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International Journal of Innovation and Technology Management Vol. 2, No.

4 (2005) 391–409 c World Scientific Publishing Company

EMPIRICAL STUDY OF SUPPLIER SELECTION PRACTICES IN SUPPLY CHAIN MANAGEMENT IN MANUFACTURING COMPANIES
Int. J. Innovation Technol. Management 2005.02:391-409. Downloaded from www.worldscientific.com by 180.149.52.43 on 03/13/13. For personal use only.

DAN WANG∗ , YEZHUANG TIAN and YUNQUAN HU School of Management Harbin Institute of Technology Harbin, China ∗danwang@hit.edu.cn Received 30 March 2005 Revised 5 August 2005 Accepted 20 September 2005 Supply chain management has seen a wide application since the 1990s in satisfying diversified customer demands. To remain competitive on a global scale, manufacturing companies greatly increased the scope of their outsourcing activities. Consequently, supplier selection has become a highly prioritized activity with major significance to companies. Previous studies of supplier selection show that there are commonly accepted supplier selection criteria. However, there are insufficient studies on the association between the manufacturer’s criteria of supplier selection and why it wins orders from its customers. Studies on the differences of supplier selection criteria among manufacturers from different countries are insufficient either. Through empirical study this paper tries to find out the association between manufacturer’s criteria in supplier selection and how it wins orders. Considerations of supplier selection criteria in different national background are compared and the consistency of supplier selection criteria and competitive priority is analyzed. Keywords : Supplier selection; supply chain management; manufacturing company; International Manufacturing Strategy Survey (IMSS).

1. Introduction The increasingly fierce market competition has shortened the product life cycle, which have resulted in a sharp increase in costs and decrease in profits. This has imposed great pressure on manufacturers and impels them to adapt their business models and develop their core competencies. The traditional model of keeping large amount of stocks and making all the components within their own companies is no long suitable for the market condition. They begin to outsource many functions locally and internationally and keep in-house only those functions they have comparative advantage. Purchasing function has been taken by many managers as a key strategic tool in the firm’s attempt to achieve positional competitive advantage [Gustin, Daugerty and Ellinger (1997)]. How managers make purchasing decisions will inevitably impact organizational performance by affecting important activities including inventory management, production planning and control, cash
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52. have lower product quality and have a smaller proportion of acceptable long-term suppliers than organizations employing similar partnership practices but using more appropriate selection and monitoring practices. The paper is divided into six sections. For personal use only. Womack et al. Weber et al. J. Int. i. the survey instrument and the sample used in the study are described. the partnership model of supplier management [Dyer (1996). Management 2005. 4. it will have a lasting effect on the competitiveness of the entire supply chain [Choi and Hartley (1996)]. Previous studies show that there are commonly accepted criteria in supplier selection decisions. Wang. (1991). it is necessary to revisit this fundamental subject. Innovation Technol. on the impacts of cultures on such criteria and its association with the manufacturer’s competitive priorities. In Sec. It is believed that the Japanese model of partnership has guaranteed better performance because companies in the partnership can share more information and are better at coordinating dependent tasks [Harland (1996). Given the strategic significance of purchasing and supplier partnership to their operation and future development. Hu flow requirements and product/service quality [Narasimhan as quoted in Katsikeas (2004)]. 6. manufacturers give more emphasis on supplier selection and establishing and maintaining an effective and efficient supplier partnership.02:391-409. An empirical study is conducted by utilizing the data from International Manufacturing Strategy Survey (IMSS). The objective is to explore the influencing factors in supplier selection and how companies from different countries vary in supplier selection practices. Y. The research in this paper is focused on investigating the characteristics of supplier selection strategies. Therefore.392 D. (1990)].e. Supplier partnership has been considered as another way of developing companies’ core competencies since late 1980s and early 1990s.worldscientific. Section 3 introduces the framework of this study where hypotheses are put forward. Downloaded from www.com by 180.149. Ittner and his colleagues [1999] found that organizations making extensive use of supplier partnership practices without making use of appropriate supplier selection and monitoring practices earn significantly lower profits. Price [1996] also suggests that when a company and its supplier have built on long-term. Section 5 discusses the results of the hypotheses. a company’s supply chain creates one of the strongest barriers to entry for competitors. It also promotes investments in relationspecific assets in order to decrease cost. improve quality and expedite new product development [Dyer (1996)]. Section 2 offers a literature review on supplier selection. This can be attributed to the success of Japanese companies that have close relationships with their suppliers. Limitations of this survey are analyzed as well. Once a supplier becomes part of a well-managed and established supply chain. Dyer and Ouchi (1993)]. but insufficient attention has been paid on the consistency between the manufacturer’s criteria in selecting suppliers and the customer’s criteria in selecting manufacturers. A conclusion of the study is made in Sec. clan-like relationships. [2003b] indicate that selecting the right suppliers can significantly reduces purchasing costs and improves corporate competitiveness.43 on 03/13/13. Tian & Y. Choy et al. .

