Conceptualizing the supplier switching process: an example from public procurement

Purpose This paper aims to develop a framework for switching a service supplier in a supply network. Design/methodology/approach The study builds on existing literature in the field of purchasing and supply management, public procurement (PP) and the Industrial Marketing and Purchasing approach, as well as on an illustrative example case, from the PP context, of a supplier switch in a service delivery process. Findings During a switching process, the buyer must simultaneously manage the ending of a relationship with the incumbent supplier and the beginning of a relationship with a new supplier. Collaboration with the focal suppliers to develop a service process with standardized components prevents disruptions in the service processes and reduces the impact of the switch on the wider network. Research limitations/implications The conceptualization suggested in this paper needs to be further explored in different empirical contexts to assess its practical adequacy. Practical implications Practitioners responsible for service procurement can use the findings to develop collaboration with suppliers, both when it comes to service process development and to the switching process. Furthermore, the authors highlight the importance of ending competencies and the development of an exit plan to conduct a “beautiful exit.” Originality/value The paper integrates relationship initiation and ending studies, as well as procurement process models to develop a refined switching process framework. Many PPs rely on short-term relationships due to the legal obligation to frequently invite suppliers to tender, thus understanding the supplier switching process is important both for private and public sector actors.

Costing the cold: Connecting fuel poverty & supplier switching in Wellington, New Zealand

<p>Fuel poverty describes the inability of households to afford adequate energy services, such as space heating. In New Zealand, where 25% of households are estimated to be ‘fuel poor’, high electricity prices in a restructured electricity market have an important influence on fuel poverty. However, the ability of the New Zealand Government to regulate these high electricity prices is constrained. Consequently, there is a strong reliance on consumers to switch energy suppliers, which promotes competitive prices and in turn regulates the price of electricity. In contrast to energy efficiency improvements, switching offers fuel poor households a low-cost opportunity to improve the short-term affordability of energy services. Yet, switching is suggested to not benefit fuel poor households who are in most need of affordable energy. This thesis explored the relationship between fuel poverty and supplier switching in Wellington, New Zealand through a geographic lens. First, a new approach to identifying fuel poverty in New Zealand was applied. Using geographic information systems (GIS), a fuel poverty index was calculated to identify fuel poverty in Wellington at meshblock level. Spatial analysis of the index revealed the complexity of identifying fuel poverty and the extent to which the spatial distribution of fuel poverty in Wellington is shaped by the city’s colonial history. The index was then used to identify survey participants through which a survey was conducted exploring Wellington households’ switching behaviours. In a competitive market, consumers are expected to switch according to economically rational behaviours. However, switching behaviours in the survey sample were influenced by factors other than these economically rational behaviours. Integrating the findings of this thesis supports suggestions that switching is not benefiting the fuel poor. Finally, this thesis sheds light on the extent to which an understanding of the geography of fuel poverty can be applied towards improving the effectiveness of policy and equitable outcomes for fuel poor households.</p>

Costing the cold: Connecting fuel poverty & supplier switching in Wellington, New Zealand

<p>Fuel poverty describes the inability of households to afford adequate energy services, such as space heating. In New Zealand, where 25% of households are estimated to be ‘fuel poor’, high electricity prices in a restructured electricity market have an important influence on fuel poverty. However, the ability of the New Zealand Government to regulate these high electricity prices is constrained. Consequently, there is a strong reliance on consumers to switch energy suppliers, which promotes competitive prices and in turn regulates the price of electricity. In contrast to energy efficiency improvements, switching offers fuel poor households a low-cost opportunity to improve the short-term affordability of energy services. Yet, switching is suggested to not benefit fuel poor households who are in most need of affordable energy. This thesis explored the relationship between fuel poverty and supplier switching in Wellington, New Zealand through a geographic lens. First, a new approach to identifying fuel poverty in New Zealand was applied. Using geographic information systems (GIS), a fuel poverty index was calculated to identify fuel poverty in Wellington at meshblock level. Spatial analysis of the index revealed the complexity of identifying fuel poverty and the extent to which the spatial distribution of fuel poverty in Wellington is shaped by the city’s colonial history. The index was then used to identify survey participants through which a survey was conducted exploring Wellington households’ switching behaviours. In a competitive market, consumers are expected to switch according to economically rational behaviours. However, switching behaviours in the survey sample were influenced by factors other than these economically rational behaviours. Integrating the findings of this thesis supports suggestions that switching is not benefiting the fuel poor. Finally, this thesis sheds light on the extent to which an understanding of the geography of fuel poverty can be applied towards improving the effectiveness of policy and equitable outcomes for fuel poor households.</p>

Incomplete Contracts in Multi-period Procurement

We analyze the problem of a buyer who purchases a long-term project from one of several suppliers. A changing state of the world influences the costs of the suppliers. We distinguish between complete contracts conditioning on all future realizations of the state of the world and incomplete contracts renegotiated whenever the state of the world changes. We provide conditions such that incomplete contracting does not pose a problem. If the changing state of the world is publicly observable and the buyer cannot switch between suppliers during the lifetime of the project, the buyer achieves the same surplus irrespective of whether contracts are complete or incomplete. An English auction followed by renegotiation whenever the state of the world changes is optimal. To identify conditions when buyers should consider drafting complete contracts, we extend the analysis by considering private information about the changing state of the world and supplier switching. In both cases, incomplete contracting poses a problem. In a survey of procurement consultants, we confirm that publicly observable states of the world via price indexes play an important role in procurement. Moreover, the consultants confirm that supplier switching is infrequent in procurement practice. Thus, incomplete contracting is less of a problem in a considerable share of procurement projects. However, complete contracts are useful and could be used more often. This paper was accepted by Yan Chen, behavioral economics and decision analysis.

The effect of cultural value orientations on responses to supply-side disruption

PurposePast research has shown that culture has significant effects on people's evaluation of and responses to risk. Despite this important role, the supply chain risk literature has been silent on this matter. The purpose of this paper is to examine the impact of cultural value orientations on managerial perception of and responses to a supply disruption risk.Design/methodology/approachThe authors conduct a scenario-based experiment to investigate the effect of cultural value orientations – i.e. individualism-collectivism and uncertainty avoidance – on individuals' perception of risk and supplier switching intention in the face of a supply disruption.FindingsThe findings highlight the negative effect of individualism-collectivism on disruption risk perception and switching intention in high uncertain circumstances. However, these relationships are non-significant in relatively less uncertain situations. Moreover, the findings show that the impact of uncertainty avoidance on risk perception and supplier switching is positive and significant in both low and high uncertain circumstances.Originality/valueExtant research has traditionally assumed that when confronted with disruption risks, managers make decisions using an economic utility model, to best serve the long-term objectives of the firm. This paper draws from advances of behavioural research to show that cultural value orientations influence such decisions through a mediating mechanism of subjective risk perception.