Performance Outcomes of Purchasing Arrangements in Industrial Buyer-Vendor Relationships

TLDR

Purchasing arrangements for repetitively used industrial supplies assume many different forms. The authors aim to advance a conceptual framework that organizes purchasing arrangements along a continuum of relationships. They employ transaction cost analysis to construct this framework. The survey of 140 OEM purchasers shows that acquisition costs improve when firms add relational elements under uncertainty, while possession costs benefit from larger bearing volumes, supporting the framework’s practical relevance.

Abstract

Purchasing arrangements for repetitively used industrial supplies assume many different forms. Drawing on transaction cost analysis, the authors advance a conceptual framework that organizes these arrangements along a continuum of relationships. They use data from a survey of 140 OEM purchasers of bearings to demonstrate that performance in terms of acquisition costs is enhanced when, under conditions of uncertainty, firms introduce more relational elements into their purchasing arrangements. Possession cost performance improved when larger volumes of bearings were purchased. Implications for theory and practice are discussed.