Relationship quality in agri-food chains: Supplier management in the German pork and dairy sector

Abstract

In this paper we develop a measurement scale for relationship quality in procurement which provides a management tool for agribusiness companies to evaluate their supply chain basis. In agribusiness, processors are often confronted with thousands of small farmer-suppliers. According to findings from several research streams, we argue that relationship quality must be conceptualised as a construct comprising satisfaction, trust, and commitment. We test our model for the German dairy and pork chains, thereby providing new insights into the critical success factors of initiating and maintaining relationships with agricultural suppliers. Relationship quality is determined by a number of factors. Though there are differences between the industries in question, we find some parallels in the factors explaining relationship quality. It is surprising that farmer orientation of the processor and perception of management competence by the farmer are more important than price satisfaction. Thus, understanding farmers' problems as well as better communication with the supplier are more relevant than the perceived price. Moreover, the data show that relationship quality affects willingness to co-operate more closely with the processor. Buyer-switching-behaviour can be reduced significantly. From these findings we draw some advice for processors to improve collaboration by means of supplier relationship management.

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