Impact of COVID-19 on strategic sourcing decisions and supplier performance

Closes:

Submission Deadline: 1st April 2022

Introduction

Purchasing and supply management is an essential function of supply chain management. It ensures that the goods and services meet the quality parameters and are delivered promptly to the right place (Bag et al., 2020).

World Health Organisation announced the COVID-19 outbreak as a pandemic on 11th March 2020. COVID-19 is an ongoing pandemic and has severe consequences for human lives, businesses, and society. As of 15th September 2021, the number of confirmed COVID-19 infected cases is 225.68 million with 4.64 million deaths worldwide (https://www.who.int/emergencies/diseases/novel-coronavirus-2019). This ongoing pandemic has created the most prolonged crisis in this 21st century and has disrupted supply chains globally. Purchasing and supply management were majorly hit during this pandemic (Bag et al., 2021a). Organizations depending on international sources for procurement actions have faced a huge setback during the early stages of the pandemic due to the lockdown and closure of international borders (Bag et al., 2021b). However, many organizations have mitigated risks to some extent by managing the contracts/service level agreements effectively.

Purchasing and supply management professionals working in larger-size firms deal with hundreds of service level agreements every year to manage their suppliers’ performance. Suppliers may be over-, under-, or average-performers; but low performers generally attract a high disruption risk (Vlachos, 2020). Also, some countries are associated with more risks and some with less risk. Country-level factors can strengthen/or weaken the effectiveness of contract specificity (Griffith and Zhao, 2015). Further, Griffith and Zhao (2015) argued that contract monitoring could mitigate the negative relationship between contract violation and relationship performance.

Contract design is gaining importance due to the volatile business environment. Recently, Vlachos (2020) investigated how contract design influences supplier performance. The study combined three theoretical views (efficiency, relational, and contingency) and provided empirical support to how effective contract design improves supplier performance. Vlachos (2020) argued that contracting with under- and over- performers present significant differences: in the case of over-performers, contracts have a dual, yet discrete, efficiency and relational role: at the transaction level, they emphasize formality, protect from opportunism, and include both liquidated damages and legal action clauses. At the relational level, they focus on relational learning and incentivizing suppliers. However, in the case of under-performers, contracts appear to focus on contingency factors, which can be a source of ambiguity (particularly in complex environments), and trust, which hurts supplier performance. Therefore, improving contract design can help reduce partner opportunism, reduce inter-firm conflicts and avoid disputes that can bear a social cost (Vlachos, 2020).

The recent COVID-19 pandemic has made the global supply chain network more fragile, causing frequent disruptions (Ivanov and Das, 2020). The supply chain ripple effect can negatively impact organizations and society. Ivanov and Dolgui (2020) suggested that intertwined supply networks are necessary for long-term survival and thereby provided a new angle to supply chain resilience research. Advanced analytical tools and enhanced decision-making processes in contract design can aid these changes (Vlachos, 2020).

Organizations face are facing new supply-related problems during this COVID-19 pandemic and will address new problems afterward. This tests organizational agility, resilience, and sustainability. Ivanov (2020) argued that a viable supply chain model could guide an organization to rebuild its supply chain structure (organizational structure, informational structure, technological structure, financial structure, and process-functional structure) after facing a long-term crisis.

Purchasing and supply management professionals have adopted various measures during this pandemic to ensure the continued viability of supply. A mix of behaviors has been observed during this ongoing pandemic. For example, some companies chose to support suppliers to prevent supplier collapse; others tried to change suppliers. These contracting decisions and behaviors and ultimately affected supply chain performance. 

Organizations have changed their buying practices during this ongoing pandemic. Buyers are looking for alternate sources of supply or entering into rate agreements with existing suppliers. For example, with bottleneck items, buyers pay advance amounts to book the raw material for a quarter or more and giving staggered delivery dates in line with the production schedules to avoid supply bottlenecks. For strategic and leverage items, buyers are negotiating prices and deliveries and changing the ordering lot sizes. However, for routine/non-critical items where risks are low, buyers are negotiating extended payment terms from 30 days to 60- or 90-days payments.

Due to lockdown rules (e.g., maintaining social distances), there have been restrictions on physical meetings and visits. The physical limitations have impacted quality inspections at supplier premises. However, buyers have modified their contract clauses to ensure that suppliers undertake the inspection themselves and then email the soft copies of the inspection reports to provide a final dispatch clearance. The buyer inspects goods at their factory on arrival and their report is final and binding. Buyers generally discuss the late delivery clause in the contract before finalizing any order.

Another important consideration is “risk purchase,” which buyers use to safeguard themselves from the supplier’s failure to deliver goods and services. Suppliers submit weekly reports highlighting the status of supply activities. If the buyer is not satisfied with the progress during the stages of manufacturing, then they can apply the risk purchase clause.

