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INTERACTION EFFECTS ON PRODUCT DEVELOPMENT NETWORKS IN CHINA
even break, when, for example, a supplier does not follow the negotiated production
plan due to a larger customer who may take over the whole capacity of the supplier
for some time (interview: Endysis Operations director). In such cases, the level of trust
will be dramatically reduced and any future interaction will be distorted.
It is interesting to see, in the sub-cases discussed in this case study that the formation
of horizontal supply networks is largely based on previous interaction episodes and
the current stage of interpersonal relationships central business actors are into. But,
initially, the supplier evaluation system that Endysis HZ employs to measure suppliers’
performance is discussed. Endysis HZ evaluates every single supplier twice a year. The
three categories that make up the 100 per cent are separated in quality, delivery and
communication. The proportion of each category to the total scale is 40, 40, and 20
percent respectively. Therefore, the final rating for each supplier is one dimensional.
Five business actors are involved to measure quality and delivery variables for each
supplier relationship; in particular, the five business actors are: the purchasing order
handler, the purchasing relationship manager and three business actors, second line
managers from the logistics and inspection departments. With regards to the meas-
urement of communication in each supplier relationship, the manager of the recently
dissolved SRM department, who is originally from China, provides the final 20 percent
of the total rating. The Operations director, although is not directly involved, makes
the final decision with regards to which suppliers will continue and which ones will be
dropped for the season that follows the evaluation. For example, in one case, a suppli-
er had scored low according to the rating formula, but the interpersonal relationship
between the director of the supplier and the Operations director was characterised by
strong ties. Strong interpersonal ties among key business actors assisted in knowledge
sharing and thus a shared understanding, in terms of the other relationships that were
the cause of production difficulties and late delivery in this specific supplier relation-
ship performance.
The Operations director although acknowledges that most of Endysis evaluators
have been given small amounts of money, explains that before 2004 suppliers paid
big amounts to the outsourced at the time quality control company. However, this has
changed since 2004, and all finished products are gathered in Endysis HZ warehouse
for quality testing. Also, defected products are sent to the repairing department of
Endysis HZ. The Operations director adds that Endysis HZ is not a textile manufacturer;
rather it is an insurance company. Better put it, Endysis HZ acts as a broker between
the customer in the West and the Chinese supply base. Further, the Project manager
claims that Western customers are willing to pay a higher price to buy an end-product
of high quality and zero defects. Findings show that foreign companies operating in
China, including those companies examined in previous cases, are acting as brokers,
exploiting their relationships both in the demand and supply side.
