CUSTOMER RELATIONSHIP MANAGEMENT

The Importance of Trust in Procurement

Practices and Its Impact on Business
Performance: An Empirical Investigation
From the Perspective of the Buyer
Supplier Dyad
Amartojit Basu (37120)
Arushi Rajvanshi (37142)
Kashmira Brahmane (37191)

Research Problem
This research study seeks to investigate how
procurement practices influence business
survival in a developing economy through
analysis of buyer-supplier relationships in
the restaurant industry

Research Objectives
To find the relationship between firms
perceived performance and importance of
procurement practices effect on business
survival
To find similarities and differences between
firms overall perceptions of procurement
practices and business survival
To find out the gaps exist within and
between firms procurement practices and
their effect on business survival in a
turbulent environment

Literature Review
Based on the literature reviewed for the definitions of trust in this
study,
it can be concluded that the term trust can mean relatively the same
thing to parties involved in a relationship or can mean something
completely
different.
(Currall and Judge, 1995; Simchi-Levi et al., 2002; Tomkins, 2001).
(Dennis and Kambil, 2003; Hines, 2004).
It appears that it is only through trust that stakeholders involved in a
procurement arrangements can focus on other issues knowing that
those with whom they are involved with will protect their interests
and not engage in activities that are harmful to your business
Therefore, trust is a belief by one part that the other party will fulfill
its obligation in a relationship This suggests that trust is being
perceived across procurement practices theoretical paradigms as a
critical construct upon which buyer and seller interactions are

 When relational exchange partners trust each other, they are more
willing to share relevant ideas, clarify goals and problems and
communicate efficiently. It also increases satisfaction with the
relationship (Anderson and Weitz, 1989, Mohr and Spekman 1994),
enhances continuity expectations (Ganesan, 1994; Joshi and Stump,
1999; Smith and Barclay, 1997), and foments cooperation,
coordination, collaboration and communication.
Based on the above discussions, the researcher believes that further
study of trust as a determinant of buyer supplier procurement
practices covers a reasonable number of dimensions that are
common in nearly all the other theories covered in this paper. Trust is
therefore perceived throughout this study as the necessary precursor
for:

Feeling to be able to rely upon another organization

Cooperating with and experiencing to be part of another group
Taking thoughtful risks, and
Experiencing believable interactions

Dimensions of Trust

Research Methodology
This research was exploratory in nature.
Multiple-case study analysis
Primary Research
In depth, structured interviews with 5 eating joints in Baner. 6
Suppliers to these joints.
Limitations Given the exploratory nature of the research,
we have done descriptive anaylsis of the collected data.

Questionnaire

Findings and Observation

A total of 22 in-depth interviews were conducted with 11 cases (i.e., 5
buying organizations and 6 supplying organizations) within the restaurant Industry in Pune city.
All interviewees had more than 3 years of relevant experience in the concerned industry and
were directly involved in activities related to procurement practices in their respective
organizations.
The majority of these cases (8 out of 11) had been operating in the industry for at least 5 years
Overall, the findings supported 24 of the 31 dimensions of the trust attributes in buyersupplier
procurement practices as having an impact on business performance.
All 11 cases supported the dimension of track record/history in the security attribute as an
important influence on business performance.
whereas the least supported dimension (2 out of 11 cases) was identified as the willingness to
disclose trade secrets in the openness attribute.

CLOSENESS
Four dimensions of CLOSENESS and the responses :
Joint decision making 7 out of 11 in support
building of joint outcomes 7 out of 11 in support
Social bonding 6 out of 11 in support
sharing of information 5 out of 11 in support

Interviewees comments :
It is procurement functions responsibility to engage with suppliers
who show willingness to undertake joint corrective action through
working jointly to align and achieve both parties objectives.
Information is power, and a strong basis for our company to make
informed
decisions as a result of communication is intergral in our company
policy.

OPENNESS
Four dimensions of the openness and responses :
internal stakeholder engagement 7 of 11 cases
external stakeholder engagement 7 of 11 cases
working together 7 of 11 cases
willingness to disclose trade secrets - 5 of 11 cases
Interviewee Comment
We value openness and transparence when forming and developing interorganizational
relationships with third parties. Performance is measured by its ability to work
collaboratively with key stakeholders to achieve cost efficiencies and cost savings.
The procurement function works collaboratively with both internal and external
stakeholders in a way influencing [the] decision-making process throughout the
procurement process.
The lack of support for willingness to disclose trade secrets, we speculate is due to the
fact that it doesnt make a difference because it is the functionaing of the two
organizationsa re sperate and that they respect the business secrets of theor partners.
This helps develop a sense of respect and integrity for the other party.

