An empirical investigation of supplier development: reactive and strategic processes

Abstract

As firms continue to focus on core competencies and outsource non‐core products and services to external suppliers, supply chain management is increasingly viewed as a source of competitive advantage. However, if the supply chain is to be a source of competitive advantage, suppliers' performance must be managed and developed to meet the needs of the buying firm. In an exploratory study based on data collected from 84 companies, the authors develop a process model for supplier development. Using this process model as a framework, the authors then compare two approaches buying firms use in supplier development: (1) reactive efforts to increase the performance of laggard suppliers, and (2) strategic efforts to increase the capabilities of the supply base to enhance the buying firm's long‐term competitive advantage. Strategic efforts were found to significantly increase the buying company's involvement in suppliers' processes, and required greater dedication of resources, personnel and communication.