A Decision Tool for Supplier Selection That Takes into Account Power and Performance

Liu, Yan (2017). A Decision Tool for Supplier Selection That Takes into Account Power and Performance. PhD thesis The Open University.

DOI: https://doi.org/10.21954/ou.ro.0000cdc2


Companies select their suppliers to provide required performance while being successful partners. An important aspect of collaboration is the power relationship between the company and its suppliers. Although the significance of power in supplier selection is acknowledged, published work rarely includes assessment of power. An empirical study on selecting suppliers for new product developments in a major European diesel engine manufacturing company, supported by three smaller studies with electronic engineering companies, frames overall questions regarding the importance of incorporating power into supplier selection and how this might be achieved.

This research proposes an approach that assesses both performance and power and integrates the assessment results by modelling the relative effects of power and performance. It positions the suppliers into six scenarios (ideal, satisfying, tolerable, unfavourable, risky and tough) which depict to what extent a supplier is ‘suitable’ to work with. A reverse analysis reviews the relationship when several suppliers appear suitable.

An assessment method is developed incorporating both subjective and objective data for qualitative and quantitative criteria. It combines two decision making methods, AHP and TOPSIS, with triangular fuzzy numbers. Multiple judgements from several decision makers are synthesised. This method is adapted for performance assessment of single, group and cross-group suppliers. Weights are calculated for the criteria, and combined with calculations of supplier performance against each criterion to provide an overall assessment and supplier profile. Power is quantified against a set of power determinants and power relations (supplier dominance, buyer dominance and balanced) are determined. The effects of supplier perceptions (objective, optimistic and pessimistic) are estimated in the calculation.

The proposed approach involves complex calculations and a prototype software tool is developed with graphical interfaces. The tool includes performance criteria and power determinants collected from literature and allows users to define new ones. Application to an agriculture case enables the sustainable performance of suppliers (farmers) to be evaluated and compared.

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