vendor selection criteria and methods
TRANSCRIPT
2 European Journal of Operational Research 50 (1991) 2-18 North-Holland
Invited Review
Vendor selection criteria and methods
Charles A. Weber, John R. Current and W.C. Benton Faculty of Management Sciences, College of Business, The Ohio State University, 1775 College Road, Columbus, OH 43210-1399, USA
Abstract: The vendor selection process has undergone significant changes during the past twenty years. These include increased quality guidelines, improved computer communications, and increased technical capabilities. Given radical changes in the purchasing selection process, it is appropriate to review the past research and to determine its relevance to the supplier selection decision. This paper reviews, annotates, and classifies 74 related articles which have appeared since 1966. Specific attention is given to the criteria and analytical methods used in the vendor selection process. In response to the increased interest in Just-In-Time (JIT) manufacturing strategies, and analysis of JIT's impact on vendor selection is also presented. Finally, conclusions and potential areas for future research are presented.
Keywords: Materials planning, production planning, supply management
1. Introduction
Strategic management decisions impact all areas of a firm. Once such decisions have been made, the criteria for making subsequent operational de- cisions must be re-examined. New strategic direc- tions may require new criteria a n d / o r a re-empha- sis of existing criteria used in making the oper- ational decisions necessary to implement them. An important area of operational decision making is that of purchasing. In this paper, we review the purchasing literature published since Dickson (1966) in order to provide a comprehensive view of the criteria that academicians and practitioners have found to be important in vendor selection. We limit this review to vendor selection by in- dustrial purchasers because such environments formed the basis of the Dickson study and most of the research since then.
Received August 1990
One major aspect of the purchasing function is vendor selection, the acquisition of required material, services and equipment for all types of business enterprises. By its very nature the purchasing function is a basic part of business management. In today's competitive operating en- vironment it is impossible to successfully-produce low cost, high quality products without satisfac- tory vendors. Thus one of the most important purchasing d~isions is the selection and mainte- nance of a competent group of suppliers.
The selection of competent suppliers has long been regarded as one of the most important func- tions to be performed by a purchasing depart- ment. For example, Howard Lewis in one of the early purchasing texts (1943), stated: " I t is prob- able that of all the responsibilities which may be said to belong to the purchasing officers, there is none more important than the selection of a proper source. Indeed, it is in some respects the most important single factor in purchasing" (Lewis, p. 249). For many firms, purchases from outside
0377-2217/91/$03.50 © 1991 - Elsevier Science Publishers B.V. (North-Holland)
C.A. Weber et al. / Vendor selection criteria and methods 3
vendors account for a large percentage of their total operating costs. The raw material purchased for most U.S. firms constitutes 40-60% of the unit cost of a product. For large automotive manufac- turers, the cost of components and parts purchased from outside vendors may total more than 50% of sales. Purchased material and services represent up to 80% of total product costs for high technol- ogy firms (Burton, 1988). Coal purchases for large electric utilities, such as TVA, approach $1 billion annually (Bender et al., 1985).
Vendor selection decisions are complicated by the fact that various criteria must be considered in the decision making process. The analysis of criteria for selection and measuring the perfor- mance of vendors has been the focus of many academicians and purchasing practitioners since the 1960's. In his seminal work, Dickson (1966) suggests: " F r o m the purchasing literature, it is fairly easily to abstract a list of at least 50 distinct factors (characteristics of vendor performance) that are presented by various authors as being meaningful to consider in a vendor selection deci- sion" (Dickson, p. 5).
The primary purpose of this paper is to review the literature since the Dickson study in order to provide a comprehensive view of the criteria that academicians and purchasing practitioners feel are important in the vendor selection decision. Anno- tations for 74 articles are presented in the next section. In the third section, a review of criteria is presented.
Since the Dickson article was published the world of purchasing has undergone some signifi- cant changes. A significant impetus for these changes has been the increased interest in, and implementation of, Just-In-Time (JIT) manufac- turing strategies. The implementaion of J IT may impose a reordering of the criteria by which vendors are selected (see Ansari and Modarress, 1986; Bender et al., 1985; Burton, 1988; Hahn et al., 1983; Manoochehri, 1984; Newman, 1988). Given the recent interest in J IT manufacturing strategy, a review of J IT 's impact on vendor selec- tion is presented in the fourth section.
In view of the economic importance, and inher- ent complexity of purchasing decisions, such deci- sions are an appropriate area for the application of quantitative analysis. Consequently, any quan- titative methods for vendor selection presented in the various articles are listed in the annotations.
In addition, these approaches are categorized and discussed in the fifth section of this paper. Con- clusions, potential areas for future research, and a summary are presented in the final section.
It should be noted that this literature review includes only articles published in major journals written in English. Consequently, working papers, books, Master 's and Doctoral theses and non-En- glish articles are not reviewed. Every effort has been made to be thorough and any oversights are unintentional and regretted.
2. Annotation
The structure of this study will be to categorize the articles based on the 23 vendor selection criteria of the Dickson study shown in the Ap- pendix. It should be noted that categorization of some articles into one of the Dickson study's criteria was not clear cut and required some judge- ment. These decisions were based on our percep- tion of the article's primary focus. For example, 'per formance history' of vendors may be captured in the vendor's 'delivery' or 'quali ty ' performance. Similarly, 'warranties and claim' policies may be reflected in a vendor's 'pr ice ' structure.
