ORIGINAL ARTICLE Analyzing the interaction of critical factors of supplier development using Interpretive Structural Modeling—an empirical study S. Chidambaranathan & C. Muralidharan & S. G. Deshmukh Received: 22 October 2007 / Accepted: 2 October 2008 / Published online: 24 October 2008 # Springer-Verlag London Limited 2008 Abstract In order to compete effectively in the global market, a company must have a network of competent suppliers. To create and maintain such a network and to improve various capabilities that are necessary for the buying organization to meet its increasing competitive challenges, the buying firms may engage in supplier development. To improve the supplier capabilities, the buying organizations have to consider various supplier development factors such as supplier base, communication with suppliers, direct involvement of suppliers, etc. Their significance and the role in supplier development process are also to be considered. These factors not only affect the supplier development process but also influence each other. However, the methodologies used in supplier development literature analyze the factors independently. This paper attempts to overcome the above, by analyzing the interre- lationship between the supplier development factors. The Interpretive Structural Modeling (ISM) approach has employed to develop the structural relationship among supplier development factors and also tried to define the levels of different factors based on their driver/dependence power and their mutual relationships. Finally, the ISM result is compared with empirical study and a case study. Keywords Supplier development . Interpretive Structural Modeling (ISM) . Structural relationship 1 Introduction In today’ s competitive business, buying firms increasingly rely on their suppliers to deliver technologically advanced, defect-free products in a timely and cost-effective manner. If the supplier lacks in some of these areas, buying firms face the decision of whether to look for an alternative source of supply or to work with the same supplier and to remedy their shortcomings. Because of the uncertainty of locating a better source, and the high cost of searching and evaluating new suppliers, buying firms may engage in supplier development [1]. Manufacturing firms on the average spend over 50% of its revenues on purchasing inputs [2]. With companies continuing to increase the volume of outsourced work across industries, the percentage is likely to rise. Conse- quently, suppliers will have a greater impact on the quality, cost, technology, and delivery of a buying company’ s own products and services and thus on its profitability. Tradi- tionally, most suppliers managed their manufacturing processes with little buyer input as long as the products meet the buyer specifications. Buyers provide hands-on assistance when suppliers have major problems with quality or delivery issues. Nowadays, most of the fortune 500 companies are working closely with their suppliers to inculcate world class standards, not just for localization and cost advantages but also to export components to their operations worldwide. They are accomplishing this through different supplier development initiatives including making the global supplier partner with the local suppliers, Int J Adv Manuf Technol (2009) 43:1081–1093 DOI 10.1007/s00170-008-1788-7 S. Chidambaranathan (*) : C. Muralidharan Department of Manufacturing Engineering, Annamalai University, Annamalainagar, Chidambaram, 608 002 Tamilnadu, India e-mail: s_cdm@yahoo.com C. Muralidharan e-mail: muralre@yahoo.co.in S. G. Deshmukh Department of Mechanical Engineering, Indian Institute of Technology, Delhi, New Delhi 110 016, India e-mail: deshmukhsg@hotmail.com