The Nature of Interfirm Partnering in Supply Chain Management.(Brief Article)

This paper conceptually integrates the antecedents and consequences of strategic and operational partnering. We suggest a continuum exists from strategic to operational partnering depending on the level of antecedents, orientation, and implementation. This paper, thus, expands the theory of partnering by providing an inclusive picture of the "partnering" phenomenon with the environmental pressures, antecedents, orientation, implementation, and consequences of strategic and operational partnering for vertical relationships within retail supply chains.

Partnering between firms is an increasingly common way for firms to find and maintain competitive advantage (Mentzer, 1999; Mohr and Spekman, 1994). Wal-Mart has successfully pursued this strategy by forming partnerships with such vendors as Procter and Gamble, 3M, and Philips Consumer Electronics to reduce inventory and other logistics costs for both the retailer and the vendor. A partnership occurs through extensive social, economic, service, and technical ties over time (Stern, El-Ansary, and Coughlan, 1996), but requires mutual commitment, trust, and common goals (Dwyer and Tanner, 1999; Morgan and Hunt, 1994), as well as communication and cooperation (Morgan and Hunt, 1994). While most partnerships share some common elements and characteristics, there is no "ideal" relationship that is appropriate in all situations (Ellram and Cooper, 1990; Lambert, Emmelhainz, and Gardner, 1996). In fact, many relationships in retail supply chains are simply transactional, implying a tactical buyer-seller relationship, with little of the aspects of partnering discussed in this paper. Partnerships are reserved for retailer-vendor relationships where some degree of continuity is expected, and the focus of the relationship goes beyond price (Frazier, Spekman, and O'Neal, 1988).

A partnership is an interorganizational entity developed between two independent organizations in a vertical relationship within a supply chain. A supply chain consists of multiple partnerships (Gentry, 1996) and, therefore, partnering is important for successful retail supply chain relationships. Supply chain management research has traditionally focused on the operational aspects of the supply chain, that is, the efficient flow of products and services, but there is a benefit in considering retail supply chain strategy in terms of relationship building among retailers and their key supply chain members.

Mentzer et al. (1999) define Supply Chain Management as "the systemic, strategic coordination of the traditional business functions and the tactics across these business functions within a particular company and across businesses within the supply chain (that consists of multiple firms), for the purposes of improving the long-term performance of the individual companies and the supply chain as a whole" (parentheses and emphasis added). This suggests supply chain management is the management of close interfirm relationships, so understanding partnering is important to develop successful retail supply chain relationships.

Webster (1992) proposed a continuum from interdependent partnerships to strategic partnerships, based upon the degree of interdependence of the partners, the exclusivity of the relationship, and the strategic goals of the relationship. Johnson (1999) defined strategic integration (i.e., a strategic partnership) as one where firms have a strategic mind-set toward the interfirm relationship. Frazier, Spekman, and O'Neal (1988) distinguished relationships from one-time supply chain transactions. However, no single, clear set of criteria exists that differentiates the nature of strategic partnering from other types of partnering. Furthermore, Achrol (1991), Johnson (1999), Thorelli (1986), Varadarajan and Cunningham (1995), and Webster (1992) emphasized strategic partnering but ignored other types of partnering. Thus, although examinations of transactional relationships exist in the marketing channels literature, and examinations of the formation process and characteristics of strategic partnerships have been ab undant, explanations of why some interfirm relationships become strategic and others do not and how strategic partnering differs from other types of partnering are lacking.

Only by deciding on the type of partnering a retailer wants to accomplish with other firms and, accordingly, combining a partnering orientation and its implementation at an appropriate level, will retailers gain the full benefits of partnering. Further, researchers should not assume all partnering relationships are strategic and ignore the operational aspects of partnering. Therefore, in this paper, we suggest a continuum of strategic and operational partnering based upon (1) the orientation of the partners and (2) the degree of implementation of partnering between two independent firms. Strategic partnering is an on-going, long-term interfirm relationship for achieving strategic goals, which delivers value to customers and profitability to partners. For example, many retailers have realized the need for strategic integration with offshore suppliers after witnessing the strategic advantage attained by such brands as Tommy Hilfiger and Ralph Lauren/Polo, and such stores as Federated Department Stores and May Department Stores. Operational partnering is an as-needed, shorter-term relationship for obtaining parity with competitors.

Operational partnering is found in such apparel retailers as The Gap that exclusively sells its own brands. This type of retailer may switch offshore suppliers based on the suppliers' availability and other purchase terms and, thus, obtains operational efficiency.

The purpose of this paper is, thus, to provide an integrated view of partnering by showing the similarities and differences between strategic and operational partnering in terms of environmental pressures, antecedents, orientation, implementation characteristics, and consequences. Figure 1 provides the conceptual framework of these relationships. To accomplish this purpose, we first examine in more depth the concepts of strategic and operational partnering and then follow the flow of Figure 1 throughout the rest of the paper. This flow first examines the environmental pressures that have led to an increase in supply chain partnering. The phenomena surrounding the formation of partnerships is then examined, including the antecedents to an orientation toward strategic or operational partnering, the implementation of strategic versus operational partnerships, and the consequences of each in terms of competitive attainment and performance. Throughout this discussion, propositions are offered where appropriate. T he paper concludes with a discussion of the managerial and research implications of this differentiation between strategic and operational partnering.

PARTNERING ORIENTATION

Retailers do not pursue partnering relationships with all their vendors. The implementation costs (in terms of capital, technology, processes, risk, and people) are too great. Thus, even retailers that do engage in partnering do so only with a select group of vendors that have a similar orientation toward partnering. An orientation toward partnering is the partners' patterns of shared values and beliefs that help individuals in the partner firms understand the functioning of the partnership and, thus, provide partnership behavioral norms (cf., Deshpande and Webster, 1989). This partnering orientation exists on a continuum from strategic to operational.

Strategic Partnering Orientation

Strategic partnering is a relationship designed to achieve long-term strategic objectives and, thus, improve or dramatically change a company's competitive position (Hitt, Ireland, and Hoskisson, 1999; Webster, 1992) through the development of new technology, new products, and new markets (Webster, 1992). Johnson (1999) proposed strategic partnering exists when a firm perceives: (1) its long-term strategy depends on maintaining a good, healthy relationship with its partner, (2) the relationship with its partner is important, and (3) a strong cooperative relationship with its partner is necessary to be competitive in the industry. Ganesan (1994) suggested retailers with a long-term orientation are concerned with both current benefits (i.e., operational efficiency and effectiveness) and future outcomes (i.e., competitive advantage). A strategic partnering orientation includes exclusivity and nonimitability (Lambert, Emmelhainz, and Gardner, 1996; Varadarajan and Cunningham, 1995). If the competitors of either firm replicate the relationship or similar cooperative arrangements are made between a partner and the major competitor of the other partner, the relationship cannot be strategic.

Partners in a strategic partnering relationship recognize each other as an extension of their own …