appeared once or twice in the sample, with the rest consisting of five general processes:
financial planning, selling insurance, selling securities, managing assets and trust
services, and managing portfolios (Table I). The average process had 39 employees and
had a median time from start to finish of approximately one week. About 47 of the
processes have an internal supplier, and 61 have an external supplier. In addition, the
organizational informants were involved in and knowledgeable about their processes,
with over half of the respondents at the vice president, director, or president level of the
organization (Table II).

Data collection
Our survey instrument covered process design and improvement issues, customer
contact and participation, operations policies, supply chain management, and
performance. We searched the literature to find previously tested scales and questions
and also consulted with managers in the financial industry in designing the survey. A
preliminary copy of the survey was then pre-tested with managers at eight service
firms, four of which were in the financial services industry. We solicited feedback from
the participants in the pre-test concerning their interpretation of the survey questions.
Based on the participants’ written and oral feedback, the wording of several questions
IJOPM Process name Percent
28,2
Financial planning 7
Selling insurance 7
Selling securities 5
Managing assets and trust services 4
Managing portfolio 4
192 Calculating commission, fee, payment 3
Developing performance report 3
Processing new account 3
Developing new business 2
Loan participation 2
Managing insurance claims 2
Providing risk management services 2
Staffing 2
Trading securities 2
Underwriting corporate debt 2
Calculating partnership cash flow 1
Delivering business insurance bid 1
Depositing and auditing 1
Developing and implementing application 1
Developing compensation program 1
Developing information system 1
Distributing work 1
Engaging in corporate valuation 1
Enrolling new customers 1
Finding structured annuity for client 1
Fulfilling request for literature 1
Managing relationships 1
Handling complaints 1
Identifying inefficient processes 1
Implementing new cash management service 1
Installing an ATM 1
Introducing long care issues into financial plan 1
Investigating claims 1
Investing in hedge funds 1
Investment advisory services 1
Invoicing clients 1
Issuing new equity 1
Leading group 1
Managing insurance line 1
Managing mutual fund investment 1
Managing relationships 1
Managing retirement and benefits 1
Marketing database 1
Opening client account 1
Placing satellite insurance policy 1
Preparing credit evaluation book 1
Presenting plan to customer 1
Pricing mutual fund 1
Processing trade 1
Processing voluntary corporate actions 1
Table I. Producing and delivering ID card 1
Process type distribution (continued)
Process name Percent
Financial
services
Producing trust statements 1
Providing data to trading floor 1 processes
Proxy voting for funds and institutional accounts 1
Purchasing a PC 1
Reconciling cash and assets 1
Remote banking 1 193
Researching corporate earnings 1
Responding to request for proposals 1
Securitizing conducts OPS 1
Selling business manager program 1
Selling municipal finance 1
Setting up web user account 1
Trading a client 1
Troubleshooting LAN access problems 1
Total 100 Table I.

Title Frequency (percent)

Vice president 30
Director 16
President 8
Consultant 7
Analyst 7
Manager 6
Associate 3
Financial advisor 3
Portfolio manager 3
Officer 3
Owner 2
Representative 2
Trader 2
Coordinator 2
Partner 2
Sales 1
Agent 1
Underwriter 1 Table II.
Trainer 1 Primary respondent title
Total 100 distribution

