Purpose – The purpose of this paper is to investigate the supplier selection issue as a way to mitigate the overall supply risk, through the proposition of a new approach which is as practical as a total cost of ownership approach and, at the same time, a real support for the supplier selection as a decision making issue, rather than an additional constraint for the decision maker. Design/methodology/approach – A risk efficiency‐based supplier selection (REBaSS) approach is developed for critical supplies, that allows a decision maker to consider the procurement‐related “risk” and “investment” for mitigation/exploitation interventions. Findings – A present total cost profile (PTCP) related to every supplier to be assessed is portrayed, as a function of the possible investments that can be made to exploit the upside and to mitigate the downside supply risks. A criterion to prioritize interventions is provided, in order to unambiguously portray the PTCP. Guidelines for the PTCP comparison by a decision maker are also proposed. Research limitations/implications – The wide set of data needed can be a limitation when the available time to perform supplier selection is very short. Practical implications – The proposed REBaSS approach allows a decision maker to deal with a quantitative and economic evaluation of the potential suppliers. The decisions are not univocal because they depend on the risk proneness of the decision maker. Originality/value – The paper's view is that REBaSS is the only approach that explicitly takes into account the variability of the output of the supplier evaluation due to the different attitude of every supplier to make a planned mitigation intervention successful.
Management Decision – Emerald Publishing
Published: Jun 20, 2008
Keywords: Supplier relations; Decision making; Suppliers; Risk management
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