Procedural rationality in supplier selection

Abstract

Purpose The purpose of this paper is to present three heuristics for choosing supplier selection criteria. By considering the balance between the expected relative effort and benefit of using different selection criteria, the heuristics suggest which criteria should be prioritized. The heuristics serve to develop our understanding of the search and evaluation heuristics used in supplier selection and to facilitate further research. Design/methodology/approach The research is primarily theoretical, yet draws on empirical studies of supplier selection. The theoretical basis is Simon’s notion of procedural rationality (Simon, 1976). The author makes the general notion of procedural rationality more concrete for supplier selection by formally describing three heuristics for choosing selection criteria. The heuristics share the same logic but differ in terms of the precision of the input information required from the purchaser. The paper provides illustrations of the heuristics. Findings It appears that procedural rationality can be specified for the process of designing the supplier selection process by explicitly recognizing the cost and value of selection criteria. There is no one way of doing this, but at the most basic level, it requires an ordinal ranking of criteria. Already such a rudimentary, qualitative, assessment can help identifying suitable criteria. The heuristics developed appear compatible with established approaches for the subsequent selection of suppliers. Originality/value The paper addresses the early stage of supplier selection which has been largely ignored in the literature.

A Decision Support Tool for Supplier Evaluation and Selection

“…In spite of the existence of different models to represent the supplier selection process, there is a concordance between the stages identified. De Boer's model [4,50] contains four steps-problem definition, criteria formulation, qualification, and final choice-and has been a guide for a number of works [4,16,41,51]. Later, this model was complemented with more stages around three groups of decisions: previous analysis, supplier evaluation, and final decision (Figure 1).…”

“…Later, this model was complemented with more stages around three groups of decisions: previous analysis, supplier evaluation, and final decision (Figure 1). Previous analysis concerns the definition of requirements and strategy analysis, criteria selection and indicator development, and the compilation of a list of potential suppliers [51,52]. Supplier evaluation is an initial screening.…”

“…Then, the firm sends requests for proposals to those suppliers to obtain more information about them. This information allows the firm to use more criteria and to organize Previous analysis concerns the definition of requirements and strategy analysis, criteria selection and indicator development, and the compilation of a list of potential suppliers [51,52]. Supplier evaluation is an initial screening.…”

“…Then, the firm sends requests for proposals to those suppliers to obtain more information about them. This information allows the firm to use more criteria and to organize the candidates hierarchically [51]. The kind and number of criteria depend on the stage of the supplier selection process.…”

“…Firstly, an initial set of suppliers is evaluated through a limited number of main criteria; then, the number of suppliers is narrowed down and the analysis intensifies with the use of more criteria. Finally, after negotiations with the potential suppliers [51] and assessment of their performance [52], one supplier is selected. Then, a collaboration agreement is designed, as well as a procedure to analyze procurement and sourcing [16].…”