In a recently published paper, my co-authors and I present a contingency model that examines the external links between the business environment and supply chain strategies, and the internal links between supply chain strategies and supplier management practices. The research model theorizes that flexibility and low-cost oriented supply chain strategies should fit with the underlying business environments, and, in turn, supplier management practices (i.e., long-term relationships, supplier assessment, and integration) should fit with the chosen supply chain strategies. The dataset to test the research model was drawn from a survey of managers from 232 Australian manufacturing firms, and comparative path analyses were employed to assess the fit among different business environments, supply chain strategies, and supply chain practices. The findings show that dynamic environment has a better fit with flexibility strategy than low-cost strategy, while competitive environment surprisingly does not show a stronger fit to low-cost strategy than flexibility strategy. Additionally, the results show that while supplier assessment is important for both flexibility and low-cost oriented strategies, longterm relationship and logistics integration are more important for flexibility strategy than for low-cost strategy.
From a managerial perspective, this study demonstrates the importance of understanding the right supply chain strategies with respect to the business environment and the practices for supporting the strategies. Managers need not only understand the external fit between the business environment and supply chain strategy but also the internal fit between supply chain strategies and supplier management practices. The findings suggest that companies following low-cost strategy are less concerned with building long-term strategic relationships and might be prepared to switch suppliers more frequently—primarily based on the price offered by the suppliers. This is particularly true when firms adopt an arm’s length approach in their relationship with suppliers, which is aimed at maintaining competition in the supply base by putting pressure on suppliers to keep their prices low or even reducing them. A closer observation of the findings confirms this point as they show that low-cost strategy only has a weak (marginal) relationship with logistics integration, and even no association with long-term relationship. Flexibility strategy, on the other hand, is linked with more advanced steps in supplier management by incorporating both logistics integration and long-term relationship, which reflect the technical and social aspects of SCM.