Does process improvement lead to supplier performance? An empirical examination

This research develops a causal-predictive model for predicting the supplier performance due to buyer-initiated supplier process improvement (SPI). SPI is one type of supply chain collaboration that focuses on process improvement. It is a common practice in supply chains that are driven by a powerful buyer firm. Drawing upon the supply chain management and process improvement literature, we relate SPI to supplier performance via a supplier’s internal process improvement effort. SPI is operationalized as an index with formative indicators, which is appropriate for prediction studies. The model is then evaluated using the partial least squares structural equation modeling method, with empirical data collected from 53 supplier plants of a Fortune 500 firm. The results strongly supported the proposed causal-predictive model. Insights from this study can shed light on further theoretical development on supply chain process improvement, as well as can provide guidance for practicing managers.