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What does it take to make the most of supplier relationships?

In the 2000 paper we argued that the level of involvement between buyer and supplier can be described in terms of links between their activities, ties between their resources and bonds between the actors, in line with Hkansson and Snehota (1995). Such features of buyer-supplier collaboration are result of coordinated interaction (e.g. Le Dain, Calvi, & Cheriti, 2010; Petersen, Handfield, & Ragatz, 2005). There is a tendency in the mainstream literature to assume that one of the parties can, and should, control the interaction and determine the pattern of interactions (e.g. Sobrero & Roberts, 2002). We tend to disagree on this point and side with research noting that exploiting the resources of the counterpart requires all-encompassing integration based on joint, rather than unilateral, process coordination (Hkansson, Ford, Gadde, Snehota, & Waluszewski, 2009; Inemek & Matthyssens, 2013). This research stream argues that too much control should be avoided since unilateral control can constrain the opportunities for interacting and thus hinder the supplier from utilising its resources in the best way. Furthermore, Brito & Miguel (2017, p. 84) recommend that buying firms relax their control ambitions to better exploit interfirm interaction as a source for learning and for the development of new capabilities. This alternative perspective implies that the actual posture of a buyer-supplier relationship is mutually interacted rather than unilaterally controlled or imposed, and that the features of a relationship result from how managers in the two organisations frame and interpret the possibilities and limitations for collaboration.

From the supplier perspective, the belief that collaborative relationships are conditional on mutual and shared understanding among managers in the companies involved is a well-established fact, documented in several studies on key account management (e.g. Cheverton, 2012; Gounaris & Tzempelikos, 2014; McDonald, Millman, & Rogers, 1997). Moreover, research taking the buyer perspective suggests that if the buying organizations want to get more out of the suppliers they have to engage in extensive interaction (Gadde & Wynstra, 2017, p. 67). Interacting is important for both parties to identify potential opportunities and implement actual solutions. Furthermore, interacting is vital when it comes to handling the impact of the environment on the relationship. For example, Ellram and Krause (2014), analysing how the economic downturn of 20082009 affected buyer-supplier relationships, found that relationships featuring frequent and deep interaction were more robust and mainly continued as before, while some of the relationships scoring lower on interaction intensity tended to deteriorate. The explanation the authors advanced was that prevailing interdependencies in the highly interactive relationships implied that the two parties' fates are linked.

Interacting is required, especially when both parties pursue benefits that go beyond cost-efficient supply solutions. In these situations, rationalisation efforts in purchasing and supply management are complemented or substituted by attempts to broaden and enhance relationship benefits. In such efforts, Ulaga and Eggert (2006) claim that relationship benefits display stronger potential for differentiation than do cost considerations (p.131). The perception regarding relational benefits has changed over time. Terpend et al. (2008) analysed the evolution of the value buying firms searched for from their suppliers in the period 19862005. They found that the initial focus on value from operational performance was supplemented over time by integration-based value and finally supplier capability-based value. Reaping broader benefits is challenging because neither the potential advantages nor the necessary relational arrangements can be fully anticipated, and uncertainty is present in any attempt to make the most of supplier relationships. Under such circumstances, buying firms tend to apply one of two strategies: either they act to avoid uncertainty, or they apply methods for coping with uncertainty (Simangunsong et al., 2012). In both cases, the means of dealing with uncertainty is interaction.

Siding with Terpend et al. (2008), we argue that interaction in terms of communication and information exchange is critical to the well-functioning interaction required to make the most of supplier relationships. Transparency regarding crucial information is necessary, as is an open mind in dialogues and discussions. Organisational arrangements have significant effects on interaction processes. Ellegaard and Koch (2012) found that mobilisation of supplier resources sometimes tended to fail when buying firms internally were inadequately organised and prepared, and therefore did not fully understand suppliers, which prevented them from engaging in meaningful joint problem-solving and development activities with their suppliers. In a similar vein, Piercy (2009) noted that strategic external relationships must be mirrored in strategic internal relationships.

The beneficial collaborative solutions that can lead to developmental effects are created jointly by the two parties. They result from productive interaction and cannot be achieved without joint action (Hkansson & Snehota, 2017). Several studies over the past decade have shown that coping with interactive processes requires acknowledging and accepting three properties and effects of the relational interaction: First, developing effective relationships cannot be achieved unilaterally, but requires substantial interaction between two committed and active parties. Second, developing supplier relationships in pursuit of benefits from developmental and structuring effects leads to mutual dependences and entails giving up some autonomy as a trade-off for achieving such benefits. Third, interaction to exploit supplier resources through collaborative relationships is costly, because substantial investments in joint solutions are needed. These efforts and costs are anticipated with respect to the possible benefits that may, but not necessarily will, materialise in time (Hkansson & Snehota, 2017).

Acknowledging the role of relationship interacting requires going beyond black-boxing of the interaction processes in supplier relationships typical of the mainstream literature. The centrality of interacting when developing and maintaining supplier relationships requires a shift of focus away from considering simply the level of relationship involvement toward the modes and processes of interacting. The emphasis should rather be on the prerequisites for interacting since these conditions may constrain or enable effective development and utilisation of supplier relationships. As shown by Tuli, Kohli, and Bharadwaj (2007) the configuration of the organisational interfaces affects the features of the solutions exchanged in buyer-supplier relationships. Buying firms need to focus on the interfaces with suppliers and the processes and platforms that support interacting between the buyer and supplier organisations (Araujo et al., 2016).