His research was based on a questionnaire sent to 273 purchasing agents and managers selected from the membership list of the National Association of Purchasing Managers. regular communication with the buying firm).43 on 03/13/13. delivery and performance history. Paparoidamis and Katsikea [2004] suggested that supplier performance in competitive pricing. The supplier selection literature can be categorized into two distinct topical areas: (1) the promulgation of various supplier selection tools.52. Management 2005.02:391-409. and flexibility (e. reliability (in delivery and product. The second category of research on supplier selection criteria will be the focus in our literature review as it is more related with the study of this paper. Innovation Technol. manufacturers become more dependent on suppliers. [1997] stressed the importance of supplier efficiency as one of the most highly rated purchasing criteria.com by 180.3%) responses were received. Katsikeas. and (2) research that attempts to determine the relative importance among the supplier selection criteria of quality. The criteria with extreme importance include quality. In some cases. the authors typically focused on methods to measure the criterion or ways to incorporate it into a larger vendor selection process and were not advocating the sole use of the criterion for vendor selection. The list included purchasing agents and managers from the United States and Canada. Manufacturers are aware of the need for a longterm interactive relationship with a vendor and the possession of such capabilities Int. [Dickson (1966). annotated and classified 74 related articles which have appeared in major journals written in English since Dickson’s study in 1966. Some of these researches are listed in Table 1. Verma and Pullman (1998)]. Since Weber and his colleagues’ work in 1991. J. the authors chose to look in detail at just one of the criteria. supplier selection becomes one of the most important activities of a company and a major research field. the supplier’s honesty. Most of the conceptual studies tend to identify supplier selection criteria from the technical. such as the analytic hierarchy process [Narasimhan (1983)] or performance indexes [Monczka and Trecha (1988)]. Gustin et al. Dickson classified them into four categories with varying importance from extreme importance and considerable importance to average importance and slight importance.Study of Supplier Selection Practices in Supply Chain Management 393 2. technological capability and service are a primary determinant of successful purchasing decision strategies. For personal use only. there have been a number of conceptual and empirical articles on supplier selection. many researchers have identified that important criteria vary by industry and buying situations. in one of the early works on supplier selection. They found that 22 of the 23 criteria ranked by Dickson were addressed in at least one of the articles. The extensive attention to certain criteria from researchers implies the importance of these criteria to the manufacturer as well as the researcher.149. cost. Consequently.g. delivery. In these cases. Literature Review Given the increasing significance of supply chain management and purchasing functions. A total of 170 (62. global and strategic perspectives. Downloaded from www. Current and Benton [1991] reviewed. Dickson [1966]. Weber. identifies over 23 different criteria that have been considered by purchasing managers in various supplier selection problems. Since his study. .worldscientific.

there are insufficient studies on the association between supplier selection criteria the manufacturer uses and how it wins orders from its customers or the association between the manufacturer’s . price Price & quality. culture.43 on 03/13/13. responsiveness to customer needs. consistency. The studies by Billesbach et al. quality and communication Finance.02:391-409. [1996] Ghodsypour. In an empirical study by Mummalaneni. Ghodsypour et al. However. Global Ellram [1990] Choi & Hartley [1996] Roodhooft & Konings [1996]. price Supplier’s supply history. Tian & Y. Hu Table 1. in spite of the large number of conceptual and empirical researches on supplier selection criteria and decision methods. [2001] Petroni & Braglia [2000] Supplier capacity in production planning Joint development. reliability. Wang. output. Apart from Dickson’s empirical study.H. technical ability and transportation cost Quality. [1998] Hong. lead time). on-time delivery.) Price. HR (design involvement. Empirical articles try to find out the most important criteria for purchasing managers when selecting suppliers.worldscientific. cost. delivery speed. [1993] Wei. Downloaded from www. Some researchers focus on the purchasing managers’ preference from the cultural perspective. delivery Competitive pricing. [1997] Krause et al. flexibility. which are: Quality. technological capability. forward engineering. customer service. trust. quality.Y. S. [1991] indicate that in spite of considerable similarities between them. logistical performance (reliability. product price.com by 180. et al. Tagaras & Lee [1996]. J.394 D. the preference of Chinese purchasing managers in supplier selection is studied. et al. supply chain management. quantity. other researches suggest that managers perceive quality to be the most important supplier attributes [Verma and Pullman (1998)]. customer satisfaction Strategic Briggs [1994] Choi.149. Innovation Technol. culture. et al. management ability. relationship with supplier and the professionalism of the salesperson. Focuses Technical Authors Chao et al. flexibility. relationship. T. supply lot. technological capability. et al. [2003] Katsikeas. purchasing practices in the US and the UK also exhibit subtle differences that need to be understood by marketers. Ellram [1996]. et al. service Future manufacturing capacity The closeness of the relation and continuous improvement capabilities Total cost analysis Int. services. revenue maximization. [2001] Lee. Dubas and Chao [1996]. reliability. delivery. reliability. etc. Management 2005. innovation Quality.52. [2005] by the supplier is essential for the manufacturer’s attempt to gain competitive advantage. Mu-Seong. For personal use only. delivery. price. Supplier selection criteria from different perspectives. et al. [2004] Criteria Quality. Y. The result presented in their study indicates the relative importance of various attributes to purchasing managers from China. price. flexibility.