Finally, one additional caveat is in order. The Dickson results were based on a survey of pur- chasing agents and managers whereas this review is primarily based on academic literature. Conse- quently, any comparisons between our findings and those of Dickson must be made with the realization that the two studies were based on two different 'populat ions ' . In spite of this, however, we believe that the Dickson study is a valid bench- mark from which to identify possible trends in the importance of various vendor selection criteria.
The Dickson study was based on a questioneer sent to 273 purchasing agents and managers selected from the membership list of the National Association of Purchasing Managers. The list in- cluded purchasing agents and managers from the United States and Canada. A total of 170 (62.3%) responses were received. Table 1 summarizes the findings of Dickson's study regarding the impor- tance of the 23 criteria for vendor selection.
In general, the articles in this review examine more than one of Dickson's criteria. In s o m e cases, the authors chose to look in detail at just one of the criteria. In these, the authors typically
4 C.A. Weber et al. / Vendor selection criteria and methods
Table 1 Dickson's vendor selection criteria a
Rank Factor Mean Evaluation r a t i n g
1 Quality 3.508 Extreme importance
2 Delivery 3.417 3 Performance history 2.998 4 Warranties and claim 2.849
policies 5 Production facilities
and capacity 2.775 6 Price 2.758 7 Technical capability 2.545 8 Financial position 2.514 9 Procedural compliance 2.488
10 Communication system 2.426 11 Reputation and position
in industry 2.412 12 Desire for business 2.256 13 Management and
organization 2.216 14 Operating controls 2.211 15 Repair service 2.187 16 Attitude 2.120 17 Impression 2.054 18 Packaging ability 2.009 19 Labor relations record 2.003 20 Geographical location 1.872 21 Amount of past business 1.597 22 Training aids 1.537 23 Reciprocal arrangements 0.610
Considerable importance
Average importance
Slight importance
a See Dickson (1966).
focused on methods to measure the criterion or ways to incorporate it into a larger vendor selec- t ion process and were not advocat ing the sole use of the criterion for vendor selection.
In the following annota t ion each entry includes author(s), year of publication, and title of the article. The full ci tations are provided in the Ref- erence section at the end of the article.
Each annota t ion lists three subentries. The first subentry identifies which of Dickson 's 23 vendor selection criteria were discussed in the article. The keyword(s) for the criteria used by Dickson are used.
The second subentry describes the purchasing envi ronment in which the criteria are discussed. Possible purchasing environments include J IT or MRP, a specific industry or items, large project purchases, etc. In cases where there is no specific
purchasing environment mentioned, an entry of 'general industrial purchasing ' is given.
The final subentry briefly describes any tech- niques or analytical methods which were used to measure or analyze the criteria. I f specific tech- niques were not used, the s tudy was categorized as either ' conceptua l ' or 'empirical ' .
In total, 74 articles were reviewed. The annota- tions are now presented in alphabetical order by the author ' s last name:
Ansari and Modarress (1986), "Just- in- t ime purchasing: Problems and Solutions",
- quality, delivery, net price, geographical lo- cation, attitudes,
- J I T ,
- conceptual . Ansari and Modarress (1988), " J I T purchasing
as a quali ty and product ion centre", - quality, delivery, net price, geographical lo-
cation, attitude, packaging, - J I T ,
- conceptual . A n t h o n y and Buffa (1977), "Strategic purchas-
ing scheduling", - delivery, net price, - general industrial purchasing, - linear p rogramming model based on trans-
por ta t ion model. Banerjee (1986), " A joint economic-lot-size
model for purchaser and vendor" , - net price, delivery, - general industrial purchasing, - jo int economic lot sizing model conceptual ly
developed. Banerjee (1986), " O n " A quant i ty discount
pricing model to increase vendor profits . . . . , - net price, - , general industrial purchasing, - EOQ. Bender, Brown, Isaac and Shapiro (1985), " I m -
proving purchasing product ivi ty at IBM with a normative decision support system",
- q u a l i t y , delivery, p roduc t ion facilities and capacity, net price,
- IBM for wide range of commodit ies , - m i x e d integer opt imizat ion p rogramming
model as par t of a decision support system. Benton (1983), "Purchase quant i ty discount
procedures and M R P " , - net price, - MRP,
CA. Weber et a L / Vendor selection criteria and methods 5
- EOQ, Least Unit Cost procedure, McLaren's Order Moment procedure studied by a simulation model.
Benton (1985), "Multiple price breaks and al- ternative purchase lot-sizing procedures in material requirements planning systems".
- net price, - MRP, - EOQ, Least Unit Cost procedure, McLaren's
Order Moment procedure studied by a simu- lation model.
Benton (1985), "Purchase lot sizing research for MRP systems",
- net price, - MRP, - review of lot sizing techniques. Benton and Krajewski (1990), "Vendor perfor-
mance and alternative manufacturing environ- ments",
- quality, delivery, service, - MRP/J IT , - simulation. Benton and Whybark (1982), "Material re-
quirements planning (MRP) and purchase dis- counts",
- net price, - MRP, - EOQ, Least Unit Cost procedure, McLaren's
Order Moment procedure studied by a simu- lation model.