COMMITMENT
Eight dimensions of the commitment attribute and responses
senior management support 7 of 11 cases
long-term relationship - 7 of 11 cases
coordinated arrangements - 7 of 11 cases
structured organization 9 of 11 cases
willingness to make idiosyncratic investment 4 of 11 cases
leadership and accountability 6 of 11 cases
Visibility 7 of 11 cases
Willingness to take risk - 7 of 11 cases
Interviewees comments
The firms procurement practices are perceived as providing leadership and advice to
business through forging relationships with trusted suppliers, cooperat[ing] with other
functions, and striv[ing] for joint and collaborative relations with supply partners to assist
both firms maximize shareholders value
The company prefers long-term contracts with strategic suppliers, so that they can be
integrated in the development of strategically important products and for the improvement of
the existing ones.

SECURITY
Five dimensions and customer responses
Track record 11 of 11 cases
credibility 10 of 11 cases
character endorsement 9 of 11 cases
acceptance of duty to protect the 10 of 11 cases
rights of partners acknowledgment of duty to protect the interests of
partners 10 of 11 cases

Interviewee comments
To keep our business going, we have to be sensitive to certain
levels of exposure.
We do not indulge in any form of business relationship deals; we
even decline being involved in high-risk, low-returns kind of
business.

HONESTY
Three dimensions of the honesty and customer responses
ethical conduct -9 of 11 cases
Transparency - 7 of 11 cases
open intentions/motives - 6 of 11 cases

Interviewee comments :
We distance ourselves from any form of practices that seek to
compromise our integrity, as this affects our reputation in the
industry.

COMPETENCE
The three dimensions of the competence and customer responses
were capability 10 of 11 cases
character endorsement - 10 of 11 cases
traceable reference - 9 of 11 cases

interviewee comments :
This is an area we have managed to keep our organization
ahead of competition and we also accredit our partners on the
same basis.
Better skills and high competence levels across the supply
chain is what enable us to offer and deliver value for money,
goods, and services.

DEPENDABLITY
Four dimensions and customer responses
Reliable 9 of 11 cases
deliver on promises - 9 of 11 cases
walk the talk 8 of 11 cases
flexibility - 7 of 11 cases

Interviewee comments
Being reliable is our cause for existence; otherwise, we risk losing our
reputation, and without it we have no business.
If we anticipate or experience any challenges regarding meeting our
promises to our customers and any other stakeholders, our policy is that we
should communicate with all those affected well in advance; we ensure that
our customers are kept informed.

Average Scores

CONCLUSIONS, IMPLICATIONS,
AND LIMITATIONS
In conclusion, this study has explored the impact of trust between buyers and suppliers in procurement
practices on business performance.
A total of 11 in-depth interviews were conducted with representatives of 11 organizationsIn Indian
restaurant industry, and the findings support 14 of the 15 dimensions of the trust attributes presented in
the preliminary framework as having an effect on an organizations business performance.
Although the findings revealed endorsement for the majority of the dimensions of the trust attributes as
influential on business performance, two dimensions (i.e., willingness to disclose trade secrets in the
openness attribute and willingness to make idiosyncratic investment in the commitment attribute) were
highlighted as not having a similar effect.
It should also be noted that there were some variations in attitudes based on buying versus supplying
organizations viewpoints relating to the impact of 11 dimensions of trust attributes on business
performance.
Furthermore, organizations also acknowledged that the extent of the effect of their procurement
practices on business performance was dependent on the level of interconnection between performance
and the importance of trust attributes in the respective organizations.
The findings of this research add new knowledge and insights to the existing literature on business-tobusiness relationships, procurement, supply chain management, and business performance with the
identification of a list of 29 dimensions of trust attributes (existing in buyersupplier procurement
practices) that could impact on business performance.

 The results provide organizations in Punes restaurant industry with a comprehensive list of
dimensions of trust attributes they could consider in their procurement practices to enhance
their business performance.
Constraints
This study investigated the initial development of a list of dimensions of trust attributes that
exist in buyersupplier procurement practices that could have an impact on business
performance.
The study was conducted within the context of the Indian restaurant industry , and this
therefore constrains the applicability of the findings to other industries and country markets.
This study is exploratory in nature, and therefore a more representative sampling
population should be sought and tested to generalize the findings.
The list of dimensions of the trust attributes developed in this study should be replicated
and tested in other industry and country settings.
This could further contribute to theory and practice when comparisons to the findings could
be made to determine whether any significance exists between these industries and
countries on the impact of trust in buyersupplier procurement practices on business
performance.