Drivers for supplier development : the local supplier in the Malaysian automotive industry.

Supplier development literature has focused on developed countries which have homegrown technology and has studied supplier development from the point of view of the buyers. Thus there is a need for studies focusing on the area of supplier development of local suppliers in developing countries which lack homegrown technology, such as Malaysia. How do these suppliers, in an environment without homegrown technology, learn and develop their capability? This study examines the experiences of suppliers involved in supplier development programs with their buyers in the Malaysian automotive industry, as the automotive industry faces a liberalised market. The research, based on the case studies of seven (7) organizations, show the pattern of supplier development of these local suppliers. The research focus is on local suppliers categorised as 'dependent suppliers' -that is, where their major buyers account for twenty percent or more of sales. Using a qualitative approach, this research investigates how buyers have an impact on the dependent suppliers' supplier development experience and how dependent suppliers need to manage the impact of the buyers through managing their scarce resources. Cases selected were Malaysian-owned firms, ranked in the first-tier supplier category, and from either the plastics or the metal-based industries. The main aim of this thesis is examining the drivers of supplier development of dependent local suppliers in the Malaysian automotive industry. The findings indicate that dependent suppliers rely upon their buyers for supplier development, yet it is shown that, as their knowledge develops, these suppliers rely more on themselves for knowledge development as the higher level training leads to more specific research areas. The buyer still plays a role, however, in supplier development, including as facilitator for technical expert access for the local suppliers. Nevertheless, any changes in the buyers' technical expertise lead to the suppliers' loss of access to these technical experts. This also suggests that some buyers are reluctant to support supplier development because these buyers lack access to certain types of knowledge and thus need to 'outsource' supplier development to their technical partners. This study has limitations in that the study focused only on supplier development programs which has government support, a situation that might not exist in other locations, nor does the study incorporate member feedback, which would have provided richer data. The research presents two models based on the findings. The first model is the pyramid of capability and funding development that was developed based on research findings. The second is the supplier development experience model which was modified based on a model from another study. Overall, this research suggests that, for local supplier~ to survive increased competition, they need to be responsible for their own knowledge development, manage their buyer-supplier relationship, and be efficient in managing their financial resources. By doing so, they can develop their knowledge capability and survive in a liberalised market, as they are subsequently able to capably supply both foreign and domestic buyers.