THE INFLUENCE OF PURCHASING STRATEGIES ON

MANUFACTURING PERFORMANCE: AN EMPIRICAL STUDY IN

MALAYSIA

P. Thrulogachantar

School of Management

Universiti Sains Malaysia,

11800, Penang,

Malaysia.

Tel: +6046577888

Fax: +604677448

Email: Thrulogachantar.Perumal@infineon.com

Suhaiza Zailani

School of Management

Universiti Sains Malaysia,

11800, Penang,

Malaysia.

Tel: +6046577888

Fax: +604677448

Email: shmz@usm.my

1

THE INFLUENCE OF PURCHASING STRATEGIES ON

MANUFACTURING PERFORMANCE: AN EMPIRICAL STUDY IN

MALAYSIA

Purpose

This paper analyzes the importance of purchasing strategies contribution on manufacturing

performance realizing purchasing function as key component in organizations.

Design/methodology/approach

A total of 750 questionnaires been distributed via email and resulted with 158 questionnaires

or 21% been returned with complete information used for statistical analysis in order to study

the significant level of the constructed model among manufacturing firms located in major

industrial states at Malaysia.

Findings

The result obtained reveals that purchasing strategies creates significant positive impact on

manufacturing performance which comprises the competitive priorities of the firms in term of

quality, cost, cycle time, new product introduction time line, delivery speed and dependability

and finally customization responsiveness performance.

Research limitations/implications

Manufacturing firms should emphasize on focusing in purchasing strategies mainly effective

negotiation, supplier collaborative relationship and interaction; effective cost management

and supply base management as navigator for their excellence performance in this volatile

market condition.

Practical implications

Purchasing professional need to be strategically align with firms cooperate and business

strategic goal in gaining the knowledge about the company and industry future, obtain the

best product and services, analyzing the cost drivers on effective total cost management by

evaluating the rewards and risk associated in order for manufacturing performance

excellence.

Originality/value Purchasing strategies are vital for manufacturing firms in order to remain competitive and

relevant in the challenging and competitive business environment.

Key words: Purchasing strategies, manufacturing performance and Malaysia

Article Type: Research paper

References: 56 references

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1.0 INTRODUCTION

In current business environment, rapid changes and new avenue on cost control is crucial in

order to strive through global competition. This has driven manufacturing firms to response

to uncertainty more rapidly. Thus, emerging of world class competitors in domestic and

international business required organization to response revamp their processes to fulfill

market needs. Therefore, fundamental goal of organizations corporate and functional level

strategies is the development of sustainable competitive advantage (Hitt, Hoskisson & Ireland,

2007). Thus, shifting exploration from conventional way of thinking to strategic purchasing

as one of the core elements enable organization to equip well in order to wave through

competition (Giunipero, Handfield & Eltantawy, 2006).

Purchasing obtain considerable amount of attention in current uncertainty business

environment as key value adding function to support and sustain firm’s successful

performance (Cousins, 2005). As a result, it is important to adopt the purchasing function into

organization business strategy as every business striving hard to reduce its cost of delivering

most unique products and services to their customers and at meantime to protect the interest

of stake holders (Monczka, Trend & Handfield, 2004). Common understanding of many

researchers on supply chain is that new millennium competition will be center on firms

efficient and effective supply chains (Carter & Ellram, 2003). Purchasing is key support

activity in manufacturing process to create value through purchase of inputs, services and

facilities needed to produce a firm’s product and same time key up the maintenance of

manufacturing facilities.In past 150 years, purchasing function milestones can be divided into

seven golden periods in organizations from 1850’s up to beginning of 21st century (Monczka

et al., 2004). The evolution begins with emerging of purchasing as a separate cooperate

function, continue with development of basic purchasing procedures and ideas, recognition

purchasing function as determining sources of supply, sustaining purchasing role to reduce

overall product cost, revive of material management as solution to material problem inclusive

sourcing, followed by globalization era where its observed the development of supply chain

management and its effect on purchasing structure and behavior (Monczka et al., 2004).

Finally in new millennium, restructure and reformation of purchasing and supply

chain management (SCM) to face new era of challenges in global competition plays an

important role for organizations (Monczka et al., 2004). Thus, this synergizes purchasing

function through supply chain capabilities to come up as one of firm’s core competencies.

Furthermore, this leads organization to achieve manufacturing and business goals with

development of sustainable competitive advantage (Das & Narasimhan, 2000). The pathway

on evolution of purchasing exposed the way of purchasing function reshape from traditional

clerically based function to a strategically focal point in an organization by exchanging

information with top management concerning to attain best products and services through

total cost, value and risk analyzing (Cousins, Lawson & Squire, 2006; Giunipero et al., 2006).

Rajagopal and Bernard (1994) stressed that those who are ignoring and undervaluing

purchasing strategy contribution on its corporate and product strategy been labeled as

committing an error in the aspect of business management. Realizing this, world class

purchasing function has extremely shifted its goal which obtained reorganization as an active

and major contributor, vital for organization competitiveness (Cavinato, 1998).

Now, the role of purchasing not only limited in obtaining the right material, but been

extended in acquisition of product in the right quantities, with right delivery time and place,

from the right source and at the right market place which been encompass as purchasing

function. In addition, on average manufacturing firms expend about 50% of their sales dollar

in the purchase of raw materials, components, supplies and services (Janda & Seshadri, 2001).

This gives purchasing function tremendous potential to increase profits by contributing 50%

saving on every dollar expense. As a result, cost of purchase reduction has bigger impact in

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increasing the profit of an organization compare to other functional activities in an

organization (Arnold & Chapman, 2004). This creates purchasing role a strategic function in

a firm’s growth (Giunipero et al., 2006) and success which enhanced shareholder value (Das

& Narasimbhan, 2000). As cited by Janda and Seshadri, (2001) from Kiser (1976),

purchasing strategies been divided into six areas which focus on negotiation, sourcing,

developing and maintaining good relations with suppliers, developing suppliers, protecting

the cost structure of the company and minimizing costs. Development of these elements in

purchasing strategies creates path for manufacturing excellence performance through

manufacturing priorities with key focus on quality, cost, delivery, and innovation (Das &

Narasimbhan, 2000).

In recent years, various articles have noted the importance and competitive potential

of the purchasing strategies and even envisaged its increased importance in the future as a

strategic weapon. However, few papers theoretically or empirically analyze the contribution

of the purchasing strategies to manufacturing performance. The present study will inter-relate

the contribution of purchasing strategies towards manufacturing performance. As highlighted

by Brookshaw and Terziovski, (1997); Carter and Narasimhan, (1994), purchasing function

contribute significantly in manufacturing performance through interfaced in quality

improvement and innovation in new product development. Furthermore, Das and Narasimhan

(2000) added that purchasing contribute substantial impact on manufacturing quality,

delivery and cost beside research and development on new product introduction and

redesigning. Purchasing focus on business improvement and sustaining involved very

minimal investment as success depends on the professional skills of purchasing personal.