Bernard (1989), "Managing vendor perfor- mance",
- quality, delivery, net price, management and organization, service,
- general industrial purchasing, - conceptual. Bragg and Hahn (1982), "Material require-
ments planning and purchasing", - delivery, production facilities and capacity, - M R P ,
- conceptual. Browning, Zabriskie and Huellmantel (1983),
"Strategic purchasing planning", - delivery, net price, technical capability, pro-
duction facilities and capacity, - general industrial purchasing, - conceptual. Buffa and Jackson (1983), "A goal program-
ming model for purchase planning", - quality, delivery, performance history, net
price, - general industrial purchasing,
- goal programming optimization model. Burton (1988), "JIT/Repet i t ive sourcing strate-
gies: 'Tying the knot' with your suppliers", - quality, delivery, production facilities and
capacity, net price, technical capability, packaging ability, geographic location, train- ing aids, management and organization, op- erational controls,
- J I T ,
- conceptual. Cardozo and Cagley (1971), "Experimental
study of industrial buyer behavior", - net price, delivery, quality, reputation and
position in industry, past business, - general industrial purchasing, - empirical. Chakravarty and Martin (1988), "An optimal
joint buyer-seller discount pricing model", - net price, - general industrial purchasing, - EOQ. Chapman (1989), "Just-in-time supplier inven-
tory: An empirical implementation model", - q u a l i t y , delivery, production facilities and
capacity, - J I T ,
- empirical. Chapman and Carter (1990), "Suppl ie r /
customer inventory relationships under just-in- time", - delivery, quality, - J I T ,
- multiple regression analysis. Cooper (1977), "A total system for measuring
delivery performance', - delivery, - general industrial purchasing, - delivery performance analysis worksheet with
linear weighted model. Croell (1980), "Measuring purchasing effective-
ness", - quality, delivery, net price, - general industrial purchasing, - conceptual. Dada and Srikanth (1987), "Pricing policies for
quantity discounts", - net price, - general industrial purchasing, - EOQ. Dempsey (1978), "Vendor selection and the
buying process", - delivery, quality, net price, repair service,
6 C.A. Weber et al. / Vendor selection criteria and methods
technical capability, performance history, production facilities and capacity, training aids, operational controls, reputation and position in industry, financial position, atti- tude, communication system, bidding proce- dural compliance, management and organi- zation, packaging capability, labor relation record, geographical location,
- electronics manufacturing and electric utili- ties industries,
- empirical. Edwards (1967), "Supplier management evalua-
tion", - management and organization, - general industrial purchasing; 9 case sce-
narios presented, - empirical. Frazier, Spekman and O'Neal (1988), "Just-in-
time exchange relationships in industrial markets", - quality, delivery, net price, technical capabil-
ity, - management and organization, - J I T ,
- conceptual. Gaballa (1974), "Minimum cost allocation of
tenders", - net price, productoin facilities and capacity, - two classes of items, - mixed integer optimization models. Goyal (1987), "Comment on: A generalized
quantity discount pricing model to increase sup- plier's profits",
- net price, - general industrial purchasing, - E O Q .
Gregory (1986), "Source selection: A matrix approach",
- quality, delivery, performance history, pro- duction facilities and capacity, net price, technical capability, bidding procedural compliance, reputation and position in in- dustry, management and organization, geo- graphical location,
- general industrial purchasing, - s o u r c i n g worksheet with linear weighting
model. Hahn, Kim and Kim (1986), "Costs of compe-
tition: Implications for purchasing strategy", - quality, delivery, production facilities and
capability, net price, technical capability, geographical location,
- J I T ,
- conceptual. Hahn, Pinto and Bragg (1983), " 'Just-in-time'
production and purchasing", - q u a l i t y , delivery, production facilities and
capacity, net price, geographical location, - J I T ,
- conceptual. Hakansson and Wootz (1975), "Supplier selec-
tion in an international environment - An experi- mental study",
- price, quality, geographical location, produc- tion facilities and capacity,
- international industrial purchasing, - empirical. Hinkle, Robinson and Green (1969), "Vendor
evaluation using cluster analysis", - quality, delivery, net price, technical capabil-
ity, - general industrial purchasing, - cluster analysis. Ho and Carter (1988), "Using vendor capacity
planning in supplier evaluation", - production facilities and capacity, - MRP, - conceptual. Hwang, Moon and Shinn (1990), "An E O Q
model with quantity discounts for both purchasing price and freight cost",
- net price, - general industrial purchasing, - E O Q .
Jacobson and Aaker (1987), "The strategic role of product quality",
- quality, - general industrial purchasing, - empirical. Jackson (1983), "Just-in-time production: Im-
plications for logistics managers", - quality, delivery, geographical location, atti-
tude, - J I T ,
- conceptual. Jordan (1987), "Purchasing decisions regarding
future price increases: An empirical approach", - net price, - general industrial purchasing, - E O Q .
