Supplier development: current practices and outcomes.

One of the purchasing function's primary objectives is to maintain a network of capable suppliers. As firms concentrate on their core competencies, they become more dependent upon suppliers. Thus to compete, firms must ensure that their suppliers' performance and capabilities are equal to or greater than the performance and capabilities of the firm's competitors. However, companies report that suppliers' performance and/or capabilities are often deficient in areas such as quality, delivery, cost reduction, financial health, adopting new technologies, and handling design changes.[1] Thus, many firms actively facilitate supplier performance and capability improvements through supplier development.

For the purpose of this study, supplier development is defined as:

Any effort of a firm to increase performance and/or capabilities to meet the firm's short- and/or long-term supply needs.

Supplier development may range from limited efforts, such as informal supplier evaluation and a request for improved performance, to extensive efforts, such as training of the supplier's personnel and investment in the supplier's operation. But in which supplier development activities are companies actually engaged? Are some activities more prevalent than others? What are the outcomes of these efforts? Are the outcomes satisfactory?

In an attempt to answer these questions, this research surveyed a sample of purchasing executives who are members of the National Association of Purchasing Management (NAPM). The first section of this article provides a brief review of the relevant literature; the second section describes data collection procedures and provides demographic information; and the third section reports the extent to which firms participated in a variety of supplier development activities and provides a framework for those activities. In addition, respondents' perceptions of the outcomes of their supplier development efforts are provided. The final section provides a summary and discussion of the implications of the results for managers.

LITERATURE REVIEW

The supplier development literature[2] consists primarily of case studies.[3] In addition, much of the supplier development literature focuses on the auto industry, both in the U.S.[4] and elsewhere.[5] An article by Watts and Hahn, based on the results of a cross-industry mail survey of 81 purchasing practitioners, reported that although supplier development was performed primarily by large firms, it was more prevalent than they expected.[6] They also noted that the focus of supplier development activities was most likely to be short-term, targeted at improving suppliers' product or service performance instead of their capabilities.