However, most organization give less attention on contribution of supply base management

and purchasing which traditionally viewed as clerical stuff (Giunipero et al., 2006). Therefore

no afford given in bring up alignment between purchasing strategies and cooperate strategy.

There are needs for organization to revisit, formulate and execute effective procurement

strategies in order to overcome challenges in the context of sustaining and developing

manufacturing performance. Focal point on purchasing strategies will provide guided path

for value creation in manufacturing performance. This paper analyzes the importance of

purchasing strategies contribution on manufacturing performance realizing purchasing

function as key component in organizations.

This study covers literature review focusing on theoretical issues and hypotheses

development in the following section. This will follow by analytical framework and research

procedures which illustrate the data and variable used for study together with finding and

interpretation. Implication, limitation of the study, suggestion for future research and

conclusion will be discussed in later part.

2.0 LITERATURE REVIEW

2.1 Purchasing Strategies

A model is suggested base on an organization conceptual approach to follow in strategizing

the purchasing function in addressing the manufacturing performance. Supplier partnership

and interaction, contract agreement, long term strategic factors correlate to core competences,

benchmarking, value chain analysis as well as cost issues been framework as fundamental for

organization purchasing strategies. On of that, other factors are such as delivery reliability,

supplier finance stability and cash position, cost capability, technical capability been essential

in firms buy decision which been translated in strategic position. In the past yields will only

focus on lowest cost position by neglecting the cost hidden factors mainly on quality and

delivery. However, firms are now aware and awake that more information is required from

suppliers before awarding the business.

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In general, purchasing in manufacturing make available raw materials, spare parts for

tools and factory maintenance as well as services for daily operation. Development of

manufacturing sector recognized the importance for firms to engage effective purchasing

strategies. Thus, in order to strive through the competitive and dynamic business environment,

purchasing strategies that focusing on formulating favorable business deal with suppliers

through identification and development of competitive sources for high quality as well as low

cost raw materials and spare parts plus excellent services is essential for world class

manufacturing firms. The present study employs four element of purchasing element which

been initiated by Kiser (1976) and later transformed by Janda and Seshadri (2001). Kiser

(1976) study offer six purchasing strategies such as negotiation, developing and maintaining

good relations with suppliers, sourcing, developing suppliers, protecting the cost structure of

company and minimizing cost (Janda & Seshadri, 2001, p. 294). The present research

adapted Kiser’s model on purchasing strategies into four elements of purchasing strategies.

Purchasing strategies in this study maintain effective negotiation and collaborative supplier

relationships and interaction, while supply base management strategy subsumes the sourcing

and developing suppliers in Kiser’s purchasing strategy. The effective cost management

includes Kiser’s latter two strategies which is protecting the cost structure of company and

minimizing cost. The study believed that the holistic integration of purchasing strategies

proposed by Kiser need to be investigated towards the manufacturing performance especially

in the context of Malaysia.

2.1.1 Effective Negotiation Strategy Hazeldine (2009) quoted “If you want to success in business…you have to learn how to

negotiate”. Firm needs to explore ways to compile resources in gaining bargaining power

with supplier as driver to sustainable competitive advantage. According to Giunipero and

Pearcy (2000), influencing and persuasion, understand business condition and customer focus

are fundamental for negotiation process. Good business relationship with supply chain

partners has been boost through effective negotiation and communication. Ramsay (2004)

stressed that negotiation process is key in managing differences of business relationships

between buyers and suppliers. There are two major approaches in negotiation. One of the

approaches had known as cooperative negotiation which stress on win-win formula between

both parties involve in negotiation process which believed to be value creating. Both parties

in cooperative negotiation assumes that all aspects of their interest been taken care well in

order to maximize their cooperative value and benefit (Ramsay, 2004; Dion & Banting, 1988).

This leads to problem solving through trust and mutual understanding environment

(Alexander, Schul & McCorkle, 1995). Another approach of negotiation called competitive

negotiation which is genuine distributive and adverse towards common understanding.

Emphasize given on individual interest whereby each party attempt to maximize self gain

through aggressive cost competition tactics, enforce time pressure, lack of flexibility and

threatening lost of business in order to gain advantage against the other party.

As examine by Janda and Seshadri (2001), cooperative negotiation cultivate win-win

formula which able to increase supplier loyalty and improve supplier relations as all parties

involved strongly believed, satisfied and agreed with mutual understanding and their common

interest well protected. Covey (2009), a writer for The 7 Habits of Highly Effective People

quoted “Win-win is a belief in the third alternative. It’s not your way or my way; it’s a better

way, a higher way. Win-win is base on paradigm that there is plenty for everybody, that one

person’s success is not achieved at the expense or exclusion of the success of others”. It is

important that both parties understand the goal of the deal and things need to be achieved

through the intended deal in order to create effective negotiation. Effective negotiation will

5

create confidence to supplier that long term business opportunity is possible for them in order

to undertake new capital investment (Ashcroft, 2004).

Negotiation is critical element to execute in purchasing strategies that an organization

developed. Negotiation will be used to close the gaps between purchaser and supplier.

Negotiating strategic with tactics need to be developed as a foundation to support purchasing

deal. In cooperative negotiation, buyer-supplier negotiate creates win-win situation in order

to decide the ways to divide and share the extended value pie (Monczka et al., 2004). In this

situation effective negotiation from buyer’s point of view creates value when receiving better

price than a competitor, assistance in developing new technology or product design, shorter

lead time for ordering and delivering. In addition, both parties able work together to reduce

waste and ultimately eliminate the hidden cost in long run. On the other hand, supplier

creates value with additional volume, preferential and promising treatment for future business

and lead to technical assistant from purchaser to reduce the operating cost. Eventually

effective negotiation strategy should lead towards greater manufacturing competitive

priorities.

2.1.2 Collaborative Relationship and Interaction Strategy Building collaborative relationship and interaction with supplier is the key element in

purchasing strategy. Mark (2004) referred supporting element of buyer-supplier collaboration

as cultural element which made of trust, mutuality, information exchange, openness and

communication. There was empirical study done by Golicic and Mentzer (2006) on

examination of relationship magnitude in term of trust, commitment and dependence as

independents variable contribute to relationship value. Relationship value had been

acknowledged as first step of quantifying measurement of relationship outcome. Humphreys,

Shiu and Chan (2001), added that collaborative relationships demand for trust and

commitment for long term cooperation in addition to willingness to share risks. Commitment

and trust been developed through effective communication (Lengnic-Hall, 1998).