(approximately 6 percent of the total questions) was changed to eliminate any potential
misunderstandings.
The survey was administered by mailing it, along with a stamped return envelope,
to each financial services professional who agreed to participate. In both, the telephone
conversations and the survey itself, we provided a definition of a process. We asked
informants to fill out a process description sheet that specified a process with which
they were involved and then to reference the sheet when completing the survey.
IJOPM Informants designated a process name, process manager, list of process activities in
28,2 chronological order (including the first activity, major process steps, and ending
activity), the number of employees involved in the process, and the average process
completion time. Reflecting the sampling frame, the processes surveyed were in firms
operating primarily in the Northeastern region of the USA. If we did not receive at
least one completed survey within three weeks, we followed up with a phone call and
194 sent out a new set of surveys if necessary. To analyze the reliability of informants’
responses, we asked the primary informant to identify a second informant whom we
could contact. In 26 cases, we obtained a second informant for the same process.
We attempted to promote rater independence by discussing its importance with both
the first and second informants and separately mailing the survey and process
description to the second informant with its own stamped, return envelope.
To assess non-response bias, we compared respondents versus non-respondents in
terms of characteristics of their firms, including the distribution of NAICS sub-codes
and firms’ locations (states) as well as the average sales and employees by firm. x 2
tests for the distribution of NAICS sub-codes and firms’ locations and two sample
t-tests for average sales and employees by firm indicated no difference between these
firm characteristics for respondents and non-respondents. In addition, for the subset of
26 processes that had two informants, we compared the level in the organization (i.e.
president, director, vice president, manager, senior professional, professional, and
clerical) of the first informant (who is an alumnus of the university) to the second
informant (who is not an alumnus of the university) by coding the informants from
president –1 to clerical –7 and conducting a paired t-test. We found no significant
difference in the organizational level of the first and second informants.
We believe that using a sample from this informant population is acceptable for an
exploratory study for the following reasons. First, we had no prior knowledge of the
processes for which the informants were responsible, and the diversity of processes in
Table I shows no evidence of bias toward a particular process. Second, the firms from
which the processes were sampled span all five NAICS codes in the finance and
insurance sector, although the credit intermediation and related activities (NAICS code
522) is somewhat under-represented, and securities, commodities, and other financial
investments (NAICS code 523) is somewhat over-represented in our sample. Third, the
responses of the 26 secondary informants, who are not alumni of the university, show a
high correlation with the primary informant. While this provides evidence of reliability
across informants, our analysis of the organizational level of the first and second
informants also suggests that, to the extent that the 26 non-alumni second informants
are representative of a broader population of financial services professionals, the
organizational level of the alumni are similar to this broader population. In summary,
our data includes a wide variety of processes from firms that approximate the
distribution of financial and insurance firms in the USA, and show no evidence of bias
between alumni and non-alumni informants.
While the close match between our sample and the population of all financial and
insurance firms is suggestive of relevance beyond our more limited population, it is
important to keep in mind that our research questions and analysis are at the process
level. Thus, the most salient issue with respect to testing our hypotheses is whether the
processes in our sample approximate the distribution of processes in financial services
firms. We have argued above that we have no reason to believe that the sample in this
study (i.e. drawn from a population of graduates of a university in the Northeastern Financial
region of the USA, who were employed in the financial services industry) would services
impose any biases with respect to their process choice (either due to the processes for
which they acted as organizational informants or due to the informants themselves). In processes
addition, by limiting the sample to financial services processes, we are helping to
control for across-industry effects. Further, in the subsequent regression analysis we
include a control variable to account for potential firm size effects, such as resource 195
levels and management, that have implications for process supply chain
management – as well as other relevant control variables discussed previously. In
total, we have taken a number of steps to limit the potential sources of sample and
analytical bias at the process, industry, and firm levels. These steps help ensure that, at
the process level, our sample includes representative financial services processes, and
the associated data is analyzed in a manner that is appropriate for addressing the
research questions in this study.

Measurement of variables
To measure supplier relations, we created a construct of five items based on the
previously discussed literature: supplier coordination (Ellram and Krause, 1994;
Prahinski and Benton, 2004), supplier cooperation (Ellram and Krause, 1994; Fynes
et al., 2005; Morgan and Hunt, 1994; Prahinski and Benton, 2004), long-term supplier
commitment (Carr and Pearson, 1999; Ellram and Krause, 1994; Fynes et al., 2005;
Morgan and Hunt, 1994; Prahinski and Benton, 2004; Sengupta et al., 2006), supplier
information-sharing (Ellram and Krause, 1994; Fynes et al., 2005; Heide and John, 1992;
Sengupta et al., 2006; Vereecke and Muylle, 2006), and supplier feedback (Ellram and
Krause, 1994; Prahinski and Benton, 2004). The construct is the average of the item
responses (Hair et al., 1998). All other variables are single items. The exact wording for
all variables and items in the supplier relations construct is included in the Appendix.
In addition, interaction terms are often highly correlated with the constituent
variables. Thus, we centered the electronic information-sharing and use of IT variables
before creating the interaction term to reduce problems with multi-collinearity (Jaccard
and Turrisi, 2003).