Kingsman (1986), "Purchasing raw materials with uncertain fluctuating prices",
- net price,
C.A. Weber et al. // Vendor selection criteria and methods 7
- commodity purchasing, - l i n e a r and dynamic programming models
conceptually discussed. Kraljic (1983), "Purchasing must become
supply management", - quality, delivery, production facilities and
capacity, technical capability, - general industrial purchasing, - conceptual. LaForge (1985), " M R P lot sizing with multiple
purchase discounts", - net price, - MRP, - EOQ, POQ, LUC, PPA, IPPA models. Lamberson, Diederich and Wuori (1976),
"Quantitative vendor evaluation", - quality, delivery, performance history, pro-
duction facilities and capacity, net price, technical capability, financial position, management and organization,
- general industrial purchasing, - d e c i s i o n analysis worksheet with linear
weighting model. Lamm and Vose (1988), "Seller pricing strate-
gies: A buyer's perspective", - net price, - general industrial purchasing, - conceptual. Lee and Rosenblatt (1986), "A generalized
quantity discount pricing model to increase sup- plier's profits",
- net price, - generalized industrial purchasing, - EOQ. Levy and Cron (1985), "A decision support
system for determining a quantitative discount pricing policy",
- net price, - generalized industrial purchasing, - EOQ placed in a decision support system
framework. Manoochehri (1984), "Suppliers and the just-
in-time concept", - q u a l i t y , delivery, production facilities and
capacity, net price, geographical location, attitudes,
- J I T ,
- conceptual. Markowski and Markowski (1988), "An alter-
native criterion for the quantity discount decision", - net price,
- general industrial purchasing, - conceptual. Mazurak, Rao and Scotton (1985), "Spread-
sheet software applications in purchasing", - quality, delivery, net price, financial posi-
tion, - general industrial purchasing, - spreadsheet vendor evaluation system using
linear weighting model. McFillen, Reck and Benton (1983), "An experi-
ment in purchasing negotiations", - price, quality, delivery, service, - general industrial purchasing, - empirical. McGinnis and Hollon (1978), "Packaging:
Organization, objectives, and interactions", - packaging, - general industrial purchasing, - empirical. Monahan (1984), "A quantity discount pricing
model to increase vendor profits", - net price, - general industrial purchasing, - EOQ. Monczka, Giunipero and Reck (1981), "Per-
ceived importance of supplier information", - quality, delivery, performance history, pro-
duction facilities and capacity, net price, financial position, reputation and position in industry, management and organization, labor relations record, geographical location,
- rankings provided for 6 industry types, - empirical. Monczka and Trecha (1988), "Cost-based sup-
plier performance evaluation", - quality, delivery, net price, management and
organization, - general industrial purchasing, - develops service factor ratings and overall
supplier performance index based on linear weighting model.
Moore and Fearon (1973), "Computer-assisted decision making in purchasing",
- quality, delivery, net price, - general industrial purchasing, - linear programming approach discussed as
part of computer-assisted vendor evaluation. Narasimhan (1983), "An analytical approach to
supplier selection", - q u a l i t y , delivery, production facilities and
capacity, net price,
8 C.A. Weber et a L / Vendor selection criteria and methods
- general industrial purchasing, - analytical hierarchical process. Narasimhan and Stoynoff (1986), "Optimizing
aggregate procurement allocation decisions", - production facilities and capacity, net price, - general industrial purchasing, - m i x e d integer optimization programming
model. Newman (1988), "Insuring quality: Purchas-
ing's role", - quality, - Statistical Process Control, - concept. Newman (1988), "The buyer-supplier relation-
ship under just-in-time", - quality, delivery, production facilities and
capacity, net price, technical capability, packaging ability, geographical location,
- J I T ,
- conceptual. Newman and Scodro (1988), "Price analysis for
negotiation", - net price, - general industrial purchasing, - conceptual. Pan (1989), "Allocation of order quantity
among suppliers", - net price, quality, delivery, - general industrial purchasing, - single objective linear programming model. Payne (1970), "Development of a supplier
evaluation technique utilizing financial informa- tion",
- financial position, - general industrial purchasing; 5 case scenar-
ios presented, - empirical. Roberts (1978), "A vendor delivery rating
model", - delivery, - general industrial purchasing, - linear weighting model for delivery perfor-
mance. Ronen and Trietsch (1988), "A decision sup-
port system for purchasing management of large projects",
- delivery, net price, - large projects, - stochastic, stationary inventory model. Rubin, Dilts and Barton (1983), "Economic
order quantities with quantity discounts",
- net price, - generalized industrial purchasing, - E O Q .
