Comparing public and private organisations in their quest to become a preferred customer of suppliers
| Pages | 119-144 |
| Date | 26 February 2020 |
| DOI | https://doi.org/10.1108/JOPP-10-2018-0041 |
| Published date | 26 February 2020 |
| Author | Holger Schiele |
| Subject Matter | Public policy & environmental management,Politics,Public adminstration & management,Government,Economics,Public finance/economics,Taxation/public revenue |
Comparing public and private
organisations in their quest to
become a preferred customer
of suppliers
Holger Schiele
Technology Management/Supply, University of Twente,
Enschede, The Netherlands
Abstract
Purpose –In industrial procurement, the conceptof supplier satisfaction has gained increasing attention.
Satisfied suppliers have been found to provide better prices, more innovations and priority in bottleneck
situations.This paper aims to analyses in how far the conceptof supplier satisfaction can be transferredto the
public procurementdomain.
Design/methodology/approach –Two large quantitativedata sets are compared, one from a sampleof
suppliersevaluating their industrial clients, the other from a publiccustomer being evaluated by its suppliers.
Findings –The same criteria which explain supplier satisfaction with its customer, which are relevant in
the private and industrial case also hold true for the public case, namely,growth opportunity, profitability,
relational behaviourand operative excellence are important criteriafor distinction. Only relational behaviour
by the customer scored significantly higherin the public sample, indicating that this is more an influencing
factor for publicorganisations.
Research limitations/implications –Showing the relevance of suppliersatisfaction also for the public
domain paves the way to further research better understanding how to measure satisfaction and how to
increasesuppliers’satisfaction.
Practical implications –Buying organisations are asked to apply a form of “upstream marketing”,in
which they activelytry to promote their organisation withtheir suppliers and increase its attractiveness.This
is a new way to get access to betterservices from suppliers.
Social implications –Analysing supplier satisfaction, on the one hand, allows to improve public
purchasingacts, which generate social benefits in better using publicmoney. On the other hand, caring for the
well-beingof suppliers is per se contributing to a socially more desirableworld.
Originality/value –Supplier satisfaction is a newconcept in the public procurement domain. This is the
first paperto introduce this approach.
Keywords Purchasing, Survey, Public procurement, Preferred customer, Supplier satisfaction
Paper type Research paper
1. Introduction: public buyers’need for attractiveness to stimulate social
reform[1]
Public procurement has three strands –commercial, regulatory and social requirements
(Erridge and McIlroy, 2002)–and has increasingly been viewed as a lever of social reform
(Nijboer et al., 2017). Examples of social targets involve the quest for sustainability or the
promotion of innovation [often linked to each other (Dale-Clough, 2015;Edler and
Georghiou, 2007)]. The underlying notion is that public authorities stimulate the desired
social reform by purchasing goods that comply with the respective goals to stimulate the
demand for such goods (Edler and Georghiou, 2007). Public procurement is increasingly
Comparing
public and
private
organisations
119
Received19 October 2018
Revised12 April 2019
19July 2019
22December 2019
Accepted14 January 2020
Journalof Public Procurement
Vol.20 No. 2, 2020
pp. 119-144
© Emerald Publishing Limited
1535-0118
DOI 10.1108/JOPP-10-2018-0041
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/1535-0118.htm
being used as a means to stimulate a desired societal outcome rather than to exclusively
focus on the most advantageous economic outcome (Grandia and Meehan, 2017). Corporate
social responsibilityincluding green procurement are elements.
However, the idea of stimulating developments by asking suppliers to comply with
expectations only works if one fundamental condition is met, i.e. the buyer must be
sufficiently attractivefor the supplier to make an offer that fully reflects the requests (Pulles
et al.,2016;Schiele et al.,2012). At the same time, there are discussions regarding the level of
attractiveness of public buyers (Evans and Schultz, 1997). If the buyer is not attractive
enough, only few or –in the worst case, no –offers will be submitted. Thenit is even more
probable that the offersonly minimally reflect the requests. Hence, if a public body wants to
leverage its purchasing volume to promote social reforms and obtain good quotes, the
attractivenessof the buyer plays a pivotal role.
Generally, research in recent years has revealed that a buyer experiencing preferred
customer status with a supplier enjoys substantial benefits, such as obtaining better prices
(Schiele et al., 2011), more innovation (Ellis et al., 2012), reducing the risk (Reichenbachs
et al., 2017) or, more generally, receiving preferential treatment (Pulles et al.,2016).
Unattractive customers or those with unsatisfied suppliers, on the other hand, may not
benefit from the requested supplier services. If public authorities follow an approach to
influence social reformby procurement, then it follows that they would be more successfulif
they are sufficiently attractiveto suppliers, achieve supplier satisfaction and ideally become
their preferred customer, in the end. Achieving supplier satisfaction by treating them in a
responsible way might alsobe considered a part of corporatesocial responsibility.
Although substantial research exists in the private sector on how to achieve supplier
satisfaction and to become a preferred customer so as to eventually obtain optimal offers
from the supplier (Pulles et al., 2019 andthe literature cited there, Hudnurkar and Ambekar,
2019b), no dedicated studies can be currently identified in the public procurement domain,
with the exception of one study on supplier satisfaction in defence (Glas, 2018). In fact,
research on supplier relationship management is largely absent from the public
procurement research(Patrucco et al.,2017). Hence, the following research question arises:
RQ1. Can the findings from private samples of buyer–supplier relations be transferred
to the public case?
A common shortfall in public procurement studies is that researchers take a sample of
public procurement respondents, analyse the findings and conclude that certain results are
valid in public procurement, suggestingthat these findings might be particular to the public
case. However, this situation can be identified only when a public business sample is
compared with a private business sample; an observed difference indicates that the
particular featurerepresents a particularity of the public case. This paper makes exactlythis
comparison, thus contributingby discussing the applicability of an existing model to a new
level of analysis, the public procurement domain. The paper reports on the first empirical
attempt to compare publicand private actors to help close the public procurementgap in the
preferred customer research. To accomplish this, the supplier satisfaction model presented
by Vos et al. (2016) is applied to a public buying organisation and contrasted with private
companies.
The results of this comparison do not generally show substantial differences between
private and public customers. Only the importance of relational behaviour is more
pronounced in the public sample than in the private sample, while growth opportunity,
operational excellence and profitability score similar as important factors influencing
supplier satisfaction. Likewise, such as in the private case, supplier satisfaction also in the
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