Boer, L. de, On millennium-proof decision making in purchasing and supply, In: Erridge, A., Fee, R. and McIlroy, J. (eds) Perspectives on Purchasing and Supply for the Milennium, 8th International IPSERA Conference, 1999 (abstract)
Present and especially future developments in Purchasing and Supply strongly urge for more systematic and transparent purchasing decision-making.
With the increasing importance of the purchasing function, purchasing decisions become more important. In addition, several developments further complicate purchasing decision-making, e.g. globalisation of trade and the Internet enlarge a purchaser’s choice-set, changing customer preferences require a broader and faster supplier evaluation, Public Procurement regulations demand more transparency and new organisational forms lead to the involvement of more decision makers, etceteras.
We argue that (prescriptive) decision models are necessary elements for systematic, transparent and effective purchasing decision-making. However, the decline in the recognition of Purchasing during the 1950’s, -60’s and –70’s discouraged the development of such models. Moreover, the existing decision models in the Purchasing and Supply literature lack the required diversity and also show a significant gap with many promising models developed in the field of Operations Research during the last decades. In other words, the Purchasing literature lacks some important types of decision models and just as important: it lacks a frame-work for guiding purchasers in finding the right model for a certain type of decision situation. In this paper, we present the design of such a framework. More specifically, we call it a toolbox for supplier selection as it links different typical supplier selection situations (e.g. first buy versus rebuy) with appropriate models and techniques for decision support.
We discuss the construction of the toolbox is detail. The construction process follows four steps. In the first step, starting points and design specifications are defined. The starting points cover basic assumptions about the factors that determine the choice of a decision model in a certain supplier selection situation and the characteristics of the situations in which the box may be used. The design specifications indicate the desired functions and characteristics of the toolbox. In the second step, we create compartments in the toolbox to represent different types of supplier selection situations as well as different levels of complexity and importance. Subsequently, within each compartment, we construct subcompartments to cover the different phases in supplier selection: problem definition, formulation of criteria, qualification of suppliers and the final selection of suppliers. Also, we show how the subcompartments can be used to plan supplier selection processes. Finally, we fill the subcompartments in the toolbox with the decision models that result from an extensive search in the Purchasing as well as the Operations Research literature.
Finally, we describe the empirical testing of the toolbox through several experiments in four different organisations. From these experiments we conclude that the toolbox may offer useful and comprehensive support for supplier selection. The usefulness of the toolbox comprises several dimensions. The box may aid the purchaser in generating and evaluating alternatives for supplier selection as well as the criteria to be used for this selection. The toolbox may also create a more transparent, objective and consistent decision making process and may aid the purchaser in effectively utilising the information available to him/her. Also, the purchaser may use the toolbox to improve the justification of and the communication about the supplier selection. Furthermore, the toolbox enables the purchasers to achieve this against justifiable efforts and costs. Also, we conclude that the use of the toolbox is not restricted to specific purchasing packages or sectors of industry.
In our opinion, the justification for this paper lies in (1) its analysis of how current and future developments relating to the conference-theme affect purchasing decision making (2) its contribution to the Purchasing literature through an up-to-date overview of decision models for supplier selection (3) its use of case-studies and experiments in several organisations and (4) its theoretical development through the design of the toolbox for supplier selection which draws upon theories from Purchasing and Industrial Marketing, organisational decision making as well as Operations Research.
The research methods employed in the paper include (1) thorough and extensive literature search (2) case-studies and (3) experiments based on the case-studies.