Sharma, Benton and Srivastave (1989), "Com- petitive strategy and purchasing decisions",
- net price, quality, delivery, - generalized industrial purchasing, - non-linear goal programming model. Sheth (1973), "A model of industrial buyer
behavior", - quality, delivery, net price, production facili-
ties and capacity, service, reputation and position in industry, reciprocal agreements, technical capability, impression,
- general industrial purchasing, - conceptual. Shore (1981), "A micro-computer based pur-
chasing information system", - quality, delivery, net price, - general industrial purchasing, - criteria reported as part of a micro-computer
based information system for purchasing. Soukup (1987), "Supplier selection strategies", - q u a l i t y , delivery, production facilities and
capacity, net price, technical capability,. financial position, desire for business; management and organization, attitude, geo- graphical location,
- general industrial purchasifig, - linear weighting model using probabilities. Timmerman (1986), "An approach to vendor
performance evaluation", - quality, delivery, performance history, net
price, technical capability. - general industrial purchasing, - linear weighting model. Treleven (1987), "Single sourcing: A manage-
ment tool for the quality supplier", - quality, delivery, production facilities and
capability, net price, - J I T ,
- conceptual. Turner (1988), "An independent system for the
evaluation of contract tenders", - net price, production facilities and capacity, - general industrial purchasing, - mixed integer optimization model. Wagner, Ettenson and Parrish (1989), "Vendor
selection among retail buyers: An analysis by merchandise division",
- industrial purchasing factors: quality, service,
C.A. Weber et al. / Vendor selection criteria and methods 9
delivery, net price, geographic location, rep- utation and position in industry,
- r e t a i l purchasing factors: reputation and position in industry, service, delivery, qual- ity, markup, fashionability, country of origin, selling history,
- study concerned with retail purchasing in women's clothing, acessories and home products markets,
- empirical. Wieters (1976), "Influences on the design and
use of vendor performance rating systems", - production facilities and capacity, technical
capability, financial position, reputation and position in industry, management and organization, operational controls, repair service, geographical location,
- 6 specific industries, - empirical. Wind and Robinson (1968), "The determinants
of vendor selection: The evaluation function ap- proach",
- quality, delivery, net price, reputation and position in industry, geographical location,
Table 2 Journal outlets of the annotated bibliography
Journal Number (%) of articles
Journal of Purchasing and Materials Management 33
Journal of Purchasing a 5 Management Science 5 Decision Sciences 4 Production and Inventory Management 3 Computers and Operations Research 3 Journal of Business Logistics 3 International Journal of Production
Research 3 Journal of Marketing 3 Journal of Marketing Research 2 Journal of Operational Research Society 1 European Journal of Operational
Research 1 Journal of Retailing 1 Industrial Marketing Management 1 Journal of Operations Management 1 Interfaces 1 Harvard Business Review 1 Operations Research 1 Decision Sciences Institute Conf. Proc. 1 International Journal of Production
Management 1 Operational Research Quarterly 1
45 6 6 5 4 4 4
a Includes Dickson's article.
reciprocal arrangements, performance his- tory, technical capability, communication system,
- general industrial purchasing, - generalized linear weighting model. Table 2 presents a list of the journals in which
these articles appeared. As one might expect, the majority of them (45%) appeared in the Journal of Purchasing and Materials Management. Given the complexity and economic importance of vendor selection decisions, it is somewhat surprising how few articles have appeared in operations research/ management science oriented journals. This issue is discussed in more detail in Sections 5 and 6.
3 . R e v i e w o f c r i t e r i a
The criteria included in each article are pre- sented in Table 3. Again, the 23 criteria presented in Dickson (1966) were used. It is interesting to note that 47 of the 74 articles or 64% discussed more than one criteria and that in one article, Dempsey (1978), 18 criteria are discussed. This demonstrates the inherently multi-objective nature of many vendor selection decisions. Also, 42 of the 74 articles or 57% have appeared since 1985. This appears to reflect a growing interest in the vendor selection process in the last 5 years.
Table 4 lists the number of articles in which each criterion was addressed as well as the rank and rating of the criteria in the Dickson study. To the extent that publication in the literature reflects interest in, and importance of, the various criteria, some observations may be made from this table. For example, Table 4 indicates that net price, delivery and quality were discussed in 80, 59 and 54% of the articles respectively. These three criteria were rated as having 'extreme' or 'considerable' importance by Dickson. Production facilities and capability, geographical location, and technical ca- pability were discussed in 31, 22 and 20% of the articles respectively. Production facilities and ca- pability, and technical capability were categorized as having 'considerable importance' by Dickson while geographical location was considered to have only 'average importance' in Dickson's ranking. Warranties and claim policies was deemed to have 'considerable importance' in the Dickson study;
• however, it was not specifically discussed in any of the articles included in this review. Certainly, this
Tab
le 3
V
end
or
sele
ctio
n cr
iter
ia
Art
icle
Y
ear
1 2
3 4
5 6
7 8
9 10
11
12
13
14
15
16
17
18
19
20
21
22
23
An
sari
and
Mod
arre
ss
1986
X
X
A
nsa
ri a
nd
Mod
arre
ss
1988
X
X
A
nth
on
y a
nd
Buf
fa
1987
X
B
aner
jee
1986
X
B
aner
jee
1986
B
ende
r et
al.
1985
X
X
B
ento
n
1983
B
ento
n 19
85
Ben
ton
19
85
Ben
ton
an
d K
raje
wsk
i 19
90
X
X
Ben
ton
an
d W
hy
bar
k
1982
B
erna
rd
1989
X
X
B
ragg
an
d H
ahn
19
82
X
X
Bro
wni
ng e
t al
. 19
83
X
X
Buf
fa a
nd
Jac
kso
n
1983
X
X
X
B
urt
on
19
88
X
X
X
Car
do
zo a
nd C
agle
y 19
72
X
X
Ch
apm
an
1989
X
X
X
C
hap
man
an
d C
arte
r 19
90
X
X
Ch
akra
var
ty a
nd
Mar
tin
19
88
Co
op
er
1977
X
C
roel
l 19
80
X
X
Dad
a an
d S
rika
nth
1987
D
emp
sey
19
78
X
X
X
X
Ed
war
ds
1967
F
razi
er e
t al
. 19
88
X
X
Gab
alla
19
74
X
Go
yal
19
87
Gre
go
ry
1986
X
X
X
H
ahn
et
al.
1986
X
X
X
H
ahn
et
al.