Meanwhile, Chandra and Kumar (2001) claimed that trust, commitment and

collaboration between buyer and supplier were becoming more popular in supply chain

relationships because of their ability to reduce fraction and uncertainty. Commitment from

both supplier and buyer been exercised through committing resources to the relationship

which exist through the expense, time and amenities of an organization (Zailani & Rajagopal,

2005). The development of trust, respect and commitment are from openness and honesty

(Whipple & Frankel, 2000). Therefore, successful and effective partnerships between buyer

and supplier observed when committing their resources towards improvement. Buyer able to

establish great network with supplier through collaborative relationship in order to achieve

cost, quality, delivery and time improvements. Bilateral interaction is part of information

sharing which open clear and broad lines of communication. Communication able to sort out

valuable information on timely manner to avoid buyer from left out on progress surrounding

them. Information sharing is essential in order for chain members to share and gather the

information available surround them. Openness and honesty a part of first impression will be

crucial step in creating trust among buyer supplier. Information sharing is not merely

desirable but mandatory to build effective collaborative buyer supplier relationship.

2.1.3 Effective Cost Management Strategy

Janda and Seshadri (2001) noted that every single percentage saving in purchasing cost can

significantly contribute in saving half point in sales. This significant contribution in

purchasing function required focus on total cost management as part of purchasing strategy

influencing manufacturing performance. Zsidisin and Ellram (2001) identified that total cost

of ownership fundamental for strategic cost management. Their research examined cost

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management associate with supplier alliances in three dimensions covers total cost of

ownership, understanding supplier cost and target costing.

Cost management revolution had switch focus from price to Total Cost of Ownership

ensuring that purchasing strategies necessity to manufacturing operation. Total cost of

ownership is essential for buyer in order to analysis and assess the cost factors involved in

acquisition, possession, utilize and subsequently disposition of a product or services (Ellram

& Siferd, 1998) which ultimately leads to firm’s make or buy decision (Zsidisin & Ellram,

2001). Ellram (1995) in his study highlighted that total cost ownership interrelated with

supplier relationship as this involved information sharing on cost driver factors. This will be

the initial point for buyer to identify the gaps that needs aligning in order to achieve the target

cost which eventually will lead to minimize the production cost. Giunipero and Pearcy (2000)

reported that purchasing function is shifting focus from tactical which stress on placing an

order and price saving, to strategic move with more attention given on value added activities

and total cost savings. Thus, as part of cost leadership strategy (Porter, 1980), manufacturing

firm must aligning goals with its core supplier in order to achieve significant cost reduction.

Zsidisin and Ellram (2001) identified specific elements such as working out breakdowns of

supplier cost structures and creates database on estimation of supplier cost structures base on

market and economic environment study able to help buyer in better understanding and

enhance knowledge on supplier costs. Understanding cost structure of key suppliers, supplier

expertise and experience will help buyer to generate new ideas and identify high cost areas

which need more attention.

Target costing development will be part of effective cost management strategy. Target

costing been studied by Ellram (2000) through detail analysis on process step to achieve

overall target costs and working on continuous cost improvement plan. Target cost is the

point organization willing to spend on the purchase of product and services which ultimately

determine the price that market willing to pay and backs out the desired profits (Zsidisin &

Ellram, 2001). As a result, target costing will be focusing on firm’s product which it can

produce and sell at reasonable profit supported with long term competitive advantage against

the competitors’ price. First component in target costing is to understand competitive position

of an organization in order to further boost the overall competitiveness. According to Ellram

(2000) second component of strategic cost management will be focus on cost driver analysis.

Cost drivers described as breakdown of cost element which used to explore cost reduction

opportunity or process improvement. Third component in Ellram (2000) research on target

costing is value chain analysis which influenced by involvement of other members of value

chain. In term of engineering effort, value chain elaborates the important of design the right

products at the right price during the pilot release of product.

2.1.4 Supply Base Management Strategy

One of the key elements in supply base management is determining the optimum number of

supplier by purchasing for continuous improvement. Thus, organization must maintain right

number of suppliers for effective management and continuous development of its supply base.

Monczka et al., (2004) outline that supply base optimization will contribute in cost, quality,

delivery and information sharing improvement between buyer and supplier. Supply base

optimization will be a continuous process which identifies the best suppliers in terms of

number and quality.

Krause has described the supplier development as “any effort by a buying firm to

improve a supplier’s performance and / or capabilities to meet the buying firm’s short term

and / or long term supply needs” (Krause, 1999, p. 206). It is required substantial effort from

purchasing to warrant that supplier development plan been in place to increase supplier

performance and capabilities (Humphreys, Li & Chan, 2004). Thus, size of supply base plays

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an important role in supplier development process. Dwyer, Schurr and Oh (1987) stressed

that purchasing able to increase committed from supplier via long term orientation with

single source supply. Trent and Monczka (1999) supported that large supply base will

jeopardize the close interaction between buyer and supplier. Therefore, genuine partnership

that an organization develops should be limited due to the factor of cost of development and

maintenance (Zailani & Rajagopal, 2005). Supply base management strategy is essential in

order to develop, improve and maintain its supplier’s performance and competencies to fulfill

manufacturer short and long term supply requirement (Ndubisi, Jantan, Loo & Ayub, 2005).

Vonderembse and Tracey (1999) research finding revealed the existence of significant

relationship between supplier selection criteria and supplier involvement contributing

towards manufacturing performance.

2.2 Manufacturing Performance

Leachman, Pegels, and Shin (2005), studies on manufacturing performance revealed that

most of the researchers evaluating manufacturing performance are sharing common

understanding that need to have multiple performance measurement. Looking back on the

evaluation of performance measurement before 1980s, the performance measurement process

was mainly concentrated with cost accounting approach which consists of financial key

performance indexes such as return on investment (ROI), profit plus earning per share

(Gomes, Yasin & Lisboa, 2006). However, focusing on the financial indicators alone been

exposed to the critics that other non-financial indicator which contribute towards organization

performance been neglected and will only lead to short term thinking.

