Supplier Development in Indian Organizations

IntroductionThere is a change in trend - it is not the traditional purchasing department anymore, but the concept of whole supply chain. Organizations strive to achieve sustainable and profitable supply chains that respond quickly to market changes. For this required sustainability, the organizations are focusing on relationship development with the other members of the supply chain, the need of the hour being mutual business perspective where a win-win situation exists. This collaboration perspective is the basic requirement to develop the partner and further the dyadic relationship of buy er and supplier.The relational view also says that investments are made by buyers in the development of suppliers in order to accrue tangible benefits such as reduced cost, greater quality and flexibility and more reliable delivery. When Harley Davidson started taking help from its key input suppliers, the output of bikes was increased and also the inventory period could reduce from 15 to 6.5 days. M&M's suppliers' technical assistance has helped in co-designing the vehicles manufactured. These two companies have made the relational investments and also procured the benefits from entering into such strategic relationship.Review of LiteratureVarious empirical studies have shown the assessment and importance of Supplier Development. A number of studies have been attempted regarding this important dimension of buyer supplier relationship across the world and it is imperative to offer an account of the studies so undertaken by different researchers and academicians.For the first time the term 'supplier development' was used by Leenders (1966) to describe efforts by manufacturers to increase the number of viable suppliers and improve suppliers' performance while discussing a case of Canadian manufacturer. Further study of Honda Motor Company by Hahn et al. (1990) emphasized on phases of supplier development followed by the company for improving performance.Krause and Ellram (1997) explored the success factors in supplier development via survey which solicited buyers' perceptions about a single instance of supplier development performed by their firms. The results of this exploratory study suggested that buying firms often directly involve themselves in their suppliers' performance and capabilities problems. According to Krause (1999), supplier development broadly refers to any effort by a buying firm to improve a supplier's performance and/or capabilities to meet the buying firm's short- and/or long-term supply needs and according to Handfield et al. (2000) supplier development involves those activities a buyer firm undertakes to increase supplier capabilities and/ or performance. Choi and Choi (2002) studied the change in trend of dealing with suppliers in Korea after the economic crisis and found that to meet the impending economic challenges in the aftermath of the Asian economic crisis, many organizations in Korea turned to supplier development. The shortage of funds led to reduction of the supply base so as to focus on a few suppliers for development by providing them independence and technology up gradation. Working together cooperatively in this fashion led to reduction in development lead time and no additional testing of products developed. The authors believe that Korean companies took the right measures after the crisis to establish a more balanced supply chain. Supplier Development was pioneered in the automotive industry such as Toyota and Honda which are the masters at supplier development initiatives. (Wagner et al 2003). Humphreys etal. (2004) examined the role of supplier development in the context of buyer-supplier performance from a buying firm's perspective and concluded that transactionspecific supplier development, trust, supplier strategic objectives and effective communications significantly contributed to the prediction of buyer-supplier performance improvement. Wagner (2006) examined the relationship between supplier development, improvements and the support of the customer firm's competitive strategy with the resourcebased view and the relational view as theoretical explanatory perspectives. …