Supplier Selection Criteria...

For many years selecting suppliers based on a cost criterion has been a traditional approach. However, while trying to respond to a volatile customer demand in today`s market and improving customer satisfaction, it is not sufficient to select suppliers solely based on a price. Therefore, in order to achieve an advantage in today`s highly competitive environment it is necessary to use more comprehensive multi-criteria approach while selecting an appropriate set of suppliers. This means that today companies should rely not only on a quantitative criterion but also intangible factors. It is easy for companies to evaluate suppliers based on quantitative criteria however it is mostly difficult to cope with the evaluation of intangible criteria. Successful supplier selection decisions are mainly dependent on companies` ability of quantifying intangible criteria which usually becomes a challenge. Intangible factors should be quantified and evaluated with the participation of not only the purchasing responsible but also cross-functional team. There are various methods of quantifying intangible criteria for evaluating suppliers in practice. Evaluating suppliers based on intangible factors is usually achieved through common decision by distributing relative weights to the selected intangible criteria on a decision analysis spreadsheet. Overall, the cost criterion and intangible factors are equally important in successful supplier selection, therefore it necessities the involvement and integration of different multiple criteria decision techniques.