Therefore, Gomes, et al., (2006) evaluate the revolutionary of the performance

measurement approaches been used by researchers in their attempt to comprehensively

measured the manufacturing performance aspects. Dsouza and Williams, (2000) stressed on

application of problem specific approaches on their research the essential of processes and

tasks flexibility measurement as an answer to address the market volatility and to fulfill the

diverse customer needs. As the focal point of the performance measurement process,

Performance Prism been established on the foundation of multi-dimensional framework by

incorporating the stakeholders contribution and fulfilling their satisfaction level. As a result,

the performance evaluation best described in term of attaining sustainable achievements

without factoring for corresponding resources or efforts pledged which normally

underestimate the true competitive status in the decision making unit. This is because that

outcome of the results might fail to stress the relationship between “good operational

practices and their economic benefits” (Leachman et al., 2005, p.855).

Manufacturing strategies consist of competitive priorities which mainly focus on

quality, cost, delivery, flexibility, innovation and responsiveness. Competitive priorities been

widely used as part of the measurement for manufacturing strategy performance (Zeng, Tam,

& Wan, 2008) most firms used to achieve these goals through engaging with advanced

technologies and manufacturing practices such as worker empowerment, JIT and concurrent

engineering (Snell & Dean, 1992). However, Das and Narasimhan (2000) reported that latest

development in industry comes out with new dimension which divert the focus of

manufacturing strategy towards supply chain capabilities to obtain quality, cost, delivery,

innovation and responsiveness goals. Zailani and Rajagopal (2005) also stressed the

importance in measuring manufacturing performance through evaluating the key competitive

priorities which consist of quality, delivery and flexibility. However, their measurement on

performance focus only given on three elements and neglecting other competitive priorities

element such as cost, innovation and customization responsiveness. Cost and new product

introduction which directly relate towards the innovation and customization responsiveness,

8

important in creating synergy in the manufacturing growth as this will eventually determine

the sales of product produced.

Das and Narasimhan (2000) in their research cited Minahan (1997) study on success

of supplier versatility that Pitney Bowes analyze a group of key suppliers with manufacturing

expertise will be developed by manufacturing performance, future growth and new product

introduction. Therefore, the competition in manufacturing industry might be within the radius

of supply chain competence which consists of purchasing strategy. Vonderembse and Tracey

(1999), measured the manufacturing performance in the aspect of quality, cost of production

and rework, finish goods delivery and in addition consider the inventory level of work in

production goods. In their study, they related supplier selection and involvement tactics

impact and manufacturing performance. As a result, they highlighted that these progress in

supply chain had provided opportunity to purchasing to become a significant influence in

achieving manufacturing and business goals.

2.3 Theoretical Framework and Hypothesis Development

As outlined earlier, the four elements of purchasing strategies used in the framework

(cooperative negotiation, supplier collaborative relationship, cost management and supply

base management) are from six dimensions of purchasing strategies proposed by Kiser (1976).

In his detail research on purchasing strategies, Kiser recommended six purchasing strategies

which consist of “negotiation, sourcing, developing and maintaining good relations with

suppliers, developing suppliers, protecting the cost structure of company and minimizing

costs” (Janda & Seshadri, 2001, p. 294). However, in later research by Janda and Seshadri

(2001), which utilized Kiser’s framework to abstract four purchasing strategies which are

cooperative negotiation, collaborative interaction, supply base and temporal relationship. As

a result, this research outlines three purchasing strategies from Janda and Seshadri (2001) and

one additional strategy on cost management which subsumes Kiser’s last two strategies on

cost. In recent development, cost element plays a significant role on firm’s profitability and

enhances share holder value. Thus, conceptualization of these four dimensions is observed as

the most suitable purchasing strategies dimension for the present study. Based on Figure 1,

the main sets of variables are categorized into independent and dependent variables.

Figure 1: The Theoretical Framework

Effective

Negotiation

Supply Base

Management

Collaborative

Relationship

and

Interaction

Effective

Cost

Management

Manufacturing

Performance

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As mentioned earlier, Janda and Seshadri (2001) stressed that cooperative negotiation

able to build up win-win formula whereby both purchaser and supplier satisfied with the

outcome of the negotiation process and believe their interest in the negotiation process well

protected. This will lead to supplier loyalty enrichment and stimulate supplier relationships.

Therefore, supplier will be more transparent to buyer needs with flexibility to fulfill buyer

requirement, provide excellent quality of products with on time delivery which eventually

leading cost reduction through cutting the waste. As explained cooperative negotiation

strategy will some how support the manufacturing performance which measured through

quality, cost, delivery, flexibility, innovation and responsiveness. As such the hypotheses

proposed are:

H1: Effective negotiation strategy has significant positive impact on manufacturing

performance.

Long run collaborative relationships with key supplier contribute to firm’s financial

performance (Carr & Pearson, 1999). They cited Ford success in forming collaborative

relationships with their supplier enable to boost the competitiveness in market. Collaborative

relationships with supplier are building up with foundation of effective communication on

information sharing, trust, commitment and cooperative. Janda and Seshadri (2001) also

supported that strong integration with supplier able to create cooperation with suppliers in

providing strategic information and technical guidance for product quality improvement, cost

reduction through non-value added activity elimination and effective delivery performance

with supply assurance. Meanwhile, Fynes, Voss, and Burca, (2005) findings revealed that

dynamics of supply chain relationships and manufacturing performance are yield more in

mixed mode. Collaborative relationship and interaction components such as communication,

trust, cooperation and adaptation have significant positive relationship with manufacturing

performance elements such as quality and cost (Fynes et al., 2005). Thus, the following

hypotheses generalize the relationship of collaborative relationships and manufacturing

performance:

H2: Supplier collaborative relationship and interaction has significant positive

impact on manufacturing performance.

Zsidisin and Ellram, (2001) highlighted that target costing, total cost of ownership and

understanding supplier cost are costing tools which able to support firm in overall reducing

manufacturing costs. Buyer will have detail information and understanding of cost

breakdown information provided by supplier through collaborative interaction. Thus, buyer

should be able to form strategic alliance with key suppliers to focus on cost driver factors to

eliminate hidden costs. Tracey and Tan (2001) also supported that strategic management of

supplier able to produce competitive pricing through reduce production cost of supplier,

minimize the rework activity and optimum level of inventory. As such the hypotheses

proposed are:

H3: Effective cost management has significant positive impact on manufacturing

performance.

Supplier selection base on quality, pricing, delivery and performance of product have

significant relationship with four elements of customer satisfaction (product quality, product

variety, delivery service and competitive pricing) and firm performance (Tracey and Tan,

2001). Further Tracey and Tan research also supported that supplier participation during

10

product design and continuous improvement creates significant impact on delivery service

and firm performance. On the other hand, Vonderembse and Tracey (1999) research findings

highlight that supplier selection criteria and supplier involvement as part of supply chain

management strategy are positively correlated with manufacturing performance. Therefore,

two major components in supply base management strategy correlation impact on

manufacturing performance provide evidence on the existence of link between them. As such

the hypotheses proposed are:

H4: Supply base management has significant positive impact on manufacturing

performance.

