A model for performance monitoring of suppliers

Abstract

The purchasing function is central to the strategic operations of e ective supply chain management. This centrality is mainly due to the signi®cant impact of material costs on pro®ts, increased investments in inter-organizational advanced manufacturing and information technologies, and a growing emphasis on the just-in-time operations philosophy. The critical business processes of the purchasing function include supplier selection, negotiation of supply contracts, monitoring supplier performance, and acting as an interface between an organization and its suppliers. Within these core processes of purchasing, this paper narrows its scope to focus upon the supplier performance evaluation and monitoring process, which assists in maintaining e ective customer±supplier linkages. While price has been traditionally considered as the single most important factor in evaluating suppliers, it has been agreed upon that value performance emphasis needs to include other important factors such as quality, delivery and¯exibility. Given this evolving business competitiveness environment, the contribution of this research is threefold. First, it applies a new multi-criteria evaluation model for supplier performance evaluation by considering various performance criteria. Second, a proposed application extension of this model serves as a monitoring and control mechanism for the performance of suppliers, thus supporting continuous process improvement to achieve e cient customer±supplier relationships. Third, the paper presents this technique as a new methodological extension to data envelopment analysis research by improving the discriminatory power of an existing variable returns to scale model. The model and its application are demonstrated through a previously published illustrative case example.

Supplier Selection through Application of DEA

“…Using the same evaluating factors proposed by Talluri and Baker (2002), DEA was used to measure the supplier performance by Talluri and Sarkis (2002) and showed that the model works. Talluri and Narasimhan (2004) used DEA for effective sourcing and proposed a model using cross efficiencies and statistical methods in clustering the supply base.…”

An Approach of Purchasing Decision Support in Healthcare Supply Chain Management

“…Content analysis of literature shows about fourteen out of seventy-eight articles (17.95%) applied DEA in the supplier selection process (Ho et al 2010). DEA approaches are used to measure the suppliers performance (Talluri & Sarkis, 2002;Garfamy, 2006;Saen, 2007), and to evaluate and to select suppliers (Narasimhan, et al, 2001;Seydel, 2006;Wu et al, 2007). Among 78 journal articles 11.54% formulate the supplier selection problem as various type of mathematical programming models such as linear programming (Talluri & Narasimhan, 2003;Ng, 2008), integer liner programming (Talluri, 2002;Hong et al 2005), goal programming (Karpak et al 2001), and multi-objective programming (Narasimhan, et al, 2006;Wadha & Ravindran, 2007, Keramydas, Xanthopoulos, & Aidonis, 2011.…”

Supplier selection and business process improvement

“…The critical business processes of the supply function of an organization include supplier selection, negotiation of supply contracts, monitoring supplier performance and acting as an interface between an organization and its suppliers (Talluri & Sarkis 2002) as well as supplier development. Within these core processes of sourcing, this study narrows its scope to focus upon the supplier selection process, which assists in maintaining effective buyer-supplier linkages.…”