Understanding Tradeoffs in the Supplier Selection Process

Numerous studies have demonstrated that firms consider multiple criteria when selecting key suppliers. In this study, we present, based on econometric choice modeling framework, how manufacturing managers/executives tradeoff between cost, delivery, flexibility, and service features in the supplier selection process, given acceptable quality. Empirical data for this study was collected from manufacturing organizations in Europe (Germany, France, Italy, United Kingdom) using a computer-based supplier selection discrete choice survey. Each survey instrument contained 16 supplier selection choice sets, which compared 23 attributes of the current suppliers with “new” potential supplier. The attributes of new suppliers were varied across two to four levels using established factorial experimental design procedures. The resultant multinomial logit models show the relative impact of cost, flexibility, delivery and service features on supplier selection.