Supplier Selection Decisions In Systems/Software Purchases

Considerable attention has focused on purchasing in recent years as more managers have come to realize its potential for contributing to the firm's overall strategic success.[1] There has also been increasing emphasis placed on integration of functions within the firm prompting greater recognition of the role of purchasing.[2] Additionally, purchasing has gained visibility because of changing buyer-seller relationships. Traditional adversarial, short-term relationships are being replaced with longer-term partnerships. Numerous examples of partnership-like relationships have been documented.[3] With the trend toward closer relationships and fewer suppliers, it becomes critical that sellers fully understand buyers' decision processes.[4] Strategic purchasing, particularly if partnering arrangements are involved, demands a new perspective. A strategic approach to purchasing is likely to encompass a new set of criteria for supplier selection.[5] This article reports on some research which sought to explore this issue. Logistics executives were surveyed to gain an understanding of their perspectives regarding the relative importance of supplier selection criteria. Following a brief review of literature relating to supplier selection, the research methodology and the results of this empirical study are presented. SUPPLIER SELECTION Industrial buying behavior is generally believed to be affected by rational factors as well as subjective variables.[6] Rational factors include product-specific factors and company-specific factors (e.g., vendor attributes). Subjective variables include buyers' lifestyles, interests, activities, and personal values. The focus of the current study was rational factors influencing purchasing decisions. Although choice criteria used in supplier evaluation and selection vary across products and services and purchase situations,[7] previous research has identified similarities in purchase decisions.[8] Preference is generally considered to be a function of case-specific evaluations of quality, price, delivery, and service.[9] Price has historically been an important -- perhaps even the preeminent -- determinant of supplier selection. For example, consistent with the earlier work of Lehmann and O'Shaughnessy, Evans found price and reliable delivery to be the most important attributes in the purchase of routine products.[10] However, recent studies have discovered a shift away from price as a primary determinant of supplier selection.[11] In today's operating environment, price may be considered a given, i.e., it is assumed prices will be competitive. In fact, there is often little difference between suppliers' prices? Thus, in many instances, focus has shifted to product and/or service differentiation to gain advantage.[13] The set of relevant supplier selection criteria is believed to change over time reflecting business and competitive environments. For example, Ellram suggested that buyers involved in strategic partnerships supplement traditional selection criteria with a new set of selection criteria and termed those criteria "soft" factors. Soft factors cover issues including management compatibility, goal congruence, and the strategic direction of the supplier firm.[14] Because of the complex nature of the decision and the magnitude of the commitment involved, it is recommended that a range of attributes be considered when attempting to gauge the relative importance of supplier selection criteria.[15] The number and range of criteria should be determined based upon the product/service being evaluated. Research conducted by Dempsey examined 20 different vendor attributes.[16] While providing valuable insight into the decision process, such an approach may be overly complicated and present difficulties for respondents. Miller suggested that most buyers cannot simultaneously handle more than seven to nine factors when making a purchase decision? …