Supplier development to improve supplier sustainable performance: a test on a dairy supply chain of a developing country

Purpose The paper develops and tests a theoretical model that explains how different types of sustainable supplier development (SSD) initiatives implemented by an agri-food processor improve the sustainable performance of the supplier in a developing country. Design/methodology/approach The theoretical model was tested in a dairy farming context in Sri Lanka, where a substantial number of smallholder farmers supply milk to their processors. The authors theorized SSD, in the form of farmer training, financial support and “evaluation and feedback on farmers’ quality performance” initiated by the milk processor, improves the economic, social and environmental performance of the farmers through the mediating roles being played by farmer capability and the processor-farmer relationship. The data were collected from 324 dairy farmers, and the theoretical model was tested using partial least squares structural equation modeling. Findings The mediating effect through processor–farmer relationship was significantly greater than that through farmer capability. The findings highlighted the pivotal role of the processor–farmer relationship in mediating the link between SSD initiatives and sustainable farmer performance, while downplaying the significance of farmer capability as a mediator. Among the three SSD initiatives, financial support had the greatest impact on sustainable farmer performance, while farmer training had the least impact, except in the region where exotic cows were raised. Originality/value The study demonstrated how supplier development theory in operations management applies in an agri-food context of a developing country.