What is Supplier Development?
The Term Supplier Development has been used since many decades, however, the scope of the definition was not presented. During my research in Lancaster University Management School, myself and my supervisor believe that there is appetite for update definition, which is presented in this blog post.
According to Krause et al. (2007) the term was first used by Leenders (1966) to describe efforts by manufacturers to increase the number of viable suppliers and improve their performance, but no formal definition was presented which covers both the manufacturers and the service providers. One of the first formal definitions of SD was presented by Watts and Hahn (1993, p. 12) as:
“A long-term cooperative effort between a buying firm and its suppliers to upgrade the suppliers’ technical, quality, delivery, and cost capabilities and to foster ongoing improvement”.
It is important to note that the above definition does not take into account short-term efforts to improve cost, quality or delivery issues with supplier(s) to meet customer expectations. However, a frequently cited definition in the literature review is presented by Krause and Ellram (1997b, p. 12) as:
“any effort of a buying firm with its supplier(s) to increase the performance and/or capabilities of the supplier and meet the buying firm’s short – and/or long-term supply needs”.
In this definition the phrase “the buying firm’s short – and/or long-term supply needs” refers to those needs that are dictated by the firm’s operational and competitive strategies. This definition does not restrict the scope of the varied activities that may be part of a Supplier Development programme; however, it is intended to exclude developing a new source of supply. Krause and Ellram (1997b) also suggest that SD can be a one-to-one effort or with two or more suppliers, or it can be a more global effort that could be rolled out to a large supplier base globally.
Latest Technical Definition of Supplier Development?
Whilst the definition by Krause and Ellram (1997b) mention short-term efforts to increase supplier performance, it does not include the aspect of continuous improvement. Therefore, it is argued that an updated definition of Supplier Development is needed, as proposed here by myself:
“Any effort of a buying firm working with its supplier(s) to increase the performance and/or capabilities of the supplier and meet the buying firm’s short- and/or long-term supply needs. Moreover, Supplier Development promotes ongoing improvements that are intended to benefit both buyer and supplier(s)”.
In the above definition the term “supplier” includes subcontractors. Nevertheless, it is useful to distinguish between the two. While the former is a provider of products or services available in the market to an extensive clientele in large quantities, the latter is a provider of tailored products or services to one customer, in varying quantities that are not normally available in the market. In this thesis, the term “supplier” will be used in its broadest sense to include “subcontractors” as defined above.