Hypothesis testing
We used the standard version of SPSS for Windows, Release 14.0 to perform all
analyses, and cases with missing values were deleted listwise. To test H1, we
conducted a regression analysis, including the control variables and supplier relations
construct. A regression analysis was used to determine the relationship between one or
more independent (or predictor) variables and a dependent (or response) variable. In
this study, we are primarily interested in the relationship between one independent
variable (i.e. supplier relations) and the dependent variable (i.e. satisfaction with overall
supplier performance). However, regression analysis also allows for the inclusion of
control variables that, while not the focus of the study, may also account for variation
in the dependent variable. Thus, the use of a regression analysis that includes control
variables results in a more precise estimate of the relationship between supplier
relations and satisfaction with overall supplier performance.
To test H2a-H2e, we correlated each of the items in the supplier relations construct
with satisfaction with overall supplier performance. Because we are comparing the
IJOPM supplier relations construct components to each other after testing for the significance
28,2 of the construct as a whole, a correlation analysis allows us to determine if certain
components of supplier relations are driving the relationship with satisfaction with
overall supplier performance.

Results and discussion

196 Descriptive statistics
The descriptive statistics for each of the variables are shown in Table III, including
their means, standard deviations, minimum and maximum values, inter-rater
reliability (IRR), and correlations. We include the IRR for each variable as one of the
analyses that attempt to assess various sources of bias in the data. In addition, Table IV
provides descriptive statistics on the individual items in the supplier relations
construct, as well as correlations with the construct and dependent variable.
For 26 of the 108 processes, we have two informants and could calculate an IRR
score for these 26 cases. We use the method proposed by James et al. (1984), referred to
by Boyer and Verma (2000) as the “ratio method.” We used the basic form of this
commonly used method to assess agreement between the raters, thereby addressing
measurement error variance (James et al., 1984). All but one of the IRR scores for the
individual items comprising the supplier relations construct exceed 0.70 (IRR for
long-term supplier commitment ¼ 0.67), with a construct IRR of 0.91. In addition, the
IRR scores for all the other variables exceed 0.70. While, Boyer and Verma (2000)
suggest a cutoff IRR score of 0.80, no actual standard exists, although values closer to 1
indicate better agreement among raters.
For the supplier relations construct, we use a summated scale (i.e. average) of the
items to represent the factor (Hair et al., 1998). The Cronbach’s a is 0.82, indicating
acceptable construct reliability (Hair et al., 1998).

Regression analysis
Overall, the regression is highly significant, with an R 2 ¼ 0.524 (Table V). We
examined the residuals for violations of the regression assumptions, including
heteroscedasticity, linearity, and normality, and found no evidence of serious
violations (Neter et al., 1996). In addition, the variance inflation factors (VIFs) indicate
no problem with multi-collinearity (maximum VIF ¼ 3.1).
Control variables. Supplier efficiency and supplier responsiveness (i.e. actual
supplier performance) are both positively associated with satisfaction with overall
supplier performance ( p , 0.01), validating the importance of actual supplier
performance on satisfaction with overall supplier performance (Table V). In addition,
the findings with respect to IT are interesting. The use of IT in the respondents’
processes is positively associated with satisfaction with overall supplier performance
( p , 0.01), but electronic information-sharing with suppliers is not associated with
overall supplier performance. Our findings are consistent with Carr and Kaynak (2007),
who found that information sharing within the buying firm and traditional
communication methods are associated with precursors to improved product quality
and firm financial performance, while advanced communication methods (such as
EDI) are not. These results may be partially explained by the interaction between use
of IT and electronic information-sharing. The coefficient estimate of the interaction
effect is negative ( p , 0.05), indicating that the effect of electronic information-sharing
Variable N Mean SD Min Max IRR 1 2 3 4 5 6 7 8 9