The widespread discussions and insufficient empirical evidence on supplier selection considerations and practices lead to our three research questions: (1) Is there any relationship between the manufacturer’s supplier selection criteria and priority in selecting suppliers and its customer’s considerations in placing orders? (2) Is there any difference among manufacturers from different countries in making supplier selection decision? If there does exist difference. The intensive global competition among manufactures to co-ordinate with and respond quickly the industry value chain from suppliers to customers has made relationship management between the manufacturer and their suppliers an important task in the new era. Customer’s criteria Supplier selection criteria Competitive priorities Cultural and economic background Fig. what is it? (3) Is there any association between the manufacturer’s supplier selection criteria and competitive priorities? 3. 1 incorporates four variables: Supplier selection criteria the manufacturer uses. such as competitive environment. For personal use only. Studies on the differences of supplier selection criteria among manufacturers from different countries are insufficient either. Choy and Lee [2003a] have noted that there exists an interesting and satisfying symmetry between the role of CRM (customer relationship management) and SRM Int. competitive priorities. and cultural and economic background the manufacturer operates. The Framework The proposed model in Fig. cultural and economic environment. it is compulsory for the manufacturer to adapt their overall and operations strategies to the environment if it is to survive or achieve sustainable development in the marketplace. etc.43 on 03/13/13. To forge competitive advantage. The model posits that the manufacturer’s supplier selection criteria are consistent or impacted by the latter three variables.worldscientific. Therefore. The proposed model is based on the premise that all manufacturers are subject to the external environment.02:391-409. 1. J. Innovation Technol. The conceptual framework.Study of Supplier Selection Practices in Supply Chain Management 395 supplier selection criteria and competitive priorities.149. .com by 180. the customer’s criteria in selecting the manufacturers. Downloaded from www.52. Management 2005. the manufacturer needs to incorporate its customer’s need and preference in selecting a manufacturer into its own supplier selection strategies. Supplier selection as the starting point in the supply chain is one of the most important functions in supplier relationship management (SRM) and is of great significance to the success of supply chain management.

Management 2005.396 D. Therefore. Swamidass and Newell (1987)]. Competitive priorities refer to the dimensions of manufacturing strategy or the content of manufacturing strategy [Fine and Hax (1985). Companies need to adjust their strategies according to the political.com by 180. Cusumano and Takeishi (1991). The competitive strategy refers to the basis on which the company can achieve and maintain a competitive advantage through differentiation. the priority of supplier selection criteria may vary. economic. 2. Downloaded from www. (supplier relationship management). cost leadership. Cultural backgrounds and the economic development situation have particular impacts on the overall and operations strategies of the company. Fig. (1991).52. Wang. . forge a close relationship with the customer and consequently winning out in the competition. As a result. Y.149. Hypothesis 1: The manufacturer’s supplier selection criteria are in consistency with its customer’s consideration in selecting manufacturers. it is hypothesized that manufacturers from different countries may have different considerations in making supplier selection decisions and therefore. Tian & Y. Mummalaneni et al. (1996)]. These impacts are naturally shown in supplier selection practices. Hypothesis 2: The priority of supplier selection criteria varies among manufacturers from different countries. It is an acknowledged fact that companies are subject to the external environment where they operate in. and response [Miller and Roth (1994)]. It is the competitive strategy that guides the choice and development of competitive priorities and specifies how the operations function provides a manufacturer with a competitive advantage in the marketplace. Therefore. companies from different countries have different considerations in making supplier selection [Billesbach et al. Skinner [1974] first suggested that the choice of competitive priorities includes cost. Innovation Technol. Simplified model of a supply chain. it is hypothesized that the criteria of supplier selection of a company are consistent with its customer’s consideration in selecting manufacturers. Another of the manufacturer’s considerations in supplier selection is the alignment of the company’s competitive strategy to the competitive environment.worldscientific. This hypothesis can be illustrated with the simplified model of a supply chain in Fig. social and technological environments.43 on 03/13/13. 2. For personal use only.02:391-409. Knowing and responding to the customers’ preference and demands and tuning them into supplier selection practices can facilitate the manufacturer to better satisfy the customer. J. Hu Consistent Selection criteria Supplier Materials & components Manufacturer Selection criteria Customer Product Int.

