The Relative Importance of Supplier Selection Criteria: The Case of Electronic Components Procurement in Japan

INTRODUCTION In academic articles, and even more so in the popular business press, Japanese industrial purchasing behavior has been painted with a single brush. The Japanese purchaser-supplier relationship is typically described as cooperative, interdependent, integrated, and, often, exclusive. Outside sellers, especially non-Japanese companies, are rarely able to penetrate this relationship. However, this characterization of Japanese industrial purchasing was always overstated. It may have accurately depicted purchaser-supplier relations in a small number of industries, most notably the automobile industry. But the portrayal failed to distinguish between different sectors of the Japanese economy, not to mention individual companies or products. Furthermore, although the pace has been painfully slow, many segments of the Japanese market have been opening up to foreign competition. This study examined purchasing behavior in the Japanese electronic (SIC 3600) and office equipment (SIC 3570) industries. The research objective was to asses and compare the relative importance of several vendor selection criteria used by Japanese electronic and office equipment companies when making purchases of two different types of components: standard switches and printed circuit boards. A switch was selected as representative of standard components. A printed circuit board, on the other hand, is often customized, and electronic firms generally rely on outside suppliers' technologies.[1] Two sets of hypotheses are presented. The first seeks to determine whether or not purchasers in the electronic and office equipment industries accord more weight to maintaining relationships with current suppliers than to so-called rational factors such as price, quality, and delivery. Furthermore, does the answer depend upon whether companies are purchasing standardized or customized components? The second group of hypotheses examines and compares the relative importance of several rational product and supplier attributes when companies purchase these two different types of components. LITERATURE REVIEW AND HYPOTHESES Supplier Relationship There have been several recent studies of purchaser-supplier alliances in the Japanese automotive industry.[2] Japanese manufacturers within each of the keiretsu have established close subcontracting relationships with some of their suppliers. In this partnership, the purchasing firm gives the supplier an exclusive or semi-exclusive contract. The supplier in turn invests in customized machinery or other facilities. The relationship is often enhanced by mutual shareholding. This emphasis upon maintaining the purchaser-supplier relationship gives rise to the following hypotheses: H1a: When purchasing standard switches, purchasers attach significantly greater importance to cross-shareholding, reciprocity, and the fact that the supplier is a subsidiary than to rational purchase decision-making factors (quality, price, and delivery). H1b: When purchasing printed circuit boards, purchasers attach significantly greater importance to cross-shareholding, reciprocity, and the fact that the supplier is a subsidiary than to rational purchase decision-making factors (quality, price, and delivery). H2a: When purchasing standard switches, purchasers attach significantly greater importance to cross-shareholding, reciprocity, and the fact that the supplier is a subsidiary than to a supplier's performance attributes (manufacturing, technical and design capabilities). H2b: When purchasing printed circuit boards, purchasers attach significantly greater importance to cross-shareholding, reciprocity, and the fact that the supplier is a subsidiary than to a supplier's performance attributes (manufacturing, technical, and design capabilities). Parallel Sourcing A number of studies[3] have concluded that single-source purchasing (a company purchases a component from only one supplier) is common in Japan. …