1983
X
X
X
H
akan
sso
n a
nd
Wo
otz
19
75
X
X
Hin
kle
et a
l. 19
69
X
X
Ho
an
d C
arte
r 19
88
X
Hw
ang
et
al.
1990
Ja
cob
son
and
Aak
er
1987
X
Ja
ckso
n
1983
X
X
Jo
rdan
19
87
Kin
gsm
an
1986
K
ralj
ic
1983
X
X
X
L
aFo
rge
1985
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
x x
x x
x x
.q
t~
I:L
q~
L~
Tab
le 3
(co
ntin
ued)
V
end
or
sele
ctio
n c
rite
ria
Art
icle
Y
ear
1 2
3 4
5 6
7 8
9 10
11
12
13
14
15
16
17
18
19
20
21
22
23
Lam
ber
son
et
al.
1976
X
X
X
X
X
X
X
X
L
amm
an
d V
ose
1988
X
Lee
an
d R
ose
nb
latt
19
86
X
Lev
y e
t al
. 19
85
X
Man
oo
cheh
ri
1984
X
X
X
X
X
Mar
ko
wsk
i an
d M
ark
ow
ski
1988
X
X
X
X
X
Maz
ura
k e
t al
. 19
85
X
X
McF
ille
n e
t al
. 19
83
X
X
McG
inn
is a
nd
Ho
llo
n
1978
Mo
nah
an
1984
Mo
ncz
ka
et a
l.
1981
X
X
X
Mo
ore
an
d F
earo
n
1973
X
X
Nar
asim
han
19
83
X
X
Nar
asim
han
an
d S
toy
no
ff
1986
New
man
19
88
X
New
man
19
88
X
X
New
man
an
d S
codr
o 19
88
Pan
19
89
X
X
Pay
ne
1970
Ro
ber
ts
1973
X
Ro
nen
an
d T
riet
sch
19
88
X
Ru
bin
et
al.
1983
S
har
ma
et a
l.
1990
X
X
Sh
eth
19
73
X
X
Sh
ore
19
81
X
X
So
uk
up
19
87
X
X
Tim
mer
man
19
86
X
X
X
Tu
rner
19
88
Tre
lev
en
1987
X
X
W
agn
er e
t al
. 19
89
X
X
Wie
ters
19
76
Win
d a
nd
Ro
bin
son
19
68
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
X
.q
t~
t~
12 C.A. Weber et al. / Vendor selection criteria and methods
does not imply that warranties and claim policies no longer have any importance in vendor selec- tion. Rather, it is more likely that this criterion has been included as a component of other criteria or that this criterion is discussed in publications not considered in this study (e.g., legal publica- tions).
Table 5 lists the criteria by year of publication of the articles. This table indicates the existence of some possible trends. Table 5 indicates that net price, delivery, and quality have received the greatest amount of attention in the last five years, appearing respectively in 86, 53 and 51% of the articles published in that time frame. As Table 4 indicates, these three criteria were discussed more than any other criteria since 1969.
On the other hand, several criteria have re- ceived little attention in the last five years. During the last five years no citations could be found for warranties and claim policies, communication sys- tem, impression, labor relations record, amount of past business, and reciprocal agreements; only one citation was found for bidding procedural compli-
ance, desire for business, operating controls, packaging ability, training aids; and only two citations were found for performance history, financial position, and reputation and position in industry.
Table 5 also indicates that production facilities and capacity, geographical location, financial position, and management and organization gen- erated an intermediate amount of attention in the past five years appearing respectively in 26, 16, 16 and 9% of the citations during that time frame. The recent attention to geographical location is especially interesting with 7 of 14 citations appear- ing since 1985 and 10 of 14 citations appearing since 1980.
4. Impact of JIT on criteria
As stated earlier, strategic management deci- sions may affect the criteria used in making subse- quent operational decisions. A review of JIT criteria for vendor selection appears appropriate
Table 4 Criteria discussed in annotated bibliography
Dickson's s tudy Criteria
Rank Rating a
Number of (%) articles
6 1 Net price 2 1 Delivery 1 1A Quality 5 1 Production facilities and capacity
20 2 Geographic location 7 1 Technical capability
13 2 Management and organization 11 2 Reputat ion and position in industry
8 1 Financial position 3 1 Performance history
15 2 Repair service 16 2 Att i tude 18 2 Packaging ability 14 2 Operational controls 22 2 Training aids
9 2 Bidding procedural compliance 19 2 Labor relations record 10 2 Communicat ion system 23 3 Reciprocal arrangements 17 2 Impression 12 2 Desire for business 21 2 Amount of past business
4 1 Warranties and claims
61 80 44 58 40 53 23 30 16 21 15 20 10 13
8 11 7 9 7 9 7 9 6 8 3 4 3 4 2 3 2 3 2 3 2 3 2 3 2 3 1 1 1 1 0 0
a Ratings: 1A = Extreme importance. 2 = Average importance. 1 = Considerable importance. 3 = Slight importance.