supplier selection. Mexico. manufacturers have to adjust their strategies Int. improving and fostering performance and competitiveness of the company.52. The survey instrument The data used in the empirical study comes from the International Manufacturing Strategy Survey (IMSS). Argentina. particularly in the third round of the survey. China. about 80 questions are on supply chain management. The second round of the survey was conducted during 1996–1997 and gathered observations from 703 companies in 18 countries. delivery. Downloaded from www. This idea has also been incorporated into IMSS questionnaire with regard to supplier selection criteria.43 on 03/13/13.149. In the questionnaire. British. Methodology 4. Japan. USA. The survey questionnaire consists of four parts: (1) Strategies. Data collection for the third round finished in the middle of 2003. Innovation Technol.02:391-409. Shin.e. is usually taken as a premise of achieving strategic purchasing objectives.e. the works of Dickson [1966]. and flexibility. Therefore. the design of questions on supply chain management was based on past literature and published surveys. Up till now. Among the total 400 plus questions in the questionnaire. The first round of IMSS covered 600 companies in 20 countries. and (4) manufacturing performance. is of great strategic significance to the manufacturing industry. i. the starting point of the purchasing function. The purpose of this survey was to explore and identify the strategies and practices utilized by manufacturing companies around the world. It is thus hypothesized that the competitive priorities are reflected in the manufacturer’s criteria of supplier selection.Study of Supplier Selection Practices in Supply Chain Management 397 quality. Management 2005. For personal use only. three rounds of survey have been accomplished.e. (2) current manufacturing and integration practices. Machinery and Equipments. Weber. This provides a sufficient database for the research. . There are also some 160 questions that are indirectly related. Supply chain management. Other studies [Hill (2000). Germany. the International Standard Industry Classification (ISIC) 38. (3) past and planned manufacturing activities. as an important and effective way in reducing production cost. With the changing competitive and market environment. The participant companies are from the manufacturing industry within the Division of Fabricated Metal Products. IMSS is an international research network consisting of 20 countries and 600 companies around the world. objectives and costs. i. To address supplier selection practices. Given the increasing importance of purchasing in a company’s strategic and operations management. which was initiated by London Business School and Chalmers University of Technology in 1992. 4. Current and Benton [1991] was used as references in building up the supplier selection criteria. this survey makes supply chain management practices an important part. including developed countries. J. Collier and Wilson [2000] note that improved supplier performance has a direct and positive impact on quality and delivery-related buyer performance. i. Hypothesis 3: The criteria of supplier selection are a reflection of the competitive priorities.worldscientific. and developing countries. Wheelwright and Bowen (1996)] have since added various dimensions of competitive priorities such as service and innovation.com by 180.1.

com by 180. As strategic management decisions impact every area of a manufacturer. Management 2005. Such criteria include: Evaluation of supplier potential and willingness to disclose cost/other information. non-response bias could conceivably exist given the response rate of 35%. The sample The research reported in this paper is based on the data from the third round of IMSS survey (hereinafter referred to as IMSS 2003). Although some phone calls have been made to encourage non-respondents. accordingly.6. Wang. be re-examined in compliance with such decisions. Hu Int. In addition. Therefore. The total sample size is 558. which contains some 400 questions. therefore. Tian & Y.3. Data collection methods varied from country to country. the length of the survey questionnaire. J. 4.1 of this paper. it is beneficial to the establishment of a closer relationship or partnership. Likert five-point rating scale is used for most of the items in the survey. sample selection was at the coordinators’ convenience. In those countries where English is not used. Phone contact was followed in most of the participating countries. 4. the criteria for making subsequent operational decisions must. The criterion of “evaluation of supplier potential” mainly examine the situation whether the supplier has a development plan and what their past performance records are. and others used random sampling. Participating countries sent their data to the coordinator who forwarded the final database to all participants. the questionnaire was translated into local native languages.149. 4. new criteria are included to incorporate the changing external environment and changes in companies’ strategies. have definitely discouraged the achievement of a higher response rate. Sharing cost and other information on production and management reduces suspicion of opportunistic behaviors [Jap (2001)] from both parties and thus. Y. Such evaluation can give the manufacturer an idea about whether the supplier is an appropriate and trustworthy partner in future cooperation. except for the Netherlands. The questionnaires were forwarded to participating companies via mailing. The informants of the questionnaires include general managers or high-rank operations executives in the industries mentioned in Sec. Limitations The sample selection in some countries is at the coordinator’s convenience instead of random sampling. Innovation Technol.02:391-409. The criterion of “willingness to disclose cost and/or other information” is used to examine the supplier’s willingness to cooperate. For personal use only. Supplier selection naturally needs new criteria and/or a re-emphasis of exiting criteria to incorporate new strategic directions. The number of samples for each scale item is well above 500 with Cronbach coefficient over 0.worldscientific. In some countries. The sample profiles for 17 participating countries are presented in Table 2. with the average return rate exceeding 35%.52.2.398 D. Downloaded from www. fax or on-site interview. where 1 indicates the least important and 5 the most important. Translation work was done by participants from the corresponding countries who have a good command of English. The rationale of adding these two criteria in supplier selection considerations is the increasing importance of supplier relationship management and supplier partnership. .43 on 03/13/13.

