Selecting the right suppliers remains a combination of analysis, art and fortune-telling.
There are many decision-making traps buyers can fall into: I’ve taken the following from JE Russo and PJH Schoemaker’s book Decision Traps: Ten Barriers to Brilliant Decision-Making and How to Overcome Them and applied them to a supply chain management context.
1. Group failure. Assuming that with many smart people involved, good choices will follow automatically, and therefore failing to manage the group decision-making process.
The performance of suppliers can have a far-reaching effect in a company. From high-level management to manufacturing, there are many different groups with a set of requirements for those suppliers. To ensure the suppliers that can best satisfy these needs are selected, decision-makers have to work with all those internal stakeholders. Most buyers are experienced and familiar with what everyone wants, but it is a mistake to assume cooperation will take place even if there’s a process for it.
2. Overconfidence in your judgement. Failing to collect key factual information because you are too sure of your assumptions and opinions.
This can appear in two ways in supplier selection. Buyers may assume they know what everyone in the company wants regarding the suppliers, or that they know how to evaluate suppliers of a particular type, relying on bits of information that have previously served them well.
In the end the overconfidence in judgement takes place because of habit and the absence of any impetus to change those habits.
Instead, buyers should be in constant communication with other groups in the company (such as manufacturing, marketing and higher management), to check if their assumptions should be amended. Being too sure of their assumptions – especially in dynamic markets – is a significant problem.
3. Shortsighted shortcuts. Relying inappropriately on rules of thumb, such as implicitly trusting the most readily available information, or taking too much heed of the most convenient facts.
This doesn’t happen because buyers are naïve and trust the readily available information or rules of thumb in decision making; it happens because it is very hard to do otherwise.
Information about potential suppliers is difficult to come by and with all the factors that can feed into selecting a ‘good’ supplier, it is only natural to rely on shortcuts. Vigilance and repeated examination of current practices is key.
4. Shooting from the hip. Believing you can keep straight in your head all the information you’ve discovered, and therefore deciding to ‘wing it’ rather than following a systematic procedure.
This is similar to the previous point, except it is applicable even in cases where the rules of thumb do work well. Even if the heuristics used make sense and are effective, there’s value in creating a system of evaluation.
5. Not keeping track. Assuming that experience will make its lessons available automatically and therefore failing to keep systematic records to track the results of your decisions and failing to analyse these in ways that reveal their key lessons.
This is one of the most common traps. The pace of the business world means most satisfactory decisions are never visited again or scrutinised. Decisions, and the rationale behind them, are usually questioned only when a crisis happens. Supplier development, however, relies on measurement and feedback. This requires constant evaluation of the decision criteria and monitoring of the results.
☛ Dr Cuneyt Altinoz is part of the faculty at Kaplan University, US. He teaches courses on supply chain management and decision analysis, and has worked for IBM, Ciba-Geigy and East Carolina University.