Background: Current competitive environment enforces companies to decrease their costs and at the same time increase their quality as well as developing new products in short time. As a result, manufacturers have tendency towards focal point of their competencies and consequently they are becoming more dependent on their suppliers. As suppliers can have impact on companies’ performance significantly thus, relationship between companies and suppliers is a vital for any organizations.  Generally, supplier development aims to provide appropriate framework for improving the performance of suppliers as well as evaluating their performance.

Purpose: The purpose of this thesis is to focus on the important supplier development elements and supplier performance evaluation from the perspective of studied SMEs manufacturing companies. Therefore collected results will be used by VIDA Inspection to provide supplier development as a value added service to its potential customers.

Method: This thesis is a multiple case study and was conducted with a deductive approach. The empirical findings were gathered through qualitative interviews with semi-structured interview guide.

Conclusion: It could be concluded that the most important supplier development elements are communication, collaboration and trust, top management involvement and long term commitment. Studied SMEs manufacturing companies were utilizing structured and unstructured model for supplier performance evaluation. Quality, delivery and cost are the most important supplier performance evaluation measures. VIDA Inspection with the help of four identified phases can utilize the results of both RQ1 and RQ2 for providing value added services to their potential manufacturing customers.