Critical Success Factors for Supplier Development and Buyer Supplier Relationship: Exploratory Factor Analysis

Critical Success Factors for Supplier Development and Buyer Supplier Relationship: Exploratory Factor Analysis

Joshi P. Sarang (National Institute of Industrial Engineering, Mumbai, India), H V. Bhasin (National Institute of Industrial Engineering, Mumbai, India), Rakesh Verma (National Institute of Industrial Engineering, Mumbai, India) and Manoj Govind Kharat (National Institute of Industrial Engineering, Mumbai, India)
Copyright: © 2016 |Pages: 21
DOI: 10.4018/IJSDS.2016010102
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Abstract

Development of supplier base is becoming mandatory for buyers, as it is not possible to manufacture all components in house, or to search new supplier every time. It is recommended that supplier base of buyer should be self-efficient and developed one to achieve competitive advantages. This development of supplier can be achieved by applying different supplier development practices and buyer supplier relationship practices as per the requirement. In this article, Exploratory Factor analysis (EFA) is applied for grouping the critical success factors with their items by using SPSS software. 6 factors viz., Drivers for Supplier Development Practices, Supplier Development Practices, Buyer supplier Relationship Practices, Buyer supplier Relationship Improvement, Competitive Advantages and Profitability were formed with their respective items. The multi-item scale shows strong evidence of reliability as well as convergent, discriminant validity in a sample. EFA and Reliability Analysis were applied on data for validation of instrument. Data from 87 respondents working in manufacturing sector were used for analysis.
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Literature Review

The buyer-supplier relationship can be challenged by several problems such as a particular product not being vended by the current suppliers, below-par supplier performance, quality provided by supplier not making the buyer competitive, and non-availability of capable suppliers in the market. For such problems, the buyer can follow any one of three courses: 1) Supplier switching 2) Vertical integration 3) Supplier development. Among these, the third option is currently becoming more important and feasible because otherwise, it is rather challenging to search for more capable suppliers. Besides, the option of making all components in-house is a big investment and financially unviable. Hence, supplier development is emerging as a feasible solution for the buyer (Wagner, 2006).

Supplier development program is divided mainly into two categories: direct and indirect. Indirect supplier development improves the suppliers’ product and delivery performance while direct supplier development improves supplier capabilities (Wagner, 2010; Aslan et al., 2011). It is mandatory that before selecting any supplier, the buyer makes a proper evaluation of the supplier through frequent visits and certification checks. In this case, if minor issues are detected then the buyer can decide at the very outset what training is required by the supplier (Aslan et al., 2011). Involving suppliers in product development can result in major benefits in terms of money and time, but it requires a substantial thinking and effort (Hasrulnizzam et al., 2011).

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