The main purpose of the paper is to identify the driver factors have effect to supply management capability. Many previous studies involve supply management capability have been mainly concern about general competences and individual skill lists which is considered necessary for the professionals to achieve an efficient procurement system. There are little concentration on the drivers of capability in supply management. This paper point out that if the corporations want to increase supply management capability it is crucial to link the role of purchasing and supply management to the strategy of the corporation, formalize the supply management functions and promote the suppliers network values and suppliers orientation to their business.

1. Research Report:
The drivers of supply management capability.
Hoang Thang Tran (ID: 18815001)
Course Name: Purchasing and Material Management
Course Number: 51259
1th March, 2017
Dr. Rama K. Ramanathan

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Table of Contents
Executive Summary. ....................................................................................................................... 2
Introduction..................................................................................................................................... 2
Research and Discussion................................................................................................................. 2
Implication and future direction...................................................................................................... 5
Conclusion ...................................................................................................................................... 5
References....................................................................................................................................... 6

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Executive Summary.
The development of globalization trend and the rising awareness of the significant role
of suppliers networks have become mains factors which constantly created new confrontations
for supply management in every corporations. Therefore, supply management has transformed
from simple cost management tasks to more complexity task which create value through
suppliers networks. The role of supply management capability in facilitating and earing profit
from corporations outward resources is an important factor in business environment today.
Introduction.
The main purpose of the paper is to identify the driver factors have effect to supply
management capability. Many previous studies involve supply management capability have
been mainly concern about general competences and individual skill lists which is considered
necessary for the professionals to achieve an efficient procurement system. There are little
concentration on the drivers of capability in supply management. This paper point out that if the
corporations want to increase supply management capability it is crucial to link the role of
purchasing and supply management to the strategy of the corporation, formalize the supply
management functions and promote the suppliers network values and suppliers orientation to
their business.
Research and Discussion
Methodology
Before the paper analysis was occurred, there are a review on supply management
capability from literature about capability of supply management which was from the last two
decade. Then two separate data collection methods were used. Firstly, focus group were arranged
to bring forth the drivers of supply management capability through the literature review and
previous study have been made. The second method is that a survey will be developed based on
not only from results given by focus group which but also from literature review. The survey was
then handle to 496 Finnish corporations which must have at least 100 employee and have turn
over equal or greater than 30 mil euros; 370 corporations participated in the survey 165 results
were collected (44% respond rate), then the statistical methods was used for evaluate the effect
of the drivers.

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Main finding of the paper
Considering into more the detail, the paper have pointed out the important role of
capability in supply management. Capability of supply management is identify as the overall
capability of the whole corporation and the ability to process procurement function in exchange
for achieving the business competitive. Therefore, instead of finding out what set of skill is
required from purchasing professionals, it is more important to focus on which factor effect on
the capability of supply management to improve and gain the competitive advantage for the
corporation.
Capability of organization is always a complicated issue and not easy to approach,in
order to earn the competitive advantage, the corporations much well manage the supply
management capability, it is critical to pinpoint the factors which can effect capability. Through
literatures review and statistical analysis, the paper have pinpoint the three main factors that
affect the capability of the corporation: strategic status; formalization of organization in
responsibilities and in purchasing, and suppliers orientation.
First, the strategic status of supply management in the corporation.
The clear understanding of the strategic role of the supply management in a corporation
help to build a foundation to develop the capacity. Because of the need of cutting cost, the
outsourcing and sub- contracting have made a great turn in doing business recently, forcing
every company to develop purchasing systems and relationship with supplier. As the result,
supply management and purchasing activities are equal as strategic activities. This have been
proved in previous studies (e.g. Eltantawy et al., 2009; Feisel et al., 2010) which indicated the
connections performance, strategy to capability; and capability of supply management become
stronger in coporations which count supply management as an element of business strategy.
Therefore, both the recognition the strategic status of supply management in the company and
the support from top management are influent the supply management capability.
Second, the formalization of the supply management function
In several studies, the role of formalization of the supply and procurement process are
connect with the capability development; and both formalization of the supply process and
responsibilities influence supply management capability. From the study by Ritter and Walter