51 9. ability to provide innovation and co-design.27 6. Variables of the manufacturer winning orders include product design and quality. Downloaded from www.75 2.worldscientific. Management 2005. delivery performance and price bid are important variables.27 5.02:391-409. the environment and knowledge of the responding person. willingness to disclose cost and/or other information. Average size (Number of employees) 281 253 381 579 1227 560 397 1194 545 377 671 207 161 664 645 546 5705 399 Country Argentina Australia Belgium Brazil China Croatia Denmark Germany Hungary Ireland Italy Netherlands Norway Spain Sweden United Kingdom USA Total Sample size 14 40 19 35 30 35 38 32 58 32 60 14 51 20 19 47 14 558 Distribution across countries (%) 2. providing great order size flexibility and offering environmentally sound products.58 3. Other variables are the manufacturer’s abilities to provide a wider product range. The actual method of collecting the data. delivery performance. and possible translating problems could result in uncertainty in such an international survey. Results and Discussion 5.42 2.51 100 Int. J. storage and handling. offering newer products more frequently.149.52. However. legal/contractual terms and evaluation of supplier potential are other criteria the manufacturer uses in supplier selection. physical proximity. 5. Evaluation of supplier potential mainly considers the situation if the supplier has a specific development program and how good their past performance records are. Hypothesis 1 Variables of the manufacturer winning orders from its customers and those of the manufacturer selecting suppliers are adopted to testify their consistency.13 3.41 6.81 5.4 5. The means and standard deviation of each group of criteria are analyzed with results shown respectively in Tables 3 and 4.Study of Supplier Selection Practices in Supply Chain Management Table 2.com by 180. Logistic costs include those costs occurred in transportation.73 10. Innovation Technol.38 6. For personal use only.43 on 03/13/13. the rich database as a counter-value is quite useable in empirical analyses.41 8. Logistic costs. superior service and lower selling price.73 10. . With regards to the manufacturer’s criteria of supplier selection.1.52 7. quality. Sample profile for participant countries.17 3.

Lee and Lo (2002)].44 3. faster and more reliable delivery. Only when the ranking of the manufacturer’s criteria in selecting suppliers is in consistency with those of the customer can the manufacturer win the order.43 on 03/13/13. Management 2005.com by 180. The ability to offer new products more frequently facilitates . Table 4. Criteria of supplier selection — order of priority. Sample size Quality of products/services Delivery performance Price bid Evaluation of supplier potential Logistic costs Ability to provide innovation and co-design Willingness to disclose cost/other info.099 1. Y.066 1. Downloaded from www. The top two priorities of the manufacturer’s in supplier selection are quality and delivery followed by price bid and evaluation of supplier potential. Incorporating the customers’ criteria in selecting manufacturers into the manufacturer’s supplier selection criteria enhances the manufacturer’s capabilities in satisfying the customers’ demand and forges its competitive advantage over its competitor.092 1.961 1.862 1.02:391-409. The manufacturer’s abilities to offer greater order size flexibility. J. Innovation Technol. the customer’s demands are considerably uncertain and diversified. Factors facilitate winning orders — order of priority.worldscientific.93 Standard deviation 0.025 1.85 Standard deviation 0.32 3. This result is similar with the findings by Mummalaneni and his colleagues [1996]. The result is easy to understand because at a competitive marketplace.218 1.52. superior customer service and lower selling prices.868 0.041 0. Physical proximity/within region Legal/contractual terms 532 536 529 515 516 518 517 521 513 Mean 4.649 0. Therefore.93 2. This is because in a highly competitive market.04 2. Tian & Y.90 3.74 3.705 0.174 Int.941 1.149. Wang.34 3.35 3. For personal use only.45 4. the way to succeed is to study and satisfy customers’ need and preference. The manufacturer’s criteria of selecting suppliers are in consistent with its customer’s consideration in selecting manufacturers.80 3.153 1.20 2.084 1.04 3.15 3.87 2.007 1. Sample size Product design and quality Delivery performance Superior customer service Lower selling price Greater order size flexibility A wider product range More frequent newer products Environmentally sound products 528 535 518 537 519 513 518 502 Mean 4.094 The results of the survey show that the manufacturer obtains orders from their customers because it excels their competitors in offering better product design and product quality.22 4. satisfying their demands requires the manufacturer to be more flexible in order size and products ranges. Hu Table 3. a wider product range and newer products more frequently than their competitors are also important factors in winning orders. This is particularly true since late 1990s when customer relationship management (CRM) is becoming more and more important in the competitive environment [Choy.400 D.

