An empirical study of buyer-supplier relationships in the Taiwanese machine tool industry

Abstract

Machine tools are an essential component of advanced manufacturing technology, and the machine tool industry in Taiwan dominates the world market. However, Taiwanese machine tool plants are unique, in that approximately 62% of the total operating cost for a plant arises from its suppliers. This paper examines buyer-supplier relationships in the Taiwanese machine tool industry. In doing so, a theoretically relevant set of buyer-supplier relationship variables is identified from the literature. Factor analysis shows that buyer-supplier relationships are a two dimensional construct containing the core dimensions of a purchasing cooperative relationship and an R&D cooperative relationship. Connections between buyer-supplier relationships and manufacturing performance (quality, cost, delivery and flexibility) are then examined. This study reveals that buyer-supplier relationships are related to overall manufacturing performance, but can vary depending on the dimensions of the relationships. Finally, some discussions are presented and managerial implications are made for the industry.