Many manufacturing firms have increased the amount of component parts and services they outsource, while refocusing on their core capabilities. Outsourcing parts and services to independent, external suppliers means that suppliers' performance is increasingly critical to the long-term success of these buying firms. Buying firms are increasingly using disparate supplier development strategies to improve supplier performance including supplier assessment, providing incentives for improved performance, instigating competition among suppliers, and direct involvement of the buying firm's personnel with suppliers through activities such as training of suppliers' personnel. Using resource-based theory, internalization theory, and structural equation modeling, we examine the impact of these supplier development strategies on performance. We conclude that direct involvement activities, where the buying firm internalizes a significant amount of the supplier development effort, play a critical role in performance improvement. Subject Areas: Materials Management, Purchasing, Structural Equation Models, and Supply Chain Management.

Faster, better, cheaper—these marching orders summarize the challenge facing new product development (NPD). In other words, NPD teams must find the means for speeding time to market while also improving product quality and reducing product costs. Cross‐functional teams have proved effective for meeting these challenges, and such teams may extend beyond company boundaries to include key materials suppliers. Effective integration of suppliers into NPD can yield such benefits as reduced cost and improved quality of purchased materials, reduced product development time, and improved access to and application of technology. As Gary Ragatz, Robert Handfield, and Thomas Scannell point out, however, those benefits do not automatically accrue to any NPD team that includes representatives from a supplier's company. In a study of 60 member companies from the Michigan State University Global Procurement and Supply Chain Electronic Benchmarking Network, they explore the management practices and the environmental factors that relate most closely to successful integration of suppliers into the NPD process. The study identifies supplier membership on the NPD project team as the greatest differentiator between most and least successful integration efforts. Although the respondents reported only moderate use of shared education and training, the study cites this management factor as another significant differentiator between most and least successful efforts. Respondents listed direct, cross‐functional, intercompany communication as the most widely used technique for integrating suppliers into NPD. To integrate suppliers into NPD, a company must overcome such barriers as resistance to sharing proprietary information, and the not‐invented‐here syndrome. The results of this study suggest that overcoming such barriers depends on relationship structuring—that is, shared education and training, formal trust development processes, formalized risk/reward sharing agreements, joint agreement on performance measurements, top management commitment from both companies, and confidence in the supplier's capabilities. Overcoming these barriers also depends on assett sharing, including intellectual assets such as customer requirements, technology information, and cross‐functional communication; physical assets such as linked information systems, technology, and shared plant and equipment; and human assets such as supplier participation on the project team and co‐location of personnel.

As firms continue to focus on core competencies and outsource non-core products and services to external suppliers, supply chain management is increasingly viewed as a source of competitive advantage. However, if the supply chain is to be a source of competitive advantage, suppliers' performance must be managed and developed to meet the needs of the buying firm. In an exploratory study based on data collected from 84 companies, the authors develop a process model for supplier development. Using this process model as a framework, the authors then compare two approaches buying firms use in Ž. Ž. supplier development: 1 reactive efforts to increase the performance of laggard suppliers, and 2 strategic efforts to increase the capabilities of the supply base to enhance the buying firm's long-term competitive advantage. Strategic efforts were found to significantly increase the buying company's involvement in suppliers' processes, and required greater dedication of resources, personnel and communication. q

SUMMARY Supplier development has become a viable supply chain management practice across industries as firms continue to focus on their core competencies and outsource a significant percentage of the costs of goods sold. Supplier development practices used by buying firms include formal supplier assessment and feedback, supplier incentives, competitive pressure, and direct involvement improving performance through activities such as training and investment. Although it is apparent that such strategies and processes are used to some extent across industries, it is unclear if there are differences in supplier development approaches between product‐ and service‐based firms. The findings indicate that service firms tend to rely on the competitive pressure of market forces to instigate supplier performance to a greater extent than product‐based firms and that productbased firms tend to use assessment, incentives, and direct involvement to a greater extent than service firms.

SUMMARY This study was undertaken to address the need for empirical research on global sourcing strategy effectiveness. This article establishes the importance of and relationships between several factors that drive the effectiveness of global sourcing strategies. Companies are increasingly viewing global sourcing strategies as a means of reducing cost, increasing quality, and enhancing a firm's overall competitive position. This article uses a structural equation modeling methodology to test an explanatory model of global sourcing strategy effectiveness. Results indicate that global sourcing structures and processes, global sourcing business capabilities, international language capabilities, and top management commitment to global sourcing are critical to the effectiveness of a global sourcing strategy.