Speed versus reliability trade-offs in supplier selection Online publication date: Wed, 10-Oct-2007
by Jianli Hu, Charles L. Munson
International Journal of Procurement Management (IJPM), Vol. 1, No. 1/2, 2007
Abstract: In many industries, order fulfillment speed is the most important competitive weapon for manufacturers. As such, supplier reliability and speed are crucial factors for success. In this paper, we explore the trade-offs among reliability, speed and price when selecting suppliers. We compare the costs of four types of suppliers categorised by their lead time and reliability characteristics: (1) slow and unreliable, (2) slow and reliable, (3) fast and unreliable, and (4) fast and reliable. Analytically, we perform a series of pairwise comparisons of these supplier types under both deterministic and stochastic demand environments. We follow that up with numerical sensitivity analysis that suggests when each of the four may become dominant based on changes in purchase price, demand uncertainty and required cycle service level. Finally, we suggest implications from this research for buyers and suppliers and for firms interested in pursuing tailored dual-sourcing strategies.
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