Satisfaction with
overall supplier
performance 104 5.25 1.26 1 7 0.88 1.00 2 0.16 0.64 * * * 0.57 * * * 0.25 * * * 0.19 * 0.18 * 0.13 0.25 * *
Ln (sales) 108 17.21 3.02 13.8 24.5 N/A 1.00 2 0.59 20.14 20.00 20.11 20.05 2 0.05 2 0.18 *
Supplier efficiency 104 4.40 1.27 1 7 0.80 1.00 0.67 * * * 0.14 0.21 * * 0.25 * * 0.05 0.16 *
Supplier
responsiveness 103 4.36 1.36 1 7 0.72 1.00 0.07 0.31 * * * 0.29 * * * 0.05 0.17 *
Use of information
technology 108 5.43 1.47 2 7 0.76 1.00 0.22 * * 0.54 * * * 0.05 0.06
Electronic
information-sharing 105 4.98 1.58 1 7 0.72 1.00 0.70 * * * 2 0.05 0.19 *
Interaction of
electronic
information-sharing
and use of
information
technology 105 1.91 3.69 2 6 9 N/A 1.00 2 0.08 0.18 *
Supplier type
(0/1 – internal/external
supplier) 108 0.56 0.50 0 1 0.85 1.00 2 0.15
Supplier relations
(construct a ¼ 0.82) 103 5.09 1.10 2.6 7 0.91 1.00
Notes: *p , 0.10; * *p , 0.05; * * *p , 0.01
processes
Financial
services

variables
Descriptive statistics for
Table III.
197
 28,2

198

variable
IJOPM

Table IV.

correlations with
relations construct and
components of supplier
Descriptive statistics for

construct and dependent

Variable N Mean SD Min Max IRR 1 2 3 4 5 6 7

Satisfaction with overall supplier performance 104 5.25 1.26 1 7 0.88 1.00 0.25 * * 0.01 0.37 * * * 0.31 * * * 0.16 0.12
Supplier relations (construct a ¼ 0.82) 103 5.09 1.10 2.6 7 0.91 1.00 0.74 * * * 0.84 * * * 0.76 * * * 0.78 * * * 0.72 * * *
Supplier coordination 105 4.94 1.46 1 7 0.82 1.00 0.57 * * * 0.35 * * 0.56 * * * 0.47 * * *
Supplier cooperation 104 5.10 1.39 2 7 0.78 1.00 0.65 * * * 0.58 * * * 0.42 * * *
Long-term supplier commitment 105 4.98 1.57 1 7 0.67 1.00 0.43 * * * 0.47 * * *
Supplier information-sharing 105 5.34 1.47 1 7 0.78 1.00 0.50 * * *
Supplier feedback 104 4.91 1.39 1 7 0.83 1.00
Notes: *p , 0.10; * *p , 0.05; * * *p , 0.01
 Financial
Variable Coefficient
services
Constant 0.304 processes
Control variables
Supplier efficiency 0.409 * * *
Supplier responsiveness 0.255 * * *
Use of information technology 0.279 * * * 199
Electronic information-sharing 0.108
Interaction of electronic information-sharing and
use of information technology 2 0.108 * *
Supplier type (0/1 – internal/external supplier) 0.114
Ln(sales) 2 0.036
Supplier relations a 0.148 * *
R2 0.524 Table V.
F 12.683 * * * Regression results:
Adjusted R 2 0.483 association of supplier
N 101 relationship with
Notes: *p , 0.10; * *p , 0.05; * * *p , 0.01. aThe significance of the supplier relations coefficient is satisfaction with overall
based on a one-tailed test, consistent with H1 supplier performance

on perceived supplier performance is increasingly negative as the use of IT in the

