Fostering buyer-supplier relationships An analysis of the supplier perspective in offshoring to China

Sammanfattning: This papers aims at analysing Chinese suppliers’ expectations of interfirm relationship when Western companies offshore their production to China. The research is motivated by the underrepresentation of the Chinese suppliers’ perspective in the literature and the undisputed role of China as the second most popular destination for offshoring. The literature finds that a successful relationship between buyer and suppliers has a positive effect on quality and satisfaction. Therefore understanding what Chinese suppliers expect from a relationship with a Western client would help to improve offshoring relationships and minimize risks for companies engaging in such strategy. The research has studied the single case of a Swedish manufacturing firm offshoring part of its production to five suppliers located in People’s Republic of China, Hong Kong and Taiwan. Both buyer and suppliers’ perspectives have been studied in order to see to what are the suppliers’ expectations and whether the Western firm meets them through its current outsourcing strategy. The findings suggest that when offshoring to China the company does not always meet its suppliers expectations on closeness and mutuality. The Chinese partners value the formation of partnerships oriented towards future mutual development, rather than connections aimed at maintaining the status quo. The strategies deployed by the buying firm are, on the other hand, functional to offshore on non-critical items with the objective of reducing costs and satisfy immediate needs on quality and delivery. As such, they do not require a big involvement of the buying firm in the supplier’s operation and fall short of the supplier’s expectations on interfirm relationship. Moreover, such offshoring strategies are not functional to ease the buyer’s concerns on quality related issues as they do not guarantee the buyer’s grip on the supplier’s operations. Keywords: outsourcing, offshoring, subcontracting, supply chain, buyer supplier relationship, China