Araujo et al. (2016) emphasise the importance of the two parties' interactive capacity and interactive capability for relationship outcomes. Interactive capacity can be represented by the amount of time devoted to interacting, as well as the number of persons and other resources involved in the processes. Interactive capability relates to the accumulated skills, knowledge and experience gained through previous interactions. Both the capacity and capability for interacting in a specific relationship are always contingent on the two parties' other relationships in the network.

At the Epicenter of COVID-19the Tragic Failure of the Global Supply Chain for Medical Supplies

The global supply chain for critical medical equipment evolved after World War II to reflect multifaceted goals, including broad access, improving quality, and affordability. The large expenditures required to implement technological advances, together with the limited resources of tax-paying patients, has led over time to an intensification of the trade-offs between these goals. The lean supply chain was thus introduced in a bid to improve financial and operational performance. As of now, lean management has allowed for more efficient and effective logistical flow as well as improved customer satisfaction (12). But leanness has also led to adversity. Unfortunately, in reducing costs via labor and supply avenues, this has led to a reduction in medical stockpiles which act as buffers during crises like COVID-19 (13).

The dominant approach of leanness in managing global supply chains has been accompanied by the implementation of alternative models in several specific countries. For instance, medical units of militaries e.g., the Indian Armed Forces Medical Services, store 6 months' worth of short shelf-life items and 8 months' worth of long-shelf-life items, to create capacity for fast disaster relief (14). Finland, likewise, understood the importance of stockpiling since World War II and kept at it consistently while neighboring Nordic countries like Sweden, Denmark and Norway eventually abandoned their stockpiles (15). Finnish pharmaceutical companies, healthcare units and importers were thus mandated to stockpile medications for up to 310 months while being compensated by the government for the cost of preserving such reserves. These models are not without their challenges. Significant variations in supply chain performance arise in individual countries. Some of the existing challenges include lack of a single national procurement unit, disorganized supply chains and most importantly bureaucratic inefficiencies which cause delays across the entire continuum and hence compromise appropriate preparedness for pandemics (13, 16). Information on the current/ongoing efforts is detailed elsewhere (Supplementary Material).

Low Initial Supplies

Regardless of the supply-chain model, the current global stockpile has been insufficient to support the health system of any country during the pandemic. As of 4 March 2020, the Department of Health and Human Services declared that the United States (US) had ~12 million N95 masks and 30 million surgical masks, making up a mere 1% of the actual required numbers during the pandemic (2). The shortage was exacerbated by the extraction in the US of the 100 million masks held in the national strategic stockpile during the 2009 H1N1 pandemic, as none of these extracted masks were subsequently restocked (17). Similarly, Australia faced a great shortage of masks from the outset of the pandemic. In January 2020, the National Medical Stockpile of Australia was reported to have a stockpile of only 12 million masks (18). However, during the 2009 H1N1 pandemic, the same agency held 40 million masks in reserve (19), implying a lack of restocking since the previous pandemic, more than a decade ago.

Low Supply From Suppliers

As the virus became pandemic, countries then took steps to protect local supplies (20). China, which normally produces half the global supply of masks at approximately 10 million masks daily, ramped up production to 115 million daily during the early phases of COVID-19 (20). However, the Chinese government simultaneously terminated all mask exports leading to a gradual depletion of global stockpiles. Germany banned the export of the majority of its PPEs (21). In other areas, where local production is not significant, vulnerabilities in the procurement of essential equipment arose. For example, Australia, which imports 90% of its medications, is vulnerable to shortages should supply be impeded (13, 22).

Sudden Rise in Demand

The exhaustion of PPEs, including masks, and ventilators early in the pandemic led to a rapid plummet in available supply just as an international surge in demand arose in late February and March. The figures are tragic: In 2019, a mere 77,000 ventilators were required globally (11). However, as of 11 March 2020, the US alone required 60,000160,000 ventilators (4). By mid-April, reports of shortages in critical chemical compounds required to produce essential medicines were rising. The production of other medications might be impeded too, especially if certain required pharmaceutical ingredients can only be sourced from countries that happen to be severely affected by COVID-19. The most important example would be China which exported many raw materials but was temporarily under an economic shutdown. Fortunately, the Food and Drug Administration (FDA) in the US reported shortages of just one drug (22). It is being discussed that the lack of national and public health led cohesive pandemic response and alacrity may have contributed to the rapid increase in cases and high fatality rates.

Breakdown of Trust Among Supply Chain Stakeholders

The COVID-19 has exposed the fragility of our existing supply chain frameworks. Increasing reports on lack of trust and pressures between various stakeholders have been reported (23). This can be attributed to the presence of middlemen or intermediaries (for contracts and procurements between supplier and buyer), who presumably use opportunistic and unfair business practices underpinning lack of transparency in reporting of stock supply numbers and the ambiguity in movements of transactions. This creates an environment which is fertile for speculation, leading to a breakdown of trust and hence the inter-institutional relationships. In a pandemic setting, this could have disastrous consequences. This is especially poignant as buyers don't believe the data coming from suppliers/middlemen, especially during crises (24, 25).