Supply market orientation: A dynamic capability of the purchasing and supply management function

Kai Foerstl, Anni-Kaisa Kähkönen, Constantin Blome & Matthias Goellner (2020). Supply market orientation: A dynamic capability of the purchasing and supply management function. Supply Chain Management: An International Journal, DOI 10.1108/SCM-06-2019-0233

Open access: https://www.emerald.com/insight/content/doi/10.1108/SCM-06-2019-0233/full/html

Capabilities to sense supply markets are now more important than ever due to the supply chain management challenges caused by the global pandemic. As the situation has evolved companies have been able to move from mere reaction to proactive strategies and, for example, to manage and mitigate risks. However, how to develop capabilities to tackle the market dynamism is the big question.

In our article, we conceptualize supply market orientation for the firm’s purchasing and supply management function. By studying large manufacturing and service firms in Germany, we show how supply market orientation capabilities are developed and how their application differs within and across firms. Our research can be used as a blueprint for the development of a supply market orientation capability that accommodates a firm’s unique contextual antecedents’ profile.

Firms can pursue their strategies more effectively through supply market orientation as they sharpen their strategic focus and can thus channel efforts and investments into the most relevant resources and practices at the function and category level.  The degree of outsourcing, purchase complexity, supply base complexity, and supply market dynamism drive the emergence of supply market orientation, while the scope and focus may well differ within the same firm. For instance, depending on the purchase task (or category) firms may either focus on innovation sourcing, whereas in other categories the focus is rather on managing risks and attaining higher levels of supply base transparency.

Firms with more advanced supply market orientation also practice internal integration more effectively as they are enabled to integrate and reconfigure internal resources and teams to reflect the needs of the respective supply environment firms are dealing with. Thus, supply market orientation helps managers assess how much integration is justified in which supply environment. This is particularly valuable because internal and supplier integration consumes resources, poses risks, and requires investments in terms of money and time. Firms can have substantial benefit if they are actively generating and exploiting supply market intelligence instead of being reactive to customer market matters and internal stakeholder demands.