3.0 METHODOLOGY

The population of the study covers manufacturing firms in five Malaysian industrial states

mainly Penang, Kedah, Perak, Selangor and Johor. It is important to highlight that Malaysia

is one of important and prominent industrialize country in South East Asia which managed to

attract many local from Small Medium Industries (SMI) development as well as foreign

investors from all over the world mainly American, Japanese, European, Singaporean and

Taiwanese. The sampling method used to collect the data is random sampling in order to

avoid bias on the feedback. Sample randomly drawn from the list of Federation of Malaysian

Manufacturers (FMM) website consists of 2,211 companies. Assuming a conservative 15-20

percentage response rate, 750 questionnaires were distributed to the manufacturing firms’

purchasing professional specialization in sourcing and purchasing whose holding most senior

position in company purchasing organization (Das & Narasimhan, 2000).

3.1 Development of Questionnaires

The questionnaires are designed to measure the factors of purchasing strategies influencing

manufacturing performance where the relationship of the affected variables is analyzed. All

questions in the questionnaire are based on the hypotheses generated which align to the unit

of analysis. Sekaran (2003) highlighted that erroneous results may occur if the questions are

not reflecting the unit of analysis which leads off beam conclusions. The questions designed

in a way that the respondents able to understand and answer the questions faster.

The model of questionnaire for purchasing strategies was adapted from Janda and

Seshadri (2001) as it was referring to the four critical variables influencing purchasing

performance through effectiveness and efficiency which eventually leads towards

manufacturing performance. On the other hand, some items measuring Supply Base

Management and Collaborative interaction been adapted from Kannan and Tan (2003); Wu,

Chiag, Wu and Tu (2004). On top of this, there are also some self constructed items which

been added in order to create more comprehensive measurement on the variables. Finally, the

model of questionnaire for manufacturing performance was adapted from Das and

Narasimhan (2000) research as it was referring to purchasing competence and its relationship

with manufacturing performance.

The questionnaires consist of two main sections which are Section A designed to

measure the independent variables and Section B measuring the dependent variables.

Respondent were asked to indicate their perception on purchasing strategies practice in their

organization and their impact on manufacturing performance. Finally Section E, focus on

respondent sex, age range, qualification, position in purchasing organization, and years of

experience in purchasing department. The questions designed with 6-point Likert scale

ranging from strongly disagree (1) to strongly agree (6) for Section B. Meanwhile, Section C

and D 6-point Likert scale from Not at All (1) to Very High (6). The 6-point Likert scale is

used to offset the central tendency bias that may be encountered with Asian respondents

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(Chen, Lawler & Bae, 2005). A cover letter is enclosed to explain the purpose of the

questionnaire to motivate and encourage respondents to participate. Summary of all items

measured in questionnaire been development from various source as depicted in Table 1.

Table 1: Source of variables items measured in questionnaire

Variables Number

of Items

Source

Effective Negotiations Skills 8 adapted from Janda and Seshadri (2001)

Collaborative Relationship and

Interaction 9

adapted from Janda and Seshadri

(2001); Kannan and Tan (2003); Wu,

Chiag, Wu and Tu (2004);

Effective Cost Management 10 adapted from Janda and Seshadri

(2001); Self contructed;

Supply Base Management 12 adapted from Janda and Seshadri

(2001); Wu, Chiag, Wu and Tu (2004);

Purchasing Strategic

Integration 6 adapted from Benito (2007)

Manufacturing Performance 6 adapted from Das and Narasimhan

(2000)

4.0 ANALYSIS

4.1 Profile of Organization and Respondent

All organization profile, purchasing function classification variables, demographic data and

biographical data of respondent been perfectly tabled from frequency distribution data. The

manufacturing organization profile been summarized in table and been categorized into 11

variables such as area of manufacturing, ownership of the companies, number of employees,

years of establishment, years of the establishment in Malaysia, perception on reputation of

product in market, number of departments, number of suppliers, total purchase outside of

Malaysia, standard payment term and finally the company location in Malaysia. The profiles

are illustrated in Table 2.

Table 2: Summary of Respondents Organization Profile

Variables Categories Frequency Percentage (%)

Electrical and Electronic Products 86 54.4 Area of

Manufacturing Consumer Products (FMCG) 24 15.2

Chemical / Gases Products 23 14.6

Metal Products 2 1.3

Others 23 14.6

Company Ownership American 55 34.8

European 30 19.0

Japanese 45 28.5

Malaysian 14 8.9

Singaporean 5 3.2

Taiwanese 8 5.1

Others 1 .6

Location in Malaysia Penang 72 45.6

12

Kedah 24 15.2

Perak 11 7.0

Selangor 51 32.3

Less than 100 19 12.0 Number of

Employees 100 – 250 22 13.9

251 – 500 48 30.4

501 – 1000 22 13.9

More than 1000 47 29.7

Less than or equal to 5 years 2 1.3

6 – 10 years 20 12.7

Years of

Establishment in

Malaysia 11 – 15 years 66 41.8

More than 15 years 70 44.3

The market leader 5 3.2 Market reputation of

products In top 3 28 17.7

In top 7 29 18.4

In top 10 37 23.4

In top 20 48 30.4

None of these 11 7.0

Less than 3 8 5.1 Number of

departments 3 – 4 9 5.7

5 – 6 57 36.1

7 – 8 66 41.8

More than 8 18 11.4

Number of suppliers Less than 25 35 22.2

25 – 50 21 13.3

51 – 75 17 10.8

76 – 100 14 8.9

More than 100 71 44.9

Less than 20% 18 11.4 Percentage purchase

from outside Malaysia 20% – 40% 13 8.2

41% - 60% 16 10.1

61% - 80% 67 42.4

81% - 100% 44 27.8

More than 90 days 19 12.0 Standard Payment

Term 90 days 41 25.9

60 days 42 26.6

45 days 22 13.9

30 days 18 11.4

Others 16 10.1

*N = 158

13

4.2 Factor Analysis

A factor analyses with principal component method using varimax rotation was applied to all

the variables. The factor analysis was done under the suspicion that there might be

multicollinearity between variables and interrelationship. Factor analysis is performed using

all items used to measure on total of four independent variables effective negotiation,

collaborative supplier relationship and interaction, supply base management and effective

cost management, continue with dependent variable for this research which is manufacturing

performance. In addition, factor analysis is performed on moderating variable which is

purchasing strategic integration. The varimax rotation method is used to determine any

underlying components for each variable.

