Mediating effect of information sharing on supplier performance in manufacturing industry of Sri Lanka

It is generally accepted that in order to compete and survive, firms must seek, build up and maintain relationships with capable suppliers and take out the maximum value through such relationships. One of the critical requirements of effective supply chain management is the creation of a synchronized flow of materials and information from suppliers to their customers. One effective way buying firms can meet this challenge is by developing their suppliers in ways that improve suppliers’ capabilities. The purpose of this paper is to extend understanding of supplier development theory by investigating the relationships among supplier development, supplier performance and information sharing. The population for this study comprised the purchasing managers of companies which were ranked as most respected entities (100) in Sri Lanka by LMD in August 2008. Data were collected from conveniently selected sample of 56 manufacturing companies with better supplier relationships by administering pre tested structured questionnaire, which consisted of 78 questions/statements with 5 point scale. Regression analysis was performed to test the relationships proposed in hypotheses. It was found that there was a significant relationship between supplier development and supplier performance. It was revealed that, information sharing caused partial mediation effect on the relationship between supplier development and supplier performance and mediation effect caused by the information sharing is not significant. Further it was found 19.5% of the total effect of supplierdevelopment on supplier performance was mediated by information sharing. Also it revealed that the traditional communication methods used had significant impact on information sharing but use of advanced communication methods had no significant impact on information sharing. In addition, organization’s philosophy on their supplier and supplier base performance was found to have a positively impact on supplier development support provided by the buying firm. The findings of this study provide insights into what makes supplier development activities effective for practitioners.