Heuristic processes in individual supplier selection Workin-progress paper

The aim of the author is to explore the heuristic steps individual decision-makers make in their supplier selection decisions. All the steps, that are in some way deviations from the ideal of formal rationality are considered as heuristic: the emergence of cognitive heuristics (Tversky – Kahneman, 1974; Gigerenzer, 2004), the use of other simplifying rules and the use of heuristic decision strategies (Bettman et al, 1991). The paper builds on the tradition of bounded rationality theory (Simon, 1972), and from its followers chooses the fast-and-frugal approach (Gigerenzer, 2004) as dominant. This means, that the focus is not on the biases, but on the potential in heuristics. There is an agreement about heuristics that these tools of the human mind are effective and fast, but the focus is not always on the positive outcomes. After dealing with theoretical discussions on heuristics, the author is addressing also the attitude of the decision makers themselves towards the use of heuristics: how do they feel about deviating from deep analysis, from exhausting decision making strategies? The paper is in a way conceptual, but a research project and its results are also presented. The research is qualitative, conducted with a constructivist grounded theory approach (Glaser – Strauss, 1967; Charmaz, 2003). Qualitative interviews are used to generate and gather information about supplier selection decision processes of individuals. Observing group processes could be easier through analysis of the dialogs, but in the case of observing heuristical and other cognitive processes it could be difficult to distinguish these from group dynamics effects. Within the interview the retrospective verbal protocol analysis is used (Payne et al, 1978). Decision-makers in small and medium sized enterprises are interviewed, as this is the enterprise size where there is no, or weak supplier selection regulation. The first findings show that decision-makers have their sets of heuristical rules, for example threshold values, metarational rules, heuristical strategies and others. They deviate from the unreachable ideal of formal rationality by using noncompensatory decision strategies and other simplifications. The usage of these tools is not seen as irrational, because their perception of rationality differs from the academic formal rationality ideal. What seems very important, is the adaptivity. Decision-makers solve a vast number of decision tasks, with different products and services, in different situations, in different supplier-buyer relationships. These and other contingency factors are handled by using different decision tools, strategies in the process. This is in concordance with the notion of ecological rationality: in different buying situations different tools are successful. This is why the the research addresses the question of adaptivity as well. The question of adaptivity interesting, because the process of tool selection from the „adaptive toolbox” is not examined by the fastand-frugal research program. The paper contributes to the literature of supplier selection: there are few studies, which enrich this literature by empirical analysis of heuristic, fast decision making in this field. It also contributes to the heuristics and biases literature: the usage of these tools is predominantly observed and analyzed in experimental situations. By analyzing real-world decision processes in supplier selection, this research enriches the results of both fields. There are further questions raised by the research which are presented in the paper.