Tab
le 5
V
end
or
sele
ctio
n c
rite
ria
by
yea
r
Yea
r V
end
ors
elec
tio
n c
rite
ria
1 2
3 4
5 6
7 8
9 10
11
12
13
14
15
16
17
18
19
20
21
22
23
1990
2
2
1989
5
5
1988
6
6
1987
3
3 19
86
4 5
2
1985
2
2
1984
1
1 19
83
6 7
1
1982
1
1981
2
2 1
1980
1
1
1979
19
78
1 2
1 19
77
1
1976
1
1 1
1975
1
1974
19
73
2 2
1972
19
71
1 1
1970
1969
1
1 19
68
1 1
1
1967
1 1
1 4
1 1
2 4
11
3 2
1 I
2 6
1 1
1 1
3 9
3 1
1 1
1 6
1 2
1
4 7
2 1
1 2
1 1
1
1
1 1
1 1
1 1
1 1
1 1
2 1
2 2
1 2
1 1
1 1
1 1
2 1
1 1
1
1
1 1
1 1
1 1
1
2 2
1
1 3 1 1
1
1 1
1 1 1
~x
e~ 2,
e,,
t.,,
14 C.A. Weber et al. / Vendor selection criteria and methods
in light of the recent movement of many firms toward this manufacturing philosophy. Of the 74 articles reviewed, 13 looked specifically at JIT. All 13 articles recognized that vendor selection under JIT is a multi-objective task. Table 6 lists the criteria addressed in these articles. Quality and delivery were discussed in all 13 of the articles. This is consistent with the Dickson study which listed these criteria as the two most important criteria for vendor selection. Production facilities and capabilities was also recognized in the articles as an important JIT criterion. In the Dickson study, this criterion ranked fifth. Net price was discussed in eight of the articles. Most authors however chose to handle net price as one compo- nent of ' total vendor cost' rather than as a sep- arate component. In the Dickson report, net price ranked sixth.
Geographical location is another important criterion for vendors in JIT systems. This is not surprising given the emphasis on local suppliers in JIT systems. This is in marked contrast to the Dickson report where geographical location ranked twentieth in importance. Other criteria that were mentioned for consideration in the JIT vendor selection process are technical capability, attitude, management and organization, operational con- trois, service and packaging.
5. Quantitative approaches to vendor selection
In the third subentry of each annotation are listed any quantitative approaches to vendor selec-
tion,that were presented in the article. These ap- proaches may be grouped into three general cate- gories:
(1) linear weighting models, (2) mathematical programming models, and (3) statistical/probabilistic approaches. By far, the most utilized approach has been
linear weighting models. Linear weighting models place a weight on each criteria (typically subjec- tively determined) and provide a total score for each vendor by summing up the vendor' s perfor- mance on the criteria multiplied by these weights. Wind and Robinson (1968) endorsed using a weighted linear model of multiple criteria for vendor selection. Other authors have followed suite, including Lamberson (1976) and Mazurak (1985). Timmerman (1986) and Gregory (1986) have linked this approach to a matrix representa- tion of data. Cooper (1977) and Roberts (1978) used linear weighting models to evaluate vendors on delivery performance. Narasimhan (1983) em- ployed the analytical hierarchical process to gener- ate weights for such models. Most recently, Monczka (1988) developed multiple criteria vendor service factor ratings and an overall supplier per- formance index using linear weighting models.
Given the inherent importance and complexity of vendor selection, it is somewhat surprising that only ten articles have proposed the use of mathematical programming techniques for vendor selection and order quantity decisions. The pro- posed techniques are linear programming, mixed integer programming, and goal programming.
Table 6 JIT Criteria for vendor selection
Dickson's study Criteria
Rank Rating a
Number of (%) articles
1 1A 2 1 6 1
20 2 5 1 7 1
16 2 13 2 18 2 14 2 15 2
Quality 13 100 Delivery 13 100 Net price 8 62 Geographical location 7 54 Production facilities and capacity 7 54 Technical capability 4 31 Attitude 4 31 Management and organization 2 15 Packaging 2 15 Operational controls 1 7 Repair service 1 7
a Ratings: 1A = Extreme importance. 2 = Average importance. 1 = Considerable importance. 3 = Slight importance.
C.A. Weber et al. / Vendor selection criteria and methods 15
Our literature review indicates that Moore and Fearon (1973) was the first of four articles to discuss the possible use of linear programming models for vendor selection. While the article did not provide an actual mathematical formulation, the objective of the conceptual model was to opti- mize the mix of vendor awards based on price, with constraints relating to the amount of business that any vendor could be awarded. Anthony and Buffa (1977) formulated a linear programming model to minimize total purchasing and storage costs in the scheduling of vendor deliveries. This model included budget, demand satisfaction and storage capacity constraints. Kingsman (1988) proposed, but did not formulate, the use of linear programming for commodity buying situations. Most recently, Pan (1989) formulated a linear programming model to minimize total purchase price. This model included constraints on quality, lead time and service.
Four of the articles proposed the use of mixed integer optimization models for vendor selection. Gaballa (1974) formulated mixed integer optimi- zation models to determine vendors and order quantities for two classes of items ordered by the Australian Post Office. The objective in these models was to minimize total purchase costs where price and value discounts were present. Bender et al. (1985) described, but did not formulate, a mixed integer optimization model to minimize the sum of purchasing, transportation and inventory costs over multiple time periods. The model is constrained by vendor capacity and policy con- straints. Narasimhan and Stoynoff (1986) for- mulated a mixed integer optimization model to determine vendors and order quantities for multi- ple production plants. The objective in this model is to minimize the sum of total costs associated with transportation and inefficient utilization of vendor capacities. Constraints in the model ad- dress demand satisfaction, contract requirements and vendor capacities. Turner (1988) discussed a mixed integer optimization model used by British Coal for vendor selection. The objective in this model is to minimize total contract cost. Con- straints in this model address demand satisfaction, vendor capacities, minimum and maximum order quantities, and geographic region purchasing con- straints.