respondents’ process increases. One possible explanation for this is as follows: as the
use of IT in the respondents’ processes increases, having the interface with the supplier
being primarily electronic is likely to limit both customer and supplier human
involvement in managing the supply chain. As a result, this may reduce opportunities
to readily discuss and resolve supply chain issues, thereby being associated with lower
satisfaction with supplier performance. Supplier type (i.e. internal vs external) is not
associated with satisfaction with overall supplier performance, suggesting
that concerns with differing levels of service to internal versus external customers
may not be an issue for financial services processes. Finally, we find no evidence of
firm size being associated with satisfaction with overall supplier performance.
Supplier relations. The supplier relations construct is positively associated with
satisfaction with overall supplier performance ( p , 0.05, one-tailed test), providing
support for H1 (Table V). To test the five-part H2, we computed the correlations
between the individual items that make up the construct and satisfaction with overall
supplier performance (Table IV). Having a co-operative relationship with suppliers, as
well as a long-term commitment are highly positively correlated ( p , 0.01) with
satisfaction with overall supplier performance, while a high degree of coordination,
information-sharing, and feedback with suppliers are not. These results support H2b
and H2c but not H2a, H2d, and H2e. The former two characteristics (i.e. cooperation
and long-term commitment) represent the “partnering” aspects of the relationship,
while the latter three characteristics (i.e. coordination, information-sharing, and
feedback) are more “operational” in nature and typically require that specific systems
be in place to facilitate them. The benefits of coordination, information-sharing, and
feedback mechanisms may be considered to be offset by their costs (in terms of time,
energy, and systems) (Hammer, 2001; Xu and Beamon, 2006). In addition, the
significant positive association between the use of IT and satisfaction with overall
supplier performance may be indicative of the use of intra-organizational information
IJOPM systems in combination with a favorable partnering climate to manage the supply
28,2 chain.
Another possible explanation for these results is that because service “products”
tend to be less clearly specified than tangible manufacturing products, service
specifications (including expectations and performance criteria) are often difficult to
develop (Ellram et al., 2004). Also, services often involve a high degree of customer
200 contact (Chase, 1981; Harvey, 1998; Kellogg and Nie, 1995), so that satisfaction with
overall supply chain performance may be more dependent on the ability to directly
work with suppliers, which is facilitated by a cooperative relationship and long-term
commitment. Cooperative and committed supplier relationships may help supply chain
partners to more easily address the greater ambiguities in the service environment.
While included in the regression analysis as a control variable and not a focus of this
study, the importance of human involvement in supply chain management is
consistent with the negative sign of the interaction between the use of IT in
respondents’ processes and electronic information-sharing.

