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Literature Review of Supplier Selection Criteria

Conference Paper · January 2014

DOI: 10.13140/2.1.1503.3924

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Literature Review of Supplier Selection Criteria Kar, A.K.

Literature Review of Supplier Selection Criteria

Arpan Kumar Kar

Assistant Professor, Indian Institute of Technology Delhi
Email id: arpan_kar@yahoo.co.in

Abstract: Supplier selection literature in procurement management has witnessed a plethora of

evaluation criteria, for selecting suppliers. This study prepares a list of all the generic supplier
selection criteria, which is prevalent in the existing purchasing literature. The objective of this study
is to facilitate an understanding of the different supplier evaluation criteria, which is present in the
existing literature, so that future methodological studies in the domain are facilitated by the usage
of the appropriate evaluation criteria.

This paper must be cited as follows: Kar, A.K. (2014). Literature Review of Supplier Selection Criteria.
Business Frontiers, 8(1), 1-110.

Keywords: Supplier Selection, Vendor Selection, Evaluation Criteria, Meta-analysis of literature,

literature review.

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Literature Review of Supplier Selection Criteria Kar, A.K.

1. Introduction

Effective management of the supply chain is a critical objective in manufacturing

firms. The vendor selection problem deals with issues related to the selection of right
vendors and subsequently, after selection, create a systematic approach of
allocating orders among the identified vendors. In fact, the importance of both intra-
firm relationships and governance through vendor management is well recognized in
purchasing literature. Vendors play an important role in achieving the objectives of
the supply management. Hence, identification and strategic partnership formulation
with the more suitable vendors should be integrated within the supply chain for
improving the performance in many directions including reducing costs by eliminating
wastages, continuously improving quality to achieve zero defects, improving
flexibility to meet the needs of the end-customers, reducing lead time at different
stages of the supply chain. No wonder that purchasing or procurement management
is such a high priority activity and there are so much of literature which has focused
on this domain.

2. Review of literature

Vendor selection is one of the classic and highly researched themes in purchasing
and outsourcing literature. In fact, reviews of literature in vendor selection indicate a
strong variety in the systemic approaches for selection (Ho, Xu and Dey, 2010) and
as well as in the evaluation criteria(Weber, Current and Benton, 1991). In this study,
the focus has been to identify the generic vendor evaluation criteria which are critical
in the iron and steel manufacturing industry and estimate their relative importance for
the purchasing practitioners. Some of the classic literature(Busch, 1962; Dickson,
1966) establishes that criteria like “quality”, “warranties” and “delivery schedule” are
critical evaluation factors amongst many others like “management capability”, “price”,
“production capability”, “financial position”, “labor relations”, “vendor reputation”,
“technical capability”, “post sales services” and multiple other relationship specific
attributes like “reciprocal arrangements” and “past business records”. Initially in the
pre-1990 era; most of the evaluation criteria were quantitative in nature. However in
the post-1990 era, qualitative criteria started getting popular in literature with the

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Literature Review of Supplier Selection Criteria Kar, A.K.

increasing maturity of the purchasing processes. Thus with the increased complexity,
it was realized that not all evaluation criteria could be quantitative and qualitative
dimensions, and it is further important to note that some of these criteria may be
tangible or even intangible (Cebi and Bayraktar, 2003; Saen, 2007). These qualitative
and intangible evaluation criteria should not be overlooked which can provide a more
holistic picture of individual vendor’s competencies and alignment with the buyer
firm’s requirements. Therefore, with the increased maturity of purchasing
management as a discipline and the onset of global sourcing trends, newer vendor
evaluation criteria like “trade restrictions”, “geographical location”, “total cost of
logistics”, “relationship”, “quality management systems”, “tariffs or customs duties”,
“culture”, “volume discounts”, “foreign exchange rates”, “capacity constraints,
“communication barriers”, “relative bargaining power” and “risk management” started
gaining prominence in vendor selection literature(Cusumano and Takeishi, 1991; Min,
1994; Choi and Hartley,1996; Meredith Smith,1999; Braglia and Petroni, 2000;
Ghodsypour and O’brien, 2001). Further, there are evidences of concerns
surrounding sustainability and the management of environment while deciding vendor
evaluation criteria like “social responsibility”, “environmental image”, environmental
costs” and “environmental factors” (Winn and Angell, 2000; Humphreys, Wong and
Chan, 2003; Cagno, Trucco and Tardini, 2005; Lee, Kang, Hsu, and Hung, 2009;
Jabbour and Jabbour, 2009)Also, with the adoption of information technology in
purchasing, new criteria for vendor selection started gaining importance like “e-
transaction capabilities”, “quality management systems”, “EDI capability” and
electronic transaction capability(Bottani and Rizzi, 2005; Talluri and Narasimhan,
2005; Chen and Huang, 2007). It is also important to note that studies have also
utilized multiple requirement specific evaluation criteria in case studies, which would
otherwise have very less generalizability across other firms or industries.

In fact different reviews of vendor selection literature (Ho, Xu and Dey, 2010; Weber,
Current and Benton, 1991)indicate that there have been over seventy-five generic
criteria which have been used across different purchasing contexts across industries,
as has been illustrated in Table 1.

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Literature Review of Supplier Selection Criteria Kar, A.K.