4.2.1 Factor Analysis on the Independent Variables Factor analysis with varimax rotation was done to validate whether the respondents perceived

the four constructs to be distinct in independent variable. The result as presented in Table 3

showed a four factor loadings with Eigenvalues greater than 1.0 for the independent variables

with total variance explained was 73.07% of the total variance. A closer examination

revealed that for factor 1 the total variance explained was 25.14%, followed by factor 2 it was

20.41%, factor 3 was 14.30% and finally in factor 4 it was 13.21%. KMO measure of the

sampling adequacy was 0.86 indicating sufficient intercorrelations while the Barlett’s Test of

Sphericity was significant (Chi square = 7.5413, p<0.01). In order to obtain this result, items

with less than 0.5 from anti-image result correlation in the diagonal direction is excluded and

factor analysis was performed again to ensure an acceptable level of measure of sampling

adequacy is attained (Hair et al., 2006). The items that been excluded during this process are

supply base management four and effective negotiation 3. In total two items measure the

independent variables been removed during the factor analysis.

Table 3: Rotated Component Matrix for Independent Variables

Factor

Relationship and Interaction (RI) RI CM SBM NG

Feels our supplier as part of the business partner in this relationship

(11) .916 .141 -.079 .066

Present strategic information to suppliers (5) .911 .169 -.152 .197

Involve in extensive formal and informal communication with suppliers

(12) .897 .153 -.147 .189

Treat suppliers as our customers (7) .889 .150 -.068 .080

Retain the same supplier(s) for more than two years (1) .878 .147 -.111 .166

Place orders on current supplier(s) for an item (2) .862 .124 -.129 .156

Involve vendors in product improvement (6) .844 .073 -.133 .167

Extend current contract(s) with suppliers (3) .837 .106 -.009 .077

Knows the strength and weakness of our supplier (9) .826 .036 -.160 .117

Let vendor access our technical and managerial know-how (4) .812 .055 -.158 .134

Supplier willing to share confidential information (8) .802 .120 -.015 .082

Perceives that our supplier is perfectly honest and truthful (10) .749 .213 -.141 .087

Cost Management (CM)

Reduce inventory level by engaging supplier with JIT, VMI &

Consignment (7) .172 .947 -.037 .099

Make or buy decision through cost measurement (10) .172 .945 .000 .099

14

Monitor poor deliver performance by suppliers (8) .145 .918 -.058 .105

Provide target costing for suppliers to be meet (3) .167 .894 -.036 .083

Request suppliers to provide the cost breakdown to analyze the cost

drivers (4) .094 .884 -.015 .139

Control internally on Order processing costs (2) .122 .817 -.055 .173

Minimize the storage and transportation cost (5) .106 .795 -.037 .108

Monitor poor quality performance by suppliers (9) .055 .748 .272 -.077

Measurement on Supplier’s ability to eliminate waste as cost reduction

(6) .121 .723 -.143 .072

Control of suppliers’ on price increases (1) .110 .720 .193 .044

Supply Base Management (SBM)

Involve suppliers’ on the new product development (7) -.150 .045 .899 .109

Devote time to improve suppliers’ productivity (9) -.146 .011 .889 .077

Prefer to purchase from single source (2) -.119 -.018 .808 -.007

Provide training support to suppliers’ as part of supplier development

(6) -.128 -.025 .786 .010

Select qualified suppliers through standard supplier selection process

(8) -.106 -.077 .784 -.026

Avoid supplier dependence (5) -.107 -.058 .730 .073

Deal many suppliers for the item (1) -.126 .050 .707 .046

Purchase items from many suppliers in one location (3) -.019 .093 .655 .067

Negotiation(NG)

Seek for win-win outcome (5) .147 .183 .108 .902

Spend longer time on negotiation process (8) .176 .154 .083 .846

Reach mutual agreement on discussed issue (6) .089 .011 .048 .809

Require bidders to provide cost data (4) .303 .167 .023 .779

Powerful enough to ask supplier to readjust their pricing strategy (7) .155 .310 .083 .773

Solicits ideas and suggestions (2) .323 .119 .056 .767

Explore supplier oriented solutions (1) .036 -.083 .001 .744

Eigenvalues 12.464 6.521 4.827 3.226

Total Variance (73.07%) 25.144 20.414 14.304 13.212

KMO 0.86

Approximate Chi-Square 7.5413**

Notes: **p<0.01

4.2.2 Factor Analysis on the Dependent Variable A total of 6 items were used to measure the dependent variable which is manufacturing

performance. Principal component analysis was used and all items measured were extracted

into one factor with eigenvalue 4.515 more than 1 and total variance explained was 75.25%

as shown in Table 4. All the anti-image correlation metric displayed a value greater than 0.50.

There was no rotation as there was only one component extracted. The KMO measure of the

sampling adequacy was 0.84 indicating sufficient intercorrelations while the Bartlett’s Test of

Sphericity was significant (Chi square = 1.0233, p<0.01).

15

Table 4: Rotated Component Matrix for Dependent Variables

Loading

The extent to which the company has been able to meet its cost reduction goals (1) .925

The extent to which the company has been able to meet its product introduction time goals

(4) .916

The extent to which the company has been able to meet its delivery goals in term of

delivery speed and dependability (5) .899

The extent to which the company has been able to meet its quality improvement goals (2) .898

The extent to which the company has been able to meet its customization responsiveness

goals (6) .896

The extent to which the company has been able to meet its manufacturing cycle time

reduction goals (3) .635

Eigenvalues 4.515

Total Variance 75.25%

KMO 0.843

Approximate Chi-Square 1.0233**

Notes: **p<0.01

4.3 Reliability Analysis

The inter-item consistency reliability or the Cronbach’s Alpha reliability coefficients of the

independent, moderating and dependent variables were obtained. The range between 0 and 1

for Cronbach Alpha coefficients is reflecting the reliability of the data. A Cronbach Alpha

coefficient is acceptable, if the value higher than 0.70 (Nunnally & Bernstein, 1994). On the

other hand, Sekaran (2003) stated that a level of 0.60 is still acceptable. However, the values

obtained for all the six variables were above 0.70 meets the standard requirement which is

considered very reliable. The highest reliability scored by Collaborative Supplier

Relationship at 0.97 Cronbach Alpha Value, while Supply Base Management scored the

lowest reliability value at 0.92. In general, the reliability of all the variables in this study

indicates to ensures consistent measurement on respondent answers to all items in measure

that indicates stability and consistency of the model development (refer Table 5). As a result,

due to the fact that all the respondents in this study are holding senior staff position in

purchasing organization and well experience in this field with around 90% respondents

experience more than 5 years provide consistency and stability in respondent answers.

