Developing Supplier Capabilities: Market and Non-market Approaches

Abstract

We explore the ways that component suppliers in a traditional US manufacturing region (Cleveland) have responded to their customers' demands for improved quality, cost, and delivery. We find that a surprising number (almost a third) have not responded by attempting systematic improvements in their production capabilities. However, two-thirds of suppliers have worked to improve their capabilities in these areas, adopting such policies as just-in-time and total quality management. Although many of the policies are inspired by Japanese management practices, the method of transfer makes far more use of market mechanisms (such as purchase of consulting services and hiring of employees who have experience implementing such practices), than in Japan. We examine the advantages and disadvantages of such market-based diffusion mechanisms.

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