Understanding trade-offs in the supplier selection process: The role of flexibility, delivery, and value-added services/support

Abstract

In this study, we present, based on econometric choice modeling framework, how manufacturing managers/executives trade-off between cost, delivery, flexibility, and service features in the supplier selection process for commodity raw materials, given acceptable quality. Empirical data for this study was collected from manufacturing organizations in Europe (Germany, France, Italy, and UK) 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 a “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.