Table 5: Reliability coefficients for the major variables Variables number of item Item dropped Cronbach’s

Alpha Value

Effective Negotiation 8 1 0.93

Supply Base Management 9 1 0.92

Collaborative Supplier Relationship

and Interaction

12 - 0.97

Effective Cost Management 10 - 0.96

Manufacturing Performance 6 - 0.93

16

4.4 Descriptive Statistics

The dependent and independent variable were measured based on a six-point Likert scale.

The mean and standard deviation of all the variables were summarized in Table 6. From the

descriptive analysis results, it shown that mean of all six variables are rather higher than

medium whereby all variables recorded mean range between 4.21 to 5.25. The highest mean

been recorded at 5.25 by Supply Base Management as independent variable, meanwhile

Collaborative Supplier Relationship and Interaction recorded lowest mean which is 4.21. On

the other hand, in term dispersion Collaborative Supplier Relationship and Interaction having

the widest dispersion with standard deviation of 0.94 and Overall the standard deviation

having range between 0.44 to 0.94 two of the independent variables (Supply Base

Management and Effective Cost Management) having same level standard deviation of 0.59.

Table 6: Descriptive Analysis of Study Variables

Variables Mean Std. Deviation

Independent Variables

Effective Negotiation 4.7342 .82049

Supply Base Management 5.2041 .59796

Collaborative Supplier Relationship and Interaction 4.1403 .93769

Effective Cost Management 4.9563 .66624

Dependent Variable

Manufacturing Performance 4.7521 .80991

Notes: Independent items used a 6-point Likert scale with (1 = Strongly Disagree and 6 = Strongly Agree), and

dependent variables used 6-point Likert scale as well with (1 = Not At All and 6 = Very High)

4.5 Regression Analysis

Table 7 presents the result of regression analysis for Factor Influencing the Manufacturing

Performance. The model is significant (F=21.212; p<0.001) and can explained 36.3 percent

variants. Even so, the hypothesis testing shows Effective Negotiation (β =0.324, p<0.001),

Supply Base Management (β = 0.263, p, <0.001), Collaborative Supplier Relationship (β =

0.183, p, <0.05), and Effective Cost Management (β =0.236, p<0.001) were positively

correlated with Manufacturing Performance. Based on this results can be concluded that the

hypotheses H1, H2, H3 and H4 were supported.

Table 7: Regression Analysis for Factor Influencing the Manufacturing Performance Predictor variable t-value Standardized Coefficients

Beta

Effective Negotiation (X1) 4.485 .324***

Supply Base Management (X2) 3.828 .263***

Collaborative Supplier Relationship and

Interaction (X3) 2.433 .183*

Effective Cost Management (X4) 3.407 .236***

F 21.212***

R² .363

Adjusted R² .346

F² Change 21.212***

R² Change .363

Note: * p value < 0.05; ** p value < 0.01; *** p value < 0.001

17

The result proved that all the independent variables (Effective Negotiation Strategy,

Collaborative Supplier Relationship and Interaction, Supply Base Management and Effective

Cost Management) have significant positive impact on manufacturing performance among

the manufacturing firms in Malaysia.

5.0 DISCUSSIONS

The test results of hypothesis as obtained from empirical output in previous section highlights

that all four independent variables of purchasing strategies have significant positive impact

influencing the manufacturing performance of an organization. The result obtained reveals

that purchasing strategies creates significant positive impact on manufacturing performance

which comprises the competitive priorities of the firms in term of quality, cost, cycle time,

new product introduction time line, delivery speed and dependability and finally

customization responsiveness performance. All these independent variables are also strongly

supported in the study by Janda and Seshadari (2001) against the impact towards effective

and efficient purchasing performance. Das and Narasimhan (2000) study’s empirical result

also revealed that buyer supplier relationship development as part of purchasing competence

has significant positive relationship with manufacturing performance.

First hypothesis result, on the impact of effective negotiation strategy has strong

significant positive impact on manufacturing performance. This been one of the main criteria

influencing the manufacturing performance competitive priorities which impact on both

internal and external performance goals. Internal performance goals comprise the elements of

cost, quality and delivery, while the external performance goals focusing on new product

introduction time and customization responsiveness (Das & Narasimhan, 2000). Guinipero

and Pearcy (2000) also supported that effective negotiation skills factors content of key skills

in term of influencing and persuasion, understanding business condition and surrounding

environment, plus with ultimate focus on customer satisfaction fulfillment in order to meet

the business requirement.

Staff in purchasing organization required to develop the negotiation skill sets in order

to be dynamic and interactive nature of purchasing function on their role as boundary spanner

(Guinipero & Pearcy, 2000). Experience of the purchasing personal plays an important role in

creating positive impact on the manufacturing performance. Purchasing staff experience in

negotiation with external business partners and internally within the organization will pursue

for mutual understanding and creates win win situation results in order to achieve the

manufacturing competitive priorities goals in term of cost, quality, delivery speed and

flexibility. Around 90% of the respondent has more than 5 years experience in purchasing

organization which comprises their negotiation skills as well.

Effective negotiation skills will expand all possible option by exploring the supplier

oriented solution while solicit ideas and suggestions from suppliers in order to achieve the

desire goals of manufacturing performance for continuous cost improvement with high

quality raw material, creating flexibility approach with short delivery time and lower

minimum order quantity (MOQ). Janda and Seshadari (2001) findings supported as well that

negotiation strategy in purchasing function using cooperative approach able to maintain the

competitive advantage through purchasing efficiency in obtaining best deal with supplier

which will be beneficial in sustaining and improving the manufacturing performance. In

general committed parties will seek for win win situation and actively search for mutual

agreement that best meets both parties’ interest.

The second independent variable which was influencing the manufacturing

performance is supplier collaborative relationship and interaction. The hypothesis is

supported whereby supplier collaborative relationship and interaction creates significant

positive impact on manufacturing performance. Contemporary purchasing organization in

18

manufacturing firms requires supply chain interaction both externally with supplier and

customers and internally with other departments within the organization (Guinipero & Pearcy,

2000). Giunipero et al. (2006) findings revealed the importance of strategic relationship

management with suppliers. In this fast moving world, customer requirement are advancing

in triple pace. Everyday there will changes in term of demand to fulfill the end user

requirement which required more flexibility and easy adaption method to run parallel in

meeting customer requirement. Thus, we need a matured purchasing function that able to

accommodate with greater customization in product and service presenting. Moving forward,

building the capability to customize will be the key component in value added service

provided by purchasing function.