Buyers nowadays use online meetings with suppliers (e.g., using MS Teams or Zoom) for communication and coordination purposes. The COVID-19 pandemic has thereby affected the entire purchasing and supply chain management process, and it is sensible to increase our research in the area of sourcing decisions and supplier performance and further extend the knowledge base.

Aims

Covid-19 pandemic has affected the global supply chain network resulting in multiple problems such as supply shortages, material price increases, logistics challenges, unavailability of containers and timely vessel connections, congestion at ports, and delivery delays which ultimately impacted the supplier performance. The traditional supplier performance measures include on-time delivery, pricing, cost-effectiveness, quality, delivery completeness, responsiveness, environmental and societal sustainability. Supplier performance is affected severely in this uncertain environment and therefore, a viable supply chain model must be adopted at all supplier levels, including tier 1, tier 2, tier 3, and beyond. Purchasing and supply chain professionals need to design contract/service level agreements, considering the internal and external factors related to the changing business environment in the new-normal era for business sustainability. Therefore, this special issue aims to explore how COVID-19 has affected strategic sourcing and supplier performance.

Outstanding contributions that report new theory development through case studies, empirical research, and real-world cases with relevant practical and/or managerial implications are welcome.

Potential topics

Given these broad questions, the potential topics for the special issue include (but are not limited to):

  • Challenges in purchasing and purchasing and supply management in the new-normal era.
  • Contract design to improve agility, resilience, and sustainability in the supply network.
  • Contract management for leverage, strategic, routine/non-critical, and bottleneck items in the new-normal age.
  • The laws and policies that guide contract design in different countries.
  • Terms and conditions of service level agreement with local and international suppliers in the new-normal era.
  • Contract violation and relationship performance in the new-normal era.
  • Vendor managed inventory in the new-normal era.
  • Collaboration with suppliers and channel partners in the new-normal era.
  • Managing average- and under-performing suppliers and channel partners in the new-normal era.
  • Analytical tools to measure purchasing and supply chain management performance in the new-normal era.
  • Purchasing and supply risk management in the new-normal era.
  • Resources and capabilities for purchasing and supply management in the new-normal era.
  • Manage channel partners in the supply chain network using digital technologies (big data analytics, artificial intelligence technologies, etc) in the new-normal era.

Outstanding contributions that report new theory development through case studies, empirical research, and real-world cases with relevant practical and/or managerial implications are welcome.

Submissions Information

Submissions deadline: 1st April 2022

Submissions are made using ScholarOne Manuscripts. Please consult the author guidelines on the journal homepage before submission.

Guest Editors

Surajit Bag Ph.D., Department of Supply Chain Management and Information Systems, Rabat Business School, International University of Rabat, Morocco, [email protected]

Peter Kilbourn D. Com, Department of Transport and Supply Chain Management, University of Johannesburg, South Africa, [email protected]

Lincoln C. Wood Ph.D., Department of Management, University of Otago, New Zealand, [email protected]

Prof. Mihalis Giannakis Ph.D., Audencia Business School, France, 8 Rte de la Jonelière, 44300 Nantes, France, [email protected]

References

Bag, S., Dhamija, P., Gupta, S. and Sivarajah, U. (2020), “Examining the role of procurement 4.0 towards remanufacturing operations and circular economy”, Production Planning & Control, pp. 1-16.

Bag, S., Gupta, S., Choi, T. M. and Kumar, A. (2021a), “Roles of Innovation Leadership on Using Big Data Analytics to Establish Resilient Healthcare Supply Chains to Combat the COVID-19 Pandemic: A Multimethodological Study”, IEEE Transactions on Engineering Management. DOI: 10.1109/TEM.2021.3101590

Bag, S., Kilbourn, P., Pisa, N. and Giannakis, M. (2021b, September), “Key Success Factors for Supply Chain Sustainability in COVID-19 Pandemic: An ISM Approach”, In IFIP International Conference on Advances in Production Management Systems, pp. 724-733. Springer, Cham.

Griffith, D. A. and Zhao, Y. (2015), “Contract specificity, contract violation, and relationship performance in international buyer-supplier relationships”, Journal of International Marketing, Vol. 23 No. 3, pp. 22-40.

Ivanov, D. (2020), “Viable supply chain model: integrating agility, resilience and sustainability perspectives—lessons from and thinking beyond the COVID-19 pandemic”, Annals of Operations Research, pp. 1-21.

Ivanov, D. and Das, A. (2020), “Coronavirus (COVID-19/SARS-CoV-2) and supply chain resilience: A research note”, International Journal of Integrated Supply Management, Vol. 13 No. 1, pp. 90-102.

Ivanov, D. and Dolgui, A. (2020), “Viability of intertwined supply networks: extending the supply chain resilience angles towards survivability. A position paper motivated by the COVID-19 outbreak”, International Journal of Production Research, Vol. 58 No. 10, pp. 2904-2915.

Vlachos, I. (2020), “Contract design and supplier performance: an empirical investigation using multi-criteria, decision analysis. International Journal of Productivity and Performance Management”, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/IJPPM-10-2019-0492