Supplier Selection and Evaluation in Small versus Large Electronics Firms

By Pearson, John N.; Ellram, Lisa M. | Journal of Small Business Management, October 1995 | Go to article overview
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Supplier Selection and Evaluation in Small versus Large Electronics Firms


Pearson, John N., Ellram, Lisa M., Journal of Small Business Management


The electronics industry is dynamic, growth-oriented, and a major contributor to the strength of the American economy in the evolving global competitive environment. Characterized by firms of various sizes working in a competitive and quickly changing environment, the electronics industry offers fertile ground for investigating changes that are currently taking place in small business management. One important domain of management is the selection and evaluation of suppliers. This article explores the techniques currently used to select and evaluate suppliers by studying a sample of small and large firms in the electronics industry.

GROWING IMPORTANCE OF SUPPLIER SELECTION AND EVALUATION

There are a number of reasons why the selection and evaluation of suppliers are more important today than they were in the recent past. With the current emphasis on supply base reduction and long-term supplier relationships, supplier selection and evaluation have become even more critical (Abegglen and Stalk, Jr. 1985). The increasing adoption of just-in-time (JIT) manufacturing practices has placed a new emphasis on supply base reduction, making the processes of the selection and evaluation of suppliers increasingly critical. Even many firms without a formal implementation of JIT manufacturing are in the process of supply base reduction (Emshwiller 1991). Supply base reduction involves a longer time commitment to suppliers on the part of buyers. This commitment usually brings greater interaction between the buyer and supplier which may lead to a sharing of resources. Resource sharing may involve training and development in an effort to improve quality, reduce costs, and emphasize continuous improvement in all areas of interaction (Watts and Hahn 1993). The strategy of involving suppliers early in the product design process is also contributing to the growing importance of the selection and evaluation process. This practice (also referred to as concurrent engineering) is recognized as a significant contributor to reducing costs and improving quality in the production cycle (Mendez and Pearson 1994). The development of advanced communication in information systems through electronic data interchange (EDI) is also facilitating the closer coordination and interaction between buyer and supplier, thus highlighting the importance of the selection and evaluation process. Finally, management has begun to recognize the importance of the purchasing/materials management activities of their firms and has decided to provide resources and commit themselves to the betterment of that aspect of the business (Tully 1995).

Supplier selection is widely considered to be one of the most important responsibilities of the purchasing function of management. An organization's suppliers directly affect the price, quality, delivery reliability, and availability of its products--all of which have a profound impact on customer satisfaction. Closely related to supplier selection is the ongoing management and evaluation of the supply base once the supplier has been chosen. The increase in importance affects small and large organizations alike.

RELEVANCE OF SIZE OF FIRM

Many research studies have examined the various management and manufacturing practices used by large firms. Unfortunately, there is much less research concerning these practices in small firms or concerning how the size of a firm might affect the application of these practices. Recent data indicate that small manufacturing firms are a vital part of the U.S. economy. Manufacturers with fewer than 250 employees currently account for approximately 96 percent of all manufacturing establishments in the U.S. and more than half of all U.S. manufacturing employees (U.S. Bureau of the Census 1992). Furthermore, trends indicate that small manufacturers are creating more new jobs while large manufacturers are downsizing and outsourcing. Watkins (1993) predicts that 61 percent of overall new job growth between now and the turn of the century will come from small business.

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