As a result, fundamental relationship element in developing long term relationship

and maintaining those relationships will be core in creating value added which help to acquire

the rewards of mutual risks and reward sharing in buyer supplier relationship. In searching

for advance technology with latest design which able to minimize the waste as well produces

superb quality of raw material and spares for machine and factory maintenance will be

essential in driving the manufacturing performance towards exceeding the customer

expectation. Strong supplier collaborative relationship and interaction will create feel that

supplier is our business partners. Information sharing through cooperative communication is

essential in build trust whereby all information on the strength and weakness of our supplier

is available in order for buying firms to provide technical assistance for improvement and

advancement in new technology (Kannan & Tan, 2003). On the other hand, firms even able

to get the assistance from supplier in order to find solution in improving on their

manufacturing process and products with the existence of strategic relationship with supplier.

The third independent variable which is effective cost management strategic been

found with strong positive influence on manufacturing performance. Giunipero et al. (2006)

revealed the findings that strategic cost control is key business driver for purchasing.

Purchasing function holding essential task in sourcing the raw material, spares for machine

and factory maintenance plus with services for their daily operation at cost that provide the

manufacturing firm with advantages in pricing, time and delivery. Total cost management in

manufacturing plays an important role in driving the competitiveness of firms’ product in

market. In total cost management, price only employs a portion and the rest of the cost

including quality, delivery, flexibility, service and other value added elements.

Therefore, purchasing need to align strategically in controlling the total cost from

suppliers. Cost breakdown analysis in identifying and understanding the cost drivers’ factors

is essential in controlling the overall manufacturing cost. Effective cost management able to

increase firms’ investment capability in exploring new product introduction and

customization while creating flexibility to customer been fundamental in building core

competence of the firm. Therefore, purchasing function need to align with supplier in

measuring the supplier capability and afford to eliminate waste as part of the cost reduction

elements. Purchasing must be creative and innovative in handling cost drivers such as

reducing inventory and cash out by engaging supplier to various inventory management

programs such as vendor managed inventory (VMI), just in time (JIT) and consignment.

The last independent variable is Supply Base Management strategic which also

resulted in positive significant impact on manufacturing performance as dependent variable.

Basically, supply base management focusing on the size of the supply base required for a

firm in driving the manufacturing performance. Size of supply base has been critical element

in determining the supplier selection and management strategies. Janda and Seshadri (2001)

findings highlighted that size of supplier base is negatively related with performance

efficiency. Supply base management need to ensure the right suppliers who have sufficient

resources in supporting manufacturer to be flexible in meeting customer expectation. Ndubisi

19

et al. (2005) empirical finding supported that manufacturer who focuses on product and new

introduction launch tends to select supplier based on technology in comparison to quality,

cost and delivery performance. Lee (2002) revealed that supply chain strategies derived from

one size model fits all or try all method will fail. Therefore, different manufacturer has

different ways in managing their supply base on the needs of the industry priorities.

Neglecting the supply base management especially in vendor selection process can

better describe in term of ‘gabbage in-gabbage out’ (GIGO) slogan been widely used to

illustrate the situation whereby poor supply base management as input will be resulting in

poor quality output (Ndubisi et al., 2005). This will definitely creates huge impact on the

manufacturing performance. As a result, focal point of supply base management strategy will

be on driving suppliers for continuous improvement plan, involving suppliers on new product

development, flexibility in term of speed decision making patterns, understand and

recognized the customer requirement will assist firm in achieving excellence manufacturing

performance.

5.1 Conclusions

The result from this study demonstrates the influence of purchasing strategies on

manufacturing performance. The result from this research also consists of the strategic value

of purchasing department and purchasing professional whom align the purchasing strategies

towards manufacturing performance. Traditional role of buyer who fill out purchase order,

send out request for quotation (RFQ) and possessing paper work must be eliminated in the

view of changing purchasing function into strategic approach. Purchasing professional need

to be strategically align with firms cooperate and business strategic goal in gaining the

knowledge about the company and industry future, obtain the best product and services,

analyzing the cost drivers on effective total cost management by evaluating the rewards and

risk associated in order for manufacturing performance excellence. Manufacturer able to

managed to obtain optimal inventory levels and production capacity in multiplant operation

such as MNCs’ which can maximize the use of working capital (Ndubisi et al., 2005). In

addition, building value added relationship both with external partners and internal units will

be the influential for all strategic relationship goals. Cooperative communication, confidential

information sharing and commitment in meeting firms request able to address the ability of

the supplier to be a reliable partner.

One of the approach in cost reduction activities is the supplier forum to discuss on

benchmarking elements, improve productivity, labor cost reduction, innovative logistic and

transportation plan, creative management of key material, efficient packaging technique and

recycle of usable material (Giunipero et al., 2006). Driving towards the competitive

environment and uncertainty in demand, purchasing function been acknowledged as

important resource in identifying right suppliers who have direct and large impact on quality,

cost, innovation, customization, delivery and flexibility subsumes the manufacturing

performance competitive priorities. On the other hand early supplier involvement in new

products development in addition with product design knowledge, understanding of clear

quality standard and technology acquiring roadmap will equipped manufacturer to be ready to

face any challenge of uncertainty in its supply chain. There should be higher attention from

top management to drill out greater competitive advantage from purchasing function.

Therefore, integrating purchasing function into strategic planning process which is align with

mainstream of business strategy is essential for further development and utilization of

purchasing function. In this case, higher importance of purchasing will be expedite to pull

purchasing function into mainstream instead of functional support which will possible to

facilitate the strategic integration of purchasing function into strategic manufacturing

objective.

20

A few limitations are identified and acknowledged while conducting the results,

although the research is consider successful in meeting the objectives. Firstly, the limitation

in this research is the uneven respondent from each category of industry responded to the

questionnaire. The respondent for this research mainly dominated from Electric and

Electronic Industry category which consist of 54% of the respondent. The sample size also

limited. Thus, this may not represent the actual scenario of purchasing strategies in

manufacturing firms influence the manufacturing performance. For future research on the

topic of this study, it would be most beneficial to examine the influence of purchasing

strategies on manufacturing performance for specific industrial cluster. As explained by Lee

(2002) supply chain strategies derived from one size model in general manufacturing industry

will not fit well to construct a model which generally acceptable. Thus, in order to understand

well the characteristic of specific industry purchasing strategies and its impact on

performance need to be carried out in order to identify the differences in purchasing function

strategies between the industrial clusters.

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