Any activity undertaken

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Any activity undertaken by a buying firm to improve supplier performance, supplier capabilities, or both and to meet the buying firm’s short and/or long term supply needs can be termed as supplier development activity.

A study by the Harvard Business School concluded that a primary reason for declining US competitiveness is that US companies invest less than foreign rivals in intangible investments such as supplier development. Half of the companies fail in this supplier development effort if executed. As supplier development help in increasing competitiveness and is not successful every time if implemented, it is essential to examine supplier development and factors which result towards the success of supplier development.

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This paper will examine aspects associated with the success of supplier development strategies within different set of industry. This research will put forward a specific set of aspects are significant contributors to supplier development; also this paper will show that some factors of supplier development have significant influence on other factors of supplier development.

Data from the population of buyers and suppliers will be collected to test the extent of relationship between significant factors and success of supplier development process. Agreement was noted between dependencies of success of supplier development process on several factors. Recommendations to supply managers and purchasing manager will be provided regarding upper management involvement, enhanced communication with their suppliers, recognition of their suppliers and development of strategic processing instead of reactive processing will be offered.

chapter 1


This thesis is a report of ethnographic study of critical factors for supplier development strategies. The study was based primarily upon the survey with supplier development managers and professionals involved in this field. This first chapter of the thesis will discuss the context of the study, intention of the study, describe the importance and will present the overview of the methodology used.

Background of Study

A global economy is emerging and resources are concentrated on core business rather than the diversification which show the way towards outsourcing. Outsourcing is increased from $91 billion to $416 billion in 20 years (Tunstall, 2002), and it is expected to increase further. In 2009 the value of outsourcing deals in logistics area were projected to $ 80 billion (Hyatt, 2009) which shows the intensity of use of suppliers. Due to this voluminous use of suppliers buying companies have to rely on their suppliers to deliver defect free product in a timely and cost effective manner. To compete in their respective markets, buying firm must ensure that their supplier capability equals the expectations (Krause & Ellram, Success factors in supplier development, 1997). When a supplier is incapable of meeting the buying firm’s need the buying firm has three alternatives: (1) Bring the outsourced item in house and produce it internally,

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