Two articles structured the vendor selection problem in terms of multi-objective mathematical
programming techniques. Buffa and Jackson (1983) formulated the problem as a goal program. Goals in the model addressed quality, price, and delivery criteria. Sharma et al. (1989) also for- mulated the problem as a goal program. Goals in the model addressed price, quality, lead time, de- mand and budget considerations. Given the multi-objective nature of the vendor selection problem, it appears this is a fruitful area for the development of additional multi-objective model- ing approaches.
The third category, statistical approaches, in- cludes three articles. Hinkle et al. (1969) used cluster analysis to generate vendor ratings. Ronen and Trietsch (1988) developed a stochastic EOQ model as part of a decision support system for purchasing of items for large projects. Soukup (1987) modified the linear weighting method by using probabilities for the criterion weights.
6. Summary and conclusions
The multi-objective nature of vendor selection has been well documented since Dickson (1966) ranked the importance placed on 23 criteria by purchasing agents and managers. In this article, we have reviewed 74 articles which address vendor selection criteria in manufacturing and retail en- vironments. Twenty-two of the 23 criteria ranked by Dickson were addressed in at least one of the articles. Forty-seven of the articles discussed more than one criteria.
Clearly, strategic management decisions effect the relative importance that the various criteria have in the vendor selection process. A recent trend in manufacturing strategy is the implemen- tation of the Just-In-Time (JIT) philosophy. Thir- teen of the articles reviewed were specifically re- lated to JIT manufacturing. All thirteen articles addressed the criteria of quality and delivery, eight of them mentioned net price, and six mentioned production facilities and capacity. These criteria ranked 1, 2, 5, and 6 in importance in the Dickson study. It is interesting to note, however, that geo- graphical location was addressed in seven of these articles, yet this criteria ranked twentieth on the Dickson list. Increased concern over the geo- graphical location of vendors is clearly one major change brought about by the implementation of
16 C.A. Weber et al. / Vendor selection criteria and methods
JIT strategies. Also, Dickson's third and fourth ranked criteria, performance history and warran- ties and claims policies, were not discussed in any of the JIT oriented articles. These changes in criteria importance brought about by JIT indicate that the impact of strategic management decisions on the vendor selection process appears to be a fruitful area for future research.
Given the complexity and economic impor- tance of vendor selection, it is somewhat surpris- ing how little attention has been paid in the litera- ture to the application of quantitative methods to vendor selection. In light of the multi-objective nature of this problem, it would appear that the application of multi-objective programming tech- niques is another fruitful area of research in the vendor selection process. Such techniques would allow purchasers to systematically examine the tradeoffs among the various criteria when select- ing specific vendors. Such analysis would enable purchasers to select the vendors who best satisfy the requirements necessary to implement manage- ment strategy.
Finally, the analysis of strategic decision-mak- ing in vendor selection is another important area for future research. Once solely considered an operational function within companies, many companies are now examining the purchasing function with a strategic orientation (Adamson, 1980; Sharma, 1989; Browning et al., 1983; Farmer, 1978; Spekman, 1981; Spekman and Hill, 1980). Decisions such as length of contracts, num- ber of vendors employed and location of vendors should be analyzed in light of their strategic impli- cations. Given the inherent multi-objective nature of vendor selection decisions and the financial importance of such decisions in highly competitive environments, it appears that multi-objective pro- gramming techniques could prove extremely use- ful in such strategic planning.
Appendix
Factors used in Dickson's study 1
(2) The ability of each vendor to meet quality specifications consistently.
(3) The repair service likely to be given by each vendor.
(4) The ability of each vendor to meet specified delivery schedules.
(5) The geographic location of each vendor. (6) The financial position and credit rating of
each vendor. (7) The production facilities and capacity of each
vendor. (8) The amount of past business that has been
done with each vendor. (9) The technical capability (including research
and development facilities) of each vendor. (10) The management and organization of each
vendor. (11) The future purchases each vendor will make
from your firm. (12) The communication system (with information
on progress data of orders) of each vendor. (13) The operational controls (including reporting,
quality control, and inventory control sys- tems) of each vendor.
(14) The position in the industry (including prod- uct leadership and reputation) of each vendor.
(15) The labor relations record of each vendor. (16) The attitude of each vendor toward your
organization. (17) The desire for your business shown by each
vendor. (18) The warranties and claims policies of each
vendor. (19) The ability of each vendor to meet your
packaging requirements for his product. (20) The impression made by each vendor in per-
sonal contacts with you. (21) The availability of training aids and educa-
tional courses in the use of the product of each vendor.
(22) Compliance or liklihood of compliance with your procedures (both bidding and operating) by each vendor.
(23) The performance history of each vendor.
(1) The net price (including discounts and freight charges) offered by each vendor. Acknowledgement
i See Dickson (1966).
The authors wish to express their gratitude to the National Association of Purchasing Managers
C.A. Weber et aL / Vendor selection criteria and methods 17
for partially funding this research under its Doc- toral Grant program.
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