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(2012), it showed that the value of buyer – perceived relationship will rise if the operative
supplier relationship function of the corporation are met the satisfaction. Furthermore, the rising
in requirements for sustainable practice and the transparency in sourcing of supply chain have
provoked the need to form some guidelines for decision making in procurement process. This
also have encouraged corporations to enhance their evaluation system and purchasing practices.
Third, the suppliers relationship management and the orientation toward the supplier network.
In any concept, managing the relationship with supplier is often known as the priority
task of supply management. Because if the relationship with suppliers are well maintain then it
help company to achieve the generate knowledge and enhance the flow of material, services,
information (Croom and Batchelor, 1997; Ziggers and Henseler, 2009). A good bond with
supplier can lead to partnership and relational exchange which are regard as possible of
advantage in competition(Wagner and Boutellier, 2002). In additions, suppliers are also
considered to be an factor of innovation. Therefore, relationship with suppliers should be well
managed, and the supplier orientation is a must have factor for any corporations. Company’s
orientation toward suppliers establishes conditions for the corporations and suppliers cooperate
equally in formal form(Shin et at, 2000). Moreover, orientation defines that while managing the
relationship with suppliers, corporation plan to accomplish its objectives; coordinated in interact
and creates joint goal between supplier and the company also the significant factors in
establishment supplier orientation. In conclude, interaction and orientation with suppliers are all
influent to supply management capability.
The paper also demonstrated the important rank of three drivers of capability
management mention above based on the hierarchical testing of the 165 model. Supplier
orientation is considered the most influent factor to capability of supply management compare
with two other factors. The strategic status factor which was considered as the most effective to
capacity by focus group in the early of state of analysis was end at third position and the
formalization factor was in second position.
Limitations.
The paper have some limitation should be recognized. First limitation was the selections
of methods. Multi-method is used to approach and analysis because in some state of the analysis

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the question become hard to measure, define or the reality is difficult to explain so this method
is the most appreciate. Second limitation was the quantity and the quality of the survey data. The
survey on small sample size and respondents was all Finnish corporations which are consider
large and have global activities. There are no diversity in geographic and culture; therefore, the
result could be different for different nation. In addition, in the survey used question only for
singles respondents so that can lead to common bias. Finally, the paper was limited in internal
view of corporations; for example, competition, labor cost and material scarcity was not
concluded in the analysis. External and environment factors have a significant impact on making
decision, choosing strategies and establishing firm policies.
Another research should take place to define the external factors that relevant to supply
management capability. In addition, study different countries should be conduct for the sake of
determining the impact of cultures, because different countries with different cultures would
result in different managing challenges. Moreover, the studies of driver supply management
capability not only could encourage the other studies about capability in the future but also could
provide as sources of development for corporations in different countries.
Implication and future direction
A well knowledge about supply management capability is an important factor for the
corporations to adapt and compete in both national and global industry. Hence, the top
management should realize the strategic role of supply management and aware of the value can
be earn through the potential of capacity. Moreover, corporations which can determine and
develop capability of supply management are easier in improving the performance of functions,
as the result this help the firm to facilitate supply management capability and achieve the
competitive advantages.
Conclusion
This paper aimed to identify the components that influence supply management
capability. Through create a survey questionnaire, use of different statistical methods for
evaluating and finalizing the survey results, author have identified the three internal factor that
effect to supply management capability are strategic status, supplier orientation and
formalization of supply management functions. Thus, to expand the capability of the corporation

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supply management, it is necessary to link supply management the corporation strategy, along
with create a clear policies and guile for activities of supply function, and encourage to establish
a supplier orientation in the business.
References
Croom, S. and Batchelor, J. (1997), “The development of strategic capabilities - an interaction
view”, Integrated Manufacturing Systems, Vol. 8 No. 5, pp. 299-312.
Eltantawy, R.A., Giunipero, L. and Fox, G.L. (2009), “A strategic skill based model of supplier
integration and its effect on supply management performance”, Industrial Marketing
Management, Vol. 38 No. 8, pp. 925-936.
Feisel, E., Hartmann, E. and Giunipero, L. (2010), “The importance of the human aspect in the
supply function: strategies for developing PSM proficiency”, Journal of Purchasing and
Supply Management, Vol. 17 No. 1, pp. 54-67.
Katrina Lintukangas Jukka Hallikas Minna Koivisto-Pitkanen Anni-Kaisa Kahkonen , (2016),"
The drivers of supply management capability ", Benchmarking: An International Journal,
Vol. 23 Iss 7 pp. 2109 – 2127.
Ritter, T. and Walter, A. (2012), “More is not always better: the impact of relationship functions
on customer-perceived relationship value”, Industrial Marketing Management, Vol. 41
No. 1, pp. 136-144.
Shin, H., Collier, D.A. and Wilson, D.D. (2000), “Supply management orientation and supplier/
buyer performance”, Journal of Operations Management, Vol. 18 No. 3, pp. 317-333.
Wagner, S.M. and Boutellier, R. (2002), “Capabilities for managing a portfolio of supplier
relationships”, Business Horizons, Vol. 45 No. 6, pp. 79-88.
Ziggers, G.W. and Henseler, J. (2009), “Inter-firm network capability: how it affects buyer-
supplier performance”, British Food Journal, Vol. 111 No. 8, pp. 794-810.