Supplier development: Improving supplier performance through knowledge transfer

The dynamic business environment today requires organizations to effectively use all available resources to remain competitive. The quality and cost of a product or service offered in the market is a function, not only of the capabilities of the firm, but also the supplier network providing inputs to the enterprise. To remain competitive, organizations are increasingly implementing supplier development programs to maintain capable and high performance supply bases. This paper presents a conceptual model of an organization's efforts to improve supplier performance. Then latent variable structural equation modeling (LVSEM) is used to test the model with data for 215 supplier development experiences from US manufacturing firms. The results suggest that evaluation and certification efforts are the most important supplier development prerequisites before undertaking operational knowledge transfer activities such as site visits and supplier training. Furthermore, collaborative inter-organizational communication is identified as important supporting factor in transforming an organization's efforts to develop suppliers into supplier performance improvements.