An exploration of supplier selection practices across the supply chain

Abstract

The US auto industry has undergone tremendous changes during the past decade. Companies have increased their level of out‐sourcing and are relying more heavily on their supply chain as a source of their competitive advantage. Thus, determining which suppliers to include in the supplier chain has become a key strategic consideration. However, previous studies of supplier selection have not considered a company's position in the supply chain. In this paper, we compare supplier‐selection practices based on a survey of companies at different levels in the auto industry. Our findings rebut the common thinking that indirect suppliers who are more involved in commodity purchasing emphasize initial price and de‐emphasize relational considerations. We learned that selecting suppliers based on the potential for a cooperative, long‐term relationship is just as important to direct and indirect suppliers as it is to the auto assemblers. We also learned that price is one of the least important selection items, regardless of position on the supply chain. Further, contrary to the existing understanding that quality and delivery are separate constructs, they formed a single construct in our study. To summarize the empirical results, no differences among the auto assemblers, direct suppliers, and indirect suppliers were found for the importance placed on consistency (quality and delivery), reliability, relationship, flexibility, price, and service. Statistically significant differences were found between the auto assemblers and indirect suppliers on the importance placed on technological capability and financial issues.