Data from IMSS 2003 on manufacturers’ criteria in supplier selection are used to analyze the differences in the rankings of these criteria. logistic costs. Suppliers with great potential of development and excellent past performance records are usually preferred because they can help the manufacturer to get a sufficiently flexible production volume with good quality and reliable delivery.2. Management 2005. Hypothesis 2 Five countries are chosen from different parts of the world to analyze whether manufacturers from different national and cultural backgrounds have different considerations in supplier selection.134.Study of Supplier Selection Practices in Supply Chain Management 401 Int. The chi-square statistic of the manufacturer’s criteria of supplier selection is 13. However. it does not indicate that quality is not as important for them as for the first three countries. The chi-square statistic of the customer’s consideration in selecting manufacturers is 13. higher than that of Australian and the US manufacturers.05.05. These countries are Australia from Oceania. 5. Chi-square analysis is conducted to test the statistical significance of the association between the manufacturer’s criteria of supplier selection and customer’s consideration in selecting manufacturers. Reliable suppliers with great potential of development can thus facilitate the manufacturer to forge competitive advantage over its competitors. legal/contractual terms and evaluation of supplier potential. “Willingness to disclose cost/other information” is taken as a least important criterion by manufacturers from all the five countries with only minor differences in that .com by 180. Germany from West Europe. The top one priority for manufacturers in China. willingness to disclose cost and/or other information. The result illustrates that manufacturers from all the five countries are taking quality of products and/or service offer and delivery performance as the top two priorities when selecting suppliers.149. quality of products/services offered. evaluation of supplier potential is also of great importance. the manufacturer to meet the customer’s needs better. China from Asia.50. Norway from North Europe and the United States from North America. The descriptive statistics are shown in Table 5. This can be explained by the means of quality. Innovation Technol.52. well above the significance level of 0.682 and asymptotic significance is 0. physical proximity/within region. are both equal to or well above 4. delivery performance. J. the manufacturer not only considers quality. Only when the manufacturer excels in these aspects can they win out in the competition. The variables BSC21 to BSC29 respectively stand for criteria of lowest price bid. Downloaded from www.worldscientific. which. whereas it is just the opposite for manufacturers in Germany and Norway.995 and the asymptotic significance is 0. also well above the significance level of 0. ability to provide innovation and co-design.083. When selecting suppliers. it should be noted that even though manufacturers in the latter two countries consider quality less important than to delivery performance. US and Australia is quality followed by delivery performance. delivery performance and prices that suppliers offer. for German and Norwegian manufacturers. For personal use only. Hypothesis 1 is proved and conclusion can be drawn that the manufacture’s criteria of supplier selection are in consistency with its customer’s consideration in selecting manufacturers.43 on 03/13/13.02:391-409. As analyzed above.

93 1.616 2 4.com by 180.60 0.767 4 3. Germany Rank Mean S.72 1.08 0.143 8 2.33 0.78 1.65 0.567 (7)∗ 3. Norway Rank Mean S.02:391-409. US Rank Mean S.20 0.099 1 4.167 2 4.43 on 03/13/13.497 2 4.03 0.149.47 1.834 5 3.worldscientific.D.032 3 3.646 1 4. For personal use only. Criteria of supplier selection — order of priority comparison.84 0.978 9 2.D.43 0.57 0.28 1.284 Country Variables D.79 0.16 8.973 6 2.043 7 2.16 0.21 1.77 0.693 4 3.13 1.765 9 2. Tian & Y. Hu Australia Rank Mean S.944 7 2.043 9 3.606 1 4.43 1.27 0.68 0. China Rank Mean S.008 2 4.82 0.87 1.86 1. J.D.498 2 4.13 1.619 4 3.14 1.975 1 4.86 1.50 0.887 9 3. Management 2005. BSC21 3 3.Int.036 (3) 3.699 1 4.36 0. Note: Figures in brackets indicate greater difference from others.86 0.074 4 3.850 3 4.53 0. 402 Table 5.947 9 2.173 (4) 3. Y.106 5 3.63 1.058 8 2.909 8 3.52.D.61 0. Innovation Technol.D.49 0.663 6 2.900 BSC22 BSC23 BSC24 BSC25 BSC26 BSC27 BSC28 BSC29 5 3.13 1. .96 1. Downloaded from www.69 0.995 6 3.866 7 2.64 1.54 0.86 1. Wang.992 7 3.08 0.36 0.036 8 2.21 0.008 6 2.756 5 2.103 6 3.058 (3) 3.167 5 3.504 8 3.

