Supplier Selection Criteria - In Manufacturing Sector- A Case

Based Analysis
Anuj Agarwal
MANAGEMENT DEVELOPMENT INSTITUTE, GURUGRAM

1.0 Introduction
Any organization needs an effective supplier selection process.
In an era of cut throat competition and focus on quality, it is absolute
necessary to have the suppliers which are cost effective with high quality
products or services. With the increase in growth of economies, there is
considerable increase in the suppliers who can be considered by the
organizations. In this research paper, an attempt has been made to
critically review the criteria and methods for supplier selection. This is
based on the review of 5 research papers mentioned in last of this paper
under references. The study indicates many important criteria for supplier
selection such as quality, price and delivery. Failure to consider these
criteria can severely impact the competiveness of the organization. It can
lead to poor quality procurement, higher cost or delay in procurement.
The company can also struggle with rework cost in case of wrong
procurement. A cutting edge with laser speed supplier selection process is
the order of the day. Also, due to increased focus on corporate governance
process by the organization, the supplier selection process must be fully
transparent with adequate checks and balances. All these factors make
supplier selection a critical problem for the organizations to handle in the
supply chain process.
2.0 Literature Review
A detailed analysis of research papers on supplier selection has
highlighted the importance of certain traditional methods like cost,
delivery and quality. A need has arisen to consider the impact and
importance of following factors in supplier selection process.
With the advancement of technology, the use of tech in the
entire process should also be evaluated. There are also means to use third
parties for an effective and impartial selection of critical vendors.
The key suppliers of an organization have a huge influence on
the success of the company. If wisely chosen, they can lend a huge
competitive edge to the organization.
2.1 Transparency in supplier selection
The Supplier Selection Problem is defining the best methods to
finalize the key suppliers in order to improve business. The papers
referred to in this paper have looked at multiple criteria that are used to
evaluate a supplier. However, now as the size of the organization is
expanding, it is important that company puts in place a process which is
transparent, open and subject to greater scrutiny apart from traditional
criteria like cost, quality and delivery. Dickson (An analysis of vendor
selection systems and decisions,” Journal of Purchasing, 2, pp. 5-20,
1966) has highlighted 23 criteria for supplier evaluation. However, the
importance of one or other of these criteria will depend on the type of
company and the market it is operating. In case of some of the companies,
the supplier selection may be guided by entirely different considerations
eg, a parent company may ask its subsidiary to procure from it. In this
scenario, there is not much choice and supplier selection is fairly simple.
2.1 Method to incorporate transparency

We can look at various factors to ensure supplier selection is

First, in the research conducted till now, more focus has been
done in a fair manner. The most important aspect of any supplier selection
on cost, quality and delivery along with certain other factors. However, a
process is that it should allow all eligible suppliers to participate in the
big gap is there as far as transparency of the process is considered. The
procurement process. This can be achieved with the help of technology.
papers do not seem to address how the transparency of the whole process
Many organizations are using the corporate website for enlisting vendors.
should be maintained.
Also, there are cost effective technologies available to ensure this. The
most widely method used by organizations in public sector is to use open
Secondly, papers address the ‘what’ part of the process e.g., at
tendering process. A detailed process should be laid down addressing
what price, what quantity, what delivery schedule, what quality but there
points such as the manner of receiving the quotations, opening of bids,
is opportunity of addressing the how part also. We have to recognize that
their comparisons, adequate approvals and announcement of successful
if the process is not transparent and open to scrutiny, an organization
bidder. The process should have adequate checks and balances to ensure
cannot source the best materials from best sources. Very often, the
that there is no possibility of fraud in the entire process. The process
procurement process is influenced by the choices of the procuring team,
should be well laid down and informed to all bidders. The organization
eg the preference to a particular region or country etc. So, the company
should have zero tolerance policy towards any unscrupulous practices.
may not be able to select the best suppliers in that case.
There are many international standards which can be referred by the
organization.
This has the biggest advantage that the organization is able to
reach out to the maximum number of eligible vendors and in turn have
more healthy competition among these potential suppliers. The
organization should also very carefully design its negotiation process.
Whether negotiation should be done with lowest bidder or with all bidders
is a key point to address in the beginning.
In the era of global scale and billions of dollars at stake, the
supplier selection process cannot be left to certain individuals in the
supply chain department. The companies have to make this as part of their
strategy and involve the business in critical decisions. A very effective
supplier selection process ensures that the organization is profitable as
well as its suppliers also get a fair price for their products. There is
complete transparency on the cost structure and any improvement in cost
is passed on to the procuring organization while protecting its margins.
Therefore, in supply chain process, supplier selection problem is critical
and important issue to handle.
References:
Dickson, W. Gary. “An analysis of vendor selection systems and
decisions,” Journal of Purchasing, 2, pp. 5-20, 1966.
S. Hossein Cheraghi, Mohammad Dadashzadeh and Muthu
Subramanian. “Critical Success Factors For Supplier Selection: An
Update.” Journal of Applied Busines Research, 2, pp. 91-108, 2002.
Zhaoxia Guo, Haitao Liu, Dongqing Zhang and Jing Yang. “ Green
Supplier Evaluation and Selection in Apparel Manufacturing Using a
Fuzzy Multi-Criteria Decision-Making Approach.” Sustainability
2017.
Teresa Wu and Dan Shunk, Jennifer Blackhurst and Rajendra Appalla.
“ AIDEA: a methodology for supplier evaluation and selection in a
supplier-based manufacturing environment.” Int. J.Manufacturing
Technology and Management, Vol. 11, No. 2, 2007.
Luitzen de Boer, Eva Labro and Pierangela Morlacchi. “A review of
methods supporting supplier selection.” European Journal of
Purchasing & Supply Management 7 (2001) 75-89.
Akshay A. Patil, Prof. Madhav and B. Kumthekar. “ Supplier
Evaluation and selection methods in construction industry.”
International Research Journal of Engineering and Technology,
Volume: 03 Issue: 06 | June-2016.