Document Type

Article

Date of Original Version

2018

Abstract

Purpose: More than two decades long technological improvements in information sharing have not yet ensured a flawless execution of vendor managed inventory (VMI) and left interested parties wondering about the reasons of poor results. Although VMI is a collaborative tool, the relational factors in a VMI setting have not received enough attention due to challenges in obtaining relational buyer-supplier data in addition to extant focus on analytical approaches. The purpose of this paper is to investigate post-implementation relational factors in order to extract relevant insights.

Design/methodology/approach: Accounting for the duration of the VMI relationship, the authors focus on two dimensions of VMI often ignored post-implementation: dependence of the buyer on the VMI-supplier and trust of the buyer in the VMI-supplier. Cross-sectional data were collected using a survey collected from distributors mostly in auto and electrical supply industries, which have their inventories managed by manufacturers through VMI arrangements. The sample was obtained from a leading third-party VMI-platform service provider that serves thousands of distributor-manufacturer locations with billions of dollars in sales orders. Multiple ordinary least squares regression has been used to test the hypotheses.

Findings: This paper provides empirical support that in the post-implementation stage, longer VMI relationships are associated with higher distributor dependence on the manufacturer. In addition, too much dependence could actually hurt the distributor’s trust in the manufacturer.

Practical implications: The authors propose that distributors maintain some of the purchasing and inventory management skills in house to limit their dependencies on the manufacturers. Manufacturers should also invest in trust-building activities, such as regular communications with distributors.

Originality/value: This is the first study providing empirical evidence on the positive association between length of VMI relationship and buyer dependence on the supplier, and curvilinear dependence-trust link in a post-implementation VMI context.

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