An Assessment of Supplier Development Practices in Competitive Environment

Abstract

In recent years, many companies have come to recognize the crucial role that purchasing and materials management activities play in determining overall corporate performance. A major concern in many companies is the supplier development program. Although the purchasing literature contains extensive research support for the assertion that supplier development is an integrated means of achieving and sustaining competitive advantage, neither the impact of supplier development on buyer-supplier performance nor the linkage between them have been empirically examined.

The main objective of this research is to explore the role of supplier development in the context of buyer-supplier performance from a buying firm's perspective. Factor analysis yielded five factors including transaction-specific supplier development: Supplier development programme, Effective communication, Supplier commitment, Long term contract and rewards, Strategic Process. Since supplier development is not successful every time when undertaken, it is essential to examine supplier development factors which can impact the success of supplier development.

This research examines aspects associated with the success of supplier development strategies within a number of industrial sectors. The purpose of the study is to determine what factors are required to make the supplier development a success; furthermore it shows that some factors have more significant influence than others on supplier development. Analyses were conducted in this project using three main statistical tools.

• Firstly, validity test was conducted with the help of factor analysis through varimax rotation method.
• Secondly, Reliability test was conducted with the help of Cronbach alpha of full scale and of individual factors.
• Thirdly, Multiple regression method was used to test the hypotheses. Multiple regression analysis allows for determining the degree of strength and the direction of the linear relationship among various variables.

The findings of the current research confirm the general positive impact of supplier development on buyer-supplier performance improvement. Given the resource implications associated with developing suppliers, this study provides useful insights and challenges from a perspective that is both academic and practical.