The supplier selection problem is of vital importance for operation of every firm because the solution of this problem can directly and substantially affect costs and quality. Indeed, for many organizations effective supplier evaluation and purchasing processes are critical success factors. A great deal of research has been conducted todetermine what criteria should be used to evaluate suppliers. In practice, any set of criteria must be considered in light of real-life constraints, making the supplier selection a complicated decision problem that involves balancing many tradeoffs and satisfying conflicting desiderata.
From a decision support system perspective, the research on the supplier selection problem can be divided into two parts. First, multi-attribute decision making models that give grades to suppliers on a set of criteria, and then use a weighting scheme to arrive at a supplier score. Second, mathematical programming techniques that model the constraints and an objective function to select the optimal supplier. The grading method is easy and intuitive but remains simplistic in that it does not consider any constraints explicitly. On the other hand, mathematical program-ming methods accommodate both constraints and supplier selection criteria, but must make restrictive assumptions to reduce inordinate complexity. As such, supplier selection criteria play an integral role in both approaches.
In this paper we considered the criteria for supplier selection reported in the literature. Specifically, we re-examined the criteria reported in the seminal work of Dickson (1966) and provided an update based on reviewing more than 110 research papers. Our study indicated significant change in the relative importance of various critical success factors in the research reported during 1966-1990 versus 1990-2001. Increased competition and globaliza-tion of markets facilitated by Internet-based technologies have combined to dramatically change the ranking of factors while introducing new criteria to the supplier selection process. Based on the results of this study, it seems appropriate to conclude that supplier selection criteria will continue to change based on an expanded definition of excellence to include traditional aspects of performance (quality, delivery, price, service) in addition to non-traditional, evolving ones (JIT communication, process improvement, supply chain management).
We also expect further erosion of the ranking of price (the number one vendor selection criterion in the research prior to ours) in future research on the supplier selection problem. Purchasing via the Internet has transformed the processes of buying, selling, and supplier selection. For commodity markets, including high-tech parts and products, electronic auctioning is not only challenging price, but also inducing a profound change in the way purchasing managers work with suppliers. Transparent and rigorously-defined criteria in an electronic auction open up established sourcing relationships to determined, underdog suppliers, and lead to pricing bandwidths heretofore unthinkable in conventional negotiation processes. Because such price reductions in supplies is ultimately passed to customers, eProcurement will drive competitiveness throughout the global supply chain allowing factors other than price to assume greater importance in the supplier selection problem.