Conclusions
This study contributes to the supply chain management literature by addressing the
identified need for process-level research focused on service supply chain management.
Because of the multitude of processes and associated supply chains within a firm,
conducting research at the process-level has the important benefit of providing a more
direct test of the relationship between supplier relations and satisfaction with overall
supplier performance than do higher level studies. In general, empirical studies of
service supply chains are sparse and, to the best of our knowledge, no other studies
have examined service supply chain dynamics at the process level of analysis.
To further focus the results at the process-level, we accounted for supplier type and
both potential industry and firm-level effects by limiting the sample to financial
services processes and controlling for factors, such as firm size, that impact supply
chain management. In addition, recognizing the key role of information systems and
information flows in service supply chain management, we controlled for the use of
information systems both within a process and across the supply chain. While not the
focus of this study, our findings shed some light on the role of information systems in
satisfaction with supply chain performance. Finally, we more closely examined the
components of supplier relations and their relationships to satisfaction with overall
supplier performance to provide more specific managerial direction and insights for
understanding and addressing the difficulties in designing and managing service
supply chains.
We first hypothesized that better supplier relations will be positively associated
with satisfaction with overall supplier performance and then hypothesized that the
individual components of supplier relations will have positive associations with overall
supplier performance. The first hypothesis was supported, and the second hypothesis
was partially supported. With respect to the second hypothesis, we found that
cooperation and long-term commitment – two characteristics of supplier relations that
describe the partnering aspect of the relationship – are significantly positively
correlated with satisfaction with overall supplier performance, while coordination,
information-sharing, and feedback – which are more operational in nature – are not
correlated with satisfaction with overall supplier performance. Because the context of
our study is in services, one possible explanation for the results is that the more Financial
uncertain nature of service products (compared to manufactured products) makes it services
more difficult to design and implement operational processes at the supplier-customer
interface and thereby increases the importance of the partnering aspects of supplier processes
relations.
From a managerial perspective, our study suggests the importance of strong
supplier relations for increased satisfaction with supplier performance in a service 201
context. What is perhaps more interesting is that a focus on the operational aspects of
managing supplier relations, while not having a negative impact on satisfaction, does
not necessarily increase satisfaction. It may be that the information and other systems
that are used for coordination, information-sharing, and feedback are considered “order
qualifiers” (i.e. a necessary and expected part of supply chain management), thereby
having little association with satisfaction with supplier performance (Hill, 2000). While
operational aspects of supplier relations are certainly necessary for the smooth
functioning of the supply chain, it appears that building partnerships within
the supply chain through cooperation and long-term commitment is a more
important source of satisfaction. Thus, managers need to recognize that putting the
technical systems in place to manage service supply chain management is not enough;
they should also focus on facilitating relationship-building as well.
As with exploratory studies in general, this study has several important limitations.
First, our informant population consists of alumni of a university in the Northeastern
region of the USA who are employed in the financial services industry, clearly limiting
the generalizability of the study results. For the results to be more generalizable, a
future sampling frame needs to be broadened to encompass larger populations in
financial services or even services in general.
Second, our sample consists largely of single informants with variables other than
supplier relations being single items. Both of these are possible sources of
measurement error, bias, or both. To assess measurement error, we had secondary
respondents for 26 processes and calculated IRR scores for each variable. For all of the
variables used in the regression, the IRR exceeded 0.70 (one item in the supplier
relations construct, long-term supplier commitment had an IRR ¼ 0.67), which
indicates agreement between the two respondents and mitigates concerns with this
type of measurement error. While single-item measures are also prone to measurement
error, we chose items from our survey that we believed to be the clearest expression of
the measures, an approach that has precedence in other operations management
research (Rosenzweig and Roth, 2004). Additionally, Drolet and Morrison (2001) found
that additional items in multi-item scales may not necessarily add much incremental
information and may induce respondent behavior that inflates across-item error term
correlations and weakens respondent reliability. Common response or methods bias
due to respondents being systematically biased in their ratings (i.e. bias across
respondents) or due to systematic biases by a single respondent across independent
and dependent variables is more difficult to address. Hausman et al. (2002) attempted
to mitigate against common methods bias by having knowledgeable executives as
respondents. Similarly, all of our informants were respondents for their own processes,
with a high degree of knowledge about these processes. Third, while the underlying
theory and results indicate that causal relationships may exist, we cannot claim
causality using our cross-sectional data.
IJOPM Despite these limitations, we believe that this study provides some important
28,2 insights to better understand service supply chain management and address the
particular difficulties of managing service supply chains. By examining supplier
relations in general and its individual components specifically, we have moved toward
developing prescriptive insights that process managers can use to target efforts for
better satisfaction with supplier performance.
202
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Corresponding author
Joy M. Field can be contacted at: fieldjo@bc.edu

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IJOPM Appendix
28,2 Satisfaction with Overall Supplier Performance
How satisfied are you with the overall performance of your primary supplier?

Very Dissatisfied Somewhat Neutral Somewhat Satisfied Very

dissatisfied dissatisfied satisfied satisfied
206
Supplier Efficiency
Strongly disagree Indifferent Strongly agree
1 2 3 4 5 6 7
My primary supplier’s service process is very efficient.

Supplier Responsiveness
Strongly disagree Indifferent Strongly agree
1 2 3 4 5 6 7
My primary supplier’s service process is very responsive to
changes in volume or service mix.

Use of Information Technology

To what degree is information technology (IT) used at your process?

Not used Average Used very

at all usage extensively

Electronic Information-sharing
Please answer the following questions about your primary supplier.
Strongly disagree Indifferent Strongly agree
1 2 3 4 5 6 7
Information-sharing between my primary supplier and me is
primarily through electronic means.

Supplier Type
Is your primary supplier (of information, services, and/or materials) internal or external to your company?

Internal supplier External supplier

Supplier Relations
Please answer the following questions about your primary supplier.
Strongly disagree Indifferent Strongly agree
1 2 3 4 5 6 7
There is a high degree of coordination between the activities
of my primary supplier and me.

Relations between my primary supplier and me can be

characterized as cooperative, more like a partnership.

My primary supplier and I have a long-term commitment to

each other.

My primary supplier and I routinely share information.

Feedback between my primary supplier and me is a common

occurrence.
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