Expanding the Knowledge Capability of Suppliers through Supplier Development Programs

Introduction

As firms increasingly outsource to focus on their core competencies, effective supplier development (SD) has become a major strategic decision in order to maintain a network of competent suppliers. Supplier development can be seen as a capability-enhancing activity that an organization undertakes to improve its suppliers’ performance (Sako, 2004). Successful management of supplier development can potentially enhance the productivity of the trading partners through the creation of knowledge and mutual assistance, along with the implementation of good practices (Giannakis, 2008). In addition, the firms’ knowledge creation capabilities play a crucial role in generating innovations, and by networking firms are able to create and share new knowledge more efficiently in a supply chain (Hallikas et al., 2009). Because SD is a knowledge-intensive process, the management of SD programs presents two equally important challenges: the establishment of practices and strategies that may lead to successful SD design and implementation, and a better understanding of the knowledge management related processes that take place in such programs. SD research has traditionally focused on the former challenge, while the few studies that consider the latter tend to look into the issue of knowledge transfer (for example Sako, 2004; Modi & Mabert, 2007; Giannakis, 2008) rather than knowledge creation. The ability of firms to consistently create knowledge and manage it strategically is viewed as critical to organizational success and survival (Nonaka & Teece, 2001). However, there is a significant gap in our understanding of the underlying structures and processes needed for knowledge creation with the implementation of promising SD practices. This study addresses this gap by conceptualizing SD as a knowledge-intensive and collaborative program, and exploring how knowledge creation processes can be facilitated through different SD activities. It is based on examining how the largest motorcycle company (M Company, hereafter) in Taiwan implements various SD activities in five of its suppliers that are small and medium-sized enterprises (SME).

This paper first reviews the existing literature related to SD programs. Second, the socialization, externalization combination and internalization (SECI) modes, and various ba proposed by Nonaka and Konno (1998) are introduced. Third, a qualitative inquiry using a thematic analysis that focuses on five companies which are the suppliers of the largest motorcycle firm in Taiwan is presented in order to identify how different SD activities facilitate the knowledge creation process through the SECI modes and ba. The final section includes a discussion of the findings and presents the conclusions of this work.