What is Supplier Development? A Technical Definition

20 Sep

What is Supplier Development?

The Term Supplier Development has been used for many decades, however, the scope of the definition was not presented. During my research in Lancaster University Management School, I and my supervisor believe that there is an 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”.

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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.
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  • Javed Iqbal Awan

    Thank U Dr. Mudassir, for such an informative article

    • muddassirism

      Thanks Javed, glad you find it useful.

      • stuart emmett

        Mmm on the claim for a new “technical” definition, as the same was published by us back in 2009 see”Excellence in Supplier Management” by Emmett and Crocker 2009

        Meanwhile for the purposes on this book, Supplier development will be defined as:

        “Any effort of a buying organisation towards a supplier that will increase the supplier’s performance and/or capabilities, to meet short and/or long-term needs of the buyer.”
        Coincidence or plagiarism?

        • muddassirism

          Thanks Stuart, if they have not given reference like I did it is Plagiarism.

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  • Art van Bodegraven

    While the abstract and arms’ length definition might be of passing interest outside of operational responsibilities, it sesms that a more useful – real-world, and practical – approach might be to begin at the beginning.

    The supplier is but a juncture reached after the mission-critical decisions have been made regarding services, materiels, substitutes, and sourcing possibilities. These initial considerations must, in any reasonable view of the strategic issues involved, lend themselves to categorizations – and there is a variety of valid and useful approaches and models to do so.

    Once categorized, sources and desirability need to be identified, recognizing that the ultimate suppliers will needs be part of relationships with markedly differing characteristics.

    Only then is it sensible to begin intinacies and processes intended and designed to engage in long term sustainable continuous improvement. No question, these are important, but the specifics vary widely, are often customized based on criteria and circumstances – and they need to be addressed in a rational sequence.

    Beginning with a notion of a universal supplier programme, soread like so much peanut butter over the supply universe is putting the cart before the horse in extremis.

  • Nick Vacalo

    Excellent site, thanks! I’ve bookmarked it 🙂

  • Moses Muwakanya

    What could be some of the actions/steps or interventions in SD?

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    […] companies' short- and/or long-term supply needs. You can read the detailed technical definition here. Moreover, Supplier Development promotes ongoing improvements that are intended to benefit both […]

  • Abhimaan Singh

    Really insightful. .

    • Muddassir Ahmed

      Thanks Abhimaan!

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  • Safiqul Islam

    This is very informative and useful for me. Thank you very much for such a nice article.

    • Muddassir Ahmed

      You are welcome Safiqul.

  • Are You More Like a Reactive or Strategic Supplier Development?

    […] Krause et al. (1998) have presented a differentiation between reactive and strategic supplier development, and have described a “reactive approach” that initiates actions only in cases of poor supplier performance and to eliminate existing deficiencies, i.e. when a supplier is not performing to the required standard and this can be classified as ‘fire fighting’ in nature. On the other hand, in the “strategic approach” firms try to improve supplier performance proactively and for the long-term capabilities to provide competitive advantage, i.e. before performance problems actually occur. Below Table depicts the major differences between strategic or systemic and reactive or remedial approaches to supplier development. […]

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