Indirect and Direct Supplier Development: Performance Implications of Individual and Combined Effects

As firms concentrate on their core competencies, they become more dependent on suppliers who possess technological competencies and manufacturing capacities that the firms themselves do not have. As a consequence, firms must maintain a network of capable and reliable suppliers. Supplier development activities can often support suppliers' improvement efforts. This research shows that indirect supplier development improves suppliers' product and delivery performance and supplier capabilities, and that direct supplier development strongly improves supplier capabilities. However, supplier development efforts are less effective if indirect and direct supplier developments are applied simultaneously. Therefore, at any given time, firms should engage in either indirect or direct supplier development, not in both. The study contends that supplier development-if conducted properly-can be a powerful supplier relationship management practice.