Snapshot of different vendor evaluation criteria used across literature

Product quality Delivery reliability Warranties
Exporting status Packaging capability Intellectual Property rights
Product pricing Production capability Technical capability
Management capability Vendor reputation Financial position
Labor relations Service quality experience Past business records
Reciprocal arrangements Cultural fitment Communication barriers
Inventory position Electronic data interchange Value-added productivity
Geographical distance Foreign exchange rates Trade tariffs
Acceptable parts per million Service design Order acknowledgements
Trade restrictions Buyer’s commitment E-Transaction capability
Documentation Design capability Supply variety
Rejection rate during inspection Dollar value of performance Purchase order stability
Lead time Indirect costs Response flexibility
Innovation Facility planning Safety adherence
Domain experience Exporting status Conflict resolution systems
Customs duties Product line diversity Intimacy of relationships
Quality management IT standards Cost reduction capability
Electrical capacity Judgment Response time
Total cost of acquisition Risk perception Certification and standards
Research and development Organizational culture Availability of parts
Sub-component pricing Regulatory compliance Self-audits
Rejection from customers Education level of personnel Receiving inspection
Billing accuracy Cost reduction performance Indirect costs
Data administration Improvement commitment Procedural compliance
Service quality credence Vendor’s commitment Skill level of staff
Table 1: Snapshot of vendor evaluation criteria used in literature
Now, if we start analyzing these vendor evaluation criteria, which are generic and
different, some degree of commonality of objectives can be identified in the usage,
though they are different defined in literature. Evaluation criteria like product pricing,
sub-component pricing, cost reduction performance and indirect costs are attempts to
capture different dimensions of total costs of acquisition of the purchased products or
commodities. Similarly, evaluation criteria like exporting status, foreign exchange

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Literature Review of Supplier Selection Criteria Kar, A.K.

rates and custom duties again are criteria which would address concerns when the
vendors are dispersed geographically, as in the context of international sourcing.
Again dimensions like product quality, receiving inspection, acceptable parts per
million, rejection rate during inspection, rejection from customers and supply variety
describe different dimensions of a vendor’s product. However, evaluation criteria like
quality management, receiving inspection, service quality credence, self audits,
procedural compliance, safety adherence, packaging capability, conflict resolution
systems, lead time and production capability are evaluation parameters from the
process perspective (Kar, 2015, Kar, 2014, Kar & Pani 2014a, Kar & Pani, 2014b, Kar
& Pani, 2014c, Kar et al, 2011; Kar, 2009; Kar & Dey, 2009; Pani & Kar, 2011a; Kar,
2013a, Kar, 2013b)

Similarly, there are evaluation dimensions like delivery reliability, warranties, delivery
reliability, response flexibility, billing accuracy, service quality credence, service
design, service quality experience and order acknowledgements which address
dimensions related to the services which are important dimensions of product or
commodity purchasing. Also, evaluation criteria like procedural compliance,
certification and standards and regulatory compliance address some of the industry
specific mandatory expectations from the vendors. Similarly, evaluation criteria like
intellectual property rights, research and development and innovation addresses the
incremental improvements made in the process and product dimensions through
innovations. Also, evaluation criteria like IT standards, documentation, data
administration and e-transaction capabilities address capabilities related to
information systems management. Again, there are evaluation parameters like
cultural fitment, vendor’s commitment, buyer’s commitment, intimacy of relationships,
past business records, volume discounts, reciprocal arrangements and improvement
commitment focus on the relation specific requirements and expectations from a
buyer and vendor partnership. Further, there are evaluation criteria like technical
capability, skill level of staff, educational level of personnel and design capability
which focus on the capabilities of the human resources available for the vendor within
its organization (Kar, 2012; Kar & Pani, 2012; Pani & Kar, 2011a; Pani & Kar, 2011b;
Pani & Kar, 2009)

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Literature Review of Supplier Selection Criteria Kar, A.K.

The presence of such a wide variety of evaluation criteria in purchasing management,

vendor selection and vendor prequalification literature makes it important to identify
the critical context specific yet generic evaluation criteria and prioritize them using a
systematic scientific approach based on their actual applicability for the practitioners.
This background provides the basic motivation for the current study to identify and
prioritize the critical evaluation criteria from the perspective of the practitioners.

3. Conclusion

The review of literature highlights that there are huge variety of supplier selection
criteria. However, only a few evaluation criteria has been consistently used across
studies. It appears that the divergence of criteria warrants difference of findings from
literature. There has to a larger focus on consolidating supplier evaluation criteria for
future studies so that key evaluation parameters may be identifiable which would be
generic across industries and also across different purchasing contexts.

Further the research brings out thought provoking ideas whether all this body of
literature would remain equally valuable if different evaluation criteria were used.
Would some studies need to be done away with or would produce very different
results and thus suffer from lack of replicability.

4. References

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selection in an e-procurement environment”, International Journal of Logistics:
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Braglia, M. and Petroni, A. (2000), “A quality-assurance oriented methodology for

handling trade-offs in supplier selection”, International Journal of Physical
Distribution and Logistics Management, Vol. 30, pp. 96 - 111.

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Literature Review of Supplier Selection Criteria Kar, A.K.

Busch, G. (1962), “New twist on supplier evaluation”, Journal of Purchasing, Vol. 55,
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Cagno, E., Trucco, P., and Tardini, L. (2005), “Cleaner production and profitability:
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Cebi, F., and Bayraktar, D. (2003),“An integrated approach for supplier

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Cusumano, M. A. and Takeishi, A. (1991), “Supplier relations and management: a

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Literature Review of Supplier Selection Criteria Kar, A.K.

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Literature Review of Supplier Selection Criteria Kar, A.K.

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 Literature Review of Supplier Selection Criteria Kar, A.K.

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