Supplier Selection and its Influence on Organizational Performance
Added on 2021-05-31
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Literature review 1LITERATURE REVIEW ON SUPPLIER SELECTION AND ITS INFLUENCE ONORGANIZATION PERFORMANCE Presented byStudent affiliationSupervisor16th, May 2018
Literature review 2LITERATURE REVIEWConcept of suppler selection Suppliers are firms and individuals providing goods and services for organizations at certain price. Their identification and engagement in work performance depends on supplier evaluation process. Deng, Hu, Deng & Mahadevan (2014, p.158) define ‘supplier selection as a process of assessing suppliers performance in order put them in a supplier base lists or award them contracts.’ A number of models and techniques are used to make assessments of suppliers. The authors further outline a carter model of using 10’c to evaluate supplier’s performance. The 10’c include; competency, capacity, character, capital, clean, collateral, consistency, cash, cost, control and culture. Suppliers are evaluated on the basis of the criteria in which the highest is awarded the contract. Rajesh & Ravi (2015, p.348) state that ‘supplier form a critical component in production process of any organization it is then critical for organizations to identify and select suitable suppliers who can perform efficiently and effectively.’ The suitable criteria’s of suppliers that is relevant to organization performance during selection process is capacity, product delivery, price and informational assessments. In many organizations the process of selecting suppliers is done annually, or in real time, and it is performed by a committee representing organizational needs. Each supplier is given equal chance to present their own performance in a supplier evaluation process. A marking criterion is put in place and all suppliers submitting request work performance are subjected to an interview process. Even though their certain models used in evaluating suppliers it is difficult to ignore external or internal forces. Rajesh & Ravi (2015, p.350) argue that ‘in other cases the supplier evaluation is influenced directly or indirectly with organizational environmental factors within and outside. Such influence is established to have positively or negatively affected the supplier evaluation process. Studies have pointed that effective supplier evaluation is not an easy endeavor because it requires structured goals and policies to be implemented. Concept of organization performanceHogan & Coote (2014, p.1609) defines organization performance as ‘improvement of a firm’s productivity, profitability, growth and market share in certain period of time.’ Financial analysts state that organization performance is mainly analyzed using performances emanating from the
Literature review 3market, shareholder value, production capacity, and financial performance. Increase in market share through growth can be a measure of organization performance. Financial performance is through profits and improved capital based from the operations while production capacity represents work performance in terms of how much produce is channeled out. ‘Organizations are able to establish their performance by making assessments of the factors influencing performance (Igarashi, de Boer & Michelsen 2015 p.443).’ The two authors state further that organizations can improve their performance if only they ensure their procedures are performed effectively and efficiently. In relation to the study organization performance is presumed to increase if proper methods and techniques are employed in evaluating suppliers. Supplier evaluation and organization performance Sarkis & Dhavale (2015 p.179) in a case study review on supplier selection for sustainable operations found that organization productivity in terms of brands and reputations increases if supplier evaluation is done well. The study conducted by the authors noted further that customersbecome loyal to certain brands increasing revenue for the respective organizations. Hogan & Coote (2014, p.1611) in there study stated that supplier evaluations creates value by involving and collaborating with suppliers evaluation process. The evaluation process creates a marking scheme in which suppliers can correct their performance. Based on culture one of the carter’s criteria of supplier evaluation, suppliers would be chosen on the basis they promote or possess culture similar to that of the organization. The mentioned studies provide empirical facts on how supplier selection can lead to building reputations and image but they lack empirical facts to directly link with organization performance metrics. Supplier evaluation process enables organization to identify and work with suitable vendors thus it reduces risks and disruptions in the production process. There are several risks that are associated with supplier selection and performance. Examples of such risks are supplier refusal to supply, supplying non-quality items, inconsistency in supplies, and changes in pricing. Winter & Lasch (2016 p.645) mentions that if suitable suppliers are selected based on previous performance, character and consistency it enables productivity not to stop and reduces risk of losing opportunities. Studies have shown that flow of materials is important in measuring organization productivity. Firms with consistent productivity are firms who do not lack supply ofinputs and raw materials. Hogan & Coote (2014, p.1612) supports further the argument by
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