Efficiency versus value maximisation in co‐manufacturing relationships

Abstract

Purpose

This paper examines two co‐manufacturing relationships, which were efficient with the aim of understanding why they were not value maximising.

Design/methodology/approach

The paper utilises a methodology designed by Wilding and Humphries and based on Williamson's organisation failure framework. Using a case study approach, it is applied in a new context to provide insights into the dynamics within two co‐manufacturing relationships in the food‐manufacturing industry.

Findings

The relationships are judged as operationally efficient by both sides but frustrations and conflicts have emerged over time, leading to a real danger of relationship breakdown. These problems are caused by failure to involve co‐manufacturing partners in strategy discussions, shortcomings in relationship management, and lack of recognition of partners' developing capabilities.

Research limitations/implications

The paper challenges the transaction cost economics (TCE) focus on efficiency in the context of co‐manufacturing relationships and advocates a relational perspective to value maximisation.

Practical implications

The findings indicate that an undue focus on operational efficiency in the management of close, long‐duration co‐manufacturing relationships may result in a reduction in innovation and a failure to maximise value.

Originality/value

The paper provides empirical support for arguments in favour of dynamic efficiency, rather than the static efficiency implied by TCE. These findings are of great importance to companies engaged in strategically important co‐manufacturing relationships, as they demonstrate how “negative spiral behaviours” can develop.

Citation

Ryals, L.J. and Humphries, A.S. (2010), "Efficiency versus value maximisation in co‐manufacturing relationships", The International Journal of Logistics Management, Vol. 21 No. 2, pp. 309-330. https://doi.org/10.1108/09574091011071979