A Performance Evaluation Model for Supply Chain Sourcing

ABSTRACT

There has been substantial conceptual and empirical study by researchers on the development of supplier evaluation models. Dickson [2] first formalized the study of supplier evaluation by compiling a set of 23 criteria used by practitioners to evaluate and select suppliers. Since this initial survey based research, numerous quantitative models have been developed for evaluating supplier performance and have been reported in the purchasing, logistics, and operations management literature. Reviews of supplier evaluation models reported in the literature are found in [7], [4], and [1].

In today’s globally competitive environment, the reduction of risk and uncertainty in the supply chain is a key strategic objective of supply chain managers. Key components supporting this strategic orientation involve customer service initiatives product availability, and response time [6]. Each of these three components is directly impacted by the performance of the supplier base within the supply chain. Hence, effective supplier evaluation represents a fundamental requirement for the success of a supply chain.

Recent research on supply chain delivery performance has investigated the ability of a supply chain to meet the delivery requirements of its end customer(s) using the modeling construct of a delivery window (see for example, [3], [5]). A gap exists in the supply chain literature in that these recently developed supply chain delivery performance models have not been linked and integrated to the supplier evaluation and selection decision environment. In this paper, we are presenting a supplier evaluation model that links delivery performance in the supply chain with respect to a delivery window with the evaluation and selection of top spend suppliers. The model presented is probabilistic and is based on the multinomial probability density function. We provide maximum likelihood estimates to parameterize the model and illustrate the model based using on a real world data set of delivery performance data.