it can also be attributed to their social and cultural backgrounds where people value. These objectives include quality. German and Chinese manufacturers.149. For the Chinese manufacturer. social and cultural backgrounds. product variety. The above analysis also shows that there are greater differences in priorities of supplier selection criteria between China and the other four countries than among the latter four. Germany and Norway. [2001] suggest that operations strategies are composed of choices along the . volume flexibility and cost [Sharma et al.52. This is because supplier partnership is given greater attention to by manufacturers as a means of improving their competitiveness. But on the other hand. Management 2005. especially for Chinese and US manufacturers. (the Chinese name for relationship) is even more important than other criteria.02:391-409. relationship. It is interesting to note that for companies in Australia. Chinese manufactures need to reduce the uncertainty resulted from Guanxi and get protected by means of legal and/or contractual terms. Other differences can be traced from the ranking of priorities by Australian. to a great extent. and the US Lower labor cost in China can explain this phenomenon. Norway.43 on 03/13/13. Downloaded from www. This finding has been noted by Mummalaneni et al. manufacturers from different countries have different considerations in supplier selection while they also share some similarities. logistic costs are less important for Chinese manufacturers than for manufacturers from Australia.Study of Supplier Selection Practices in Supply Chain Management 403 manufacturers in Australia and China take it as second least important criteria in supplier selection. Guanxi can make business partners trust each other and facilitate business transactions. which in turn determines the objective of a manufacturing company.worldscientific. or guanxi. Therefore. Innovation Technol. [1996]. The criterion of “evaluation of supplier potential” is also taken as an important consideration by manufacturers. (2003)]. To sum up. the friendly and reliable relationship with their business partners. This is because the other four are developed western countries and they have more in common in their economic. J. Therefore.com by 180. it may also bring along uncertainty. In some situations. price bid is the third important criteria in selecting suppliers while it only ranks the fifth by Chinese manufacturers. The German manufacturers put “ability to provide innovation and co-design” as the fourth important criterion while manufacturers from the other countries put this criterion in the 6th or 7th place. Krause et al.3. Hypothesis 2 that the priority differences of supplier selection criteria vary among manufacturers from different countries is partially supported by the empirical study. It indicates that German companies give sufficient emphasis on innovation in their operation and they require their suppliers be innovative and able to participate in design activities. delivery. That explains why legal/contractual terms are one of the prioritized considerations in selecting suppliers by Chinese manufacturers. 5. Similarly. Int. while China is more distinctive from them in these aspects though the differences are decreasing with the global economic integration. Hypothesis 3 Competitive environment determines the corporate strategy. For personal use only.

025 1.649 0. Delivery. Hill (2000)]. descriptive analysis is performed to classify the degree of importance of these supplier selection criteria at the more recent time frame. Both elements are fundamental for the manufacturer to become competitive in the marketplace.93 2. Wheelwright and Bowen (1996).066 1. For personal use only. This tendency is the consequences of economic and technical changes. The results of both analyses are shown in Table 6.941 1.149. cost.02:391-409. These objectives and considerations have been reflected in the criteria of supplier selection.com by 180. Tian & Y. Management 2005. (2003)].45 4. speed and flexibility) are taken as the most important factors considered in selecting suppliers by manufacturers.worldscientific. Comparatively. Hu Table 6. The above result shows that the quality of product/service and delivery performance (including delivery reliability. Sample size Standard deviation 0. Since the 1980s. These increased opportunities bring with them fiercer competition at both domestic and international markets. time-based competition has emerged as the winning strategy.44 3. Improved facilities for international communications. cost is not as important as the above two elements. Innovation Technol.092 1. Based on the data from IMSS 2003.705 0. Quality of products/services Delivery performance Price bid Evaluation of supplier potential Logistic costs Ability to provide innovation and co-design Willingness to disclose cost/other information Physical proximity/within region Legal/contractual terms 532 536 529 515 516 518 517 521 513 Slight important competitive priorities to support the overall operational mission and business strategy.961 1. Supplier selection criteria — Degree of importance.041 0. (1992)]. Downloaded from www. It also holds true with logistic cost.404 D. Wang. service and innovation are also important competitive priorities noted by researchers [Skinner (1974).04 2. .87 2. transportation and logistics offer wider scope than ever before for globalization of business. The development and construction of Boeing-777 is a successful example in this aspect [Pearce II and Robinson.094 Mean 4. Purchasing function has been viewed as a “pattern of decisions related to acquiring required materials and services to support operations activities that are consistent with the overall corporate competitive strategy” [Watts et al. quality as a competitive priority has helped companies win orders in the marketplace [Dilworth (1993)].85 Evaluation Extreme important Considerable important Average important Int.15 3. Whether the supplier has the ability to provide innovation and co-design and whether he is willing to disclose cost and other information are becoming more important than before when manufacturer-supplier partnership has great impact on the company’s performance and establishment of competitive advantage. Jr. J. Physical proximity of the supplier is taken as less important to manufacturers.34 3.52. flexibility. More recently. Supplier selection as a significant part of the purchasing function becomes a natural reflection of the company’s competitive strategy and competitive priority.43 on 03/13/13. Y.80 3.

