This paper investigates the role played by service quality at supplier-manufacturer dyad in small-medium manufacturing units, and presents a model to establish that contribution of both the supplier and manufacturer towards service quality could lead to satisfaction followed by loyalty. The research design for this study includes a combination of literature survey, exploratory interviews with practitioners, and a questionnaire survey conducted through interview schedule from 120 respondents working in different small-medium manufacturing units of North India. Structural equation modeling (SEM) is used for data analysis. The paper develops dual directional scales to evaluate service quality at supplier-manufacturer dyad and tests a set of four propositions. A model showing linkages of manufacturer (manufacturing unit’s) service quality with supplier service quality leading to satisfaction and loyalty is also developed. The model is empirically tested and is found to be fit. This study would be of interest to SME managers particularly engaged in ‘purchase’ function and researchers working on inter-firm supply chains in such units. This study recommends forming strong collaborative relationships with suppliers to achieve a win-win situation.