Title: Speed versus reliability trade-offs in supplier selection

Authors: Jianli Hu, Charles L. Munson

Addresses: The George L. Argyros School of Business & Economics, Chapman University, One University Drive, Orange, CA, 92866, USA. ' Department of Management and Operations, Washington State University, P.O. Box 644736, Pullman, WA, 99164–4736, USA

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.

Keywords: purchasing; supplier selection; lead times; inventory; computational analysis; procurement management; supplier