(2005)]. most companies made the majority of their purchases from domestic or regional markets and only from abroad when there is a lack of local availability or when there are significant purchase price advantages. Conclusion This study analyzes the characteristics of the manufacturer’s practice in supplier selection and the relationship between the manufacturer and their supplier from the supply chain perspective.43 on 03/13/13. This has resulted in the availability of a large number of qualified suppliers who can satisfy customers’ requirements [Choy et al. Downloaded from www. Traditionally. Innovation Technol. The emergence and widespread use of the Internet allows the search of suppliers from the smallest company to largest corporations on a global base. 6. J. price advantage and so on [Helper (1991)]. These developments are in turn leading companies towards the procurement of materials and components from foreign sources to improve their competitive performance. This situation can be attributed to their corresponding cultural influences and economic environments.worldscientific. thereby creating synergies between them. . Hypothesis 3 is supported by the empirical study with IMSS 2003 database. This empirical study has found that manufacturers from different countries have different priorities with regard to the supplier selection criteria. the priority of supplier selection criteria may vary.52. A conclusion can be drawn that the supplier selection criteria are a reflection of the competitive priority. The empirical study also shows that the supplier selection criteria are the reflection of competitive priority of the manufacturer. Do supplier selection criteria that the manufacturer uses have any impacts on its performance? Do these criteria have any impacts on supplier partnership? Do highly profitable manufacturers have different considerations in supplier selection from those unprofitable ones? Future research will be needed to address these issues.02:391-409. manufacturers from different countries have different considerations in making supplier selection decisions and therefore. Now international or global purchasing is viewed as a strategic weapon in the quest for improved performance and profitability through greater availability.149.Study of Supplier Selection Practices in Supply Chain Management 405 Int.com by 180. (2) Due to the cultural and economic backgrounds. For personal use only. (3) The manufacturer’s supplier selection criteria are a reflection of the competitive priority. enhance technology. Management 2005. The results of the study reveal the following: (1) The manufacturer’s supplier selection criteria are in consistency with its customer’s consideration in selecting manufacturers. Whether the supplier is willing to disclose cost and/or other information is a criterion that the manufacturer would consider in selecting suppliers because it makes it possible for both parties to share strategic planning and production information and utilizing each other’s expertise in product and process design. There are some future issues to be considered. Based on the variables extracted from the IMSS 2003 database. this study has empirically verified the relationship between the competitive advantage of the manufacturer in winning orders and his criteria in selecting suppliers.

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(1998). International Journal of Purchasing and Materials Management. Harvard Business Review. M. H. D. Skinner. Z. Womack. For personal use only. Linking purchasing to corporate competitive strategy. 5. Verma.. She teaches undergraduate and graduate courses in organizational behavior and business planning. 26. M. D. 1: 2–18. 96: 97–102. Relating objectives to manufacturing decisions in dynamic environments: Implications of an exploratory study of Indian and German manufacturing firms. Management Science. Journal of Operations Management. environmental uncertainty and performance: A path analytic model. 1: 59–77.worldscientific. and Benton. Downloaded from www. Collier. Supply management orientation and supplier/buyer performance. (1990). P.02:391-409. C. He was a visiting professor in the Department of Industrial Engineering at the University of Wisconsin during 1987 to 1989. A. Roodhooft. She received her Master degree in business administration from Brisbane Graduate School of Business at Queensland University of Technology. Management 2005. 4: 2–8. K. 4: 509–524. W. A. Wang. Shrotriya. (2000). IEEE International Conference on Intelligent Processing Systems. . and Behera. The focused factory. Yezhuang Tian is a professor of human resources management of the School of Management at Harbin Institute of Technology. Biography Dan Wang is an associate professor of organizational theory of the School of Management at Harbin Institute of Technology. Manufacturing strategy. 5–6: 472–491.. K. 3: 113–121. (1992). Wheelwright.408 D. International Journal of Manufacturing Technology and Management. W. 52. He received his Bachelor degree of Psychology in Hangzhou University.52. P. Australia and is currently pursuing her PhD in Harbin Institute of Technology. Economic models for vendor evaluation with quality cost analysis. Vendor selection and evaluation. (1991). A. (2003). He teaches undergraduate and graduate courses in human resources management and innovation management. R. An analysis of the supplier selection process. Y. T. Current. Sharma. F. He has published several books and dozens of papers in these fields in journals and at international conferences. His research interests are in HRM and manufacturing strategies. J. Swamidass. R. 33. A supplier-selecting system using a neural network. 6: 739–750. Kim. European Journal of Operational Research. J. Wei. Yunquan Hu is a professor of operational research in the School of Management at Harbin Institute of Technology. A. Production and Operations Management. Management Science. 5. C.. W.. S. (1997). A. (1996). 42. October. J. Master and PhD in management of engineering from the School of Management at Harbin Institute of Technology. K. R. Y. and Wilson. S. Weber. The Machines that Changed the World. (1996). H. 50. 18: 317–333. S. Hu Int. D. Jones. and Konings. D. J. C. and Hahn. C. D. Shin. Her research interests are in organizational theory and supply chain management. and Pullman. E. R. The challenge of competitive advantage. and Roos. Harper.. She has published dozens of papers in these fields in journals and at international conferences. (1996). and Li. (1987). 28.43 on 03/13/13. An activity based costing approach. G. Tagaras. Innovation Technol. and Newell. and Lee. C. T.. Tian & Y. J. L. 111: 1531–1542. Watts. Vendor selection criteria and methods. European Journal of Operational Research. and Bowen.149. Omega International Journal of Management Science. Zhang. New York. (1974).com by 180. China.

02:391-409. Int.52.worldscientific.149. He has published four textbooks in these fields which are very popular among university students in China. Innovation Technol. For personal use only.43 on 03/13/13. J. . Downloaded from www.Study of Supplier Selection Practices in Supply Chain Management 409 He teaches undergraduate and graduate courses in operational research and quantitative methodology in management decisions. His research interests are in transportation and application of economics and management. Management 2005. He has published over a hundred papers in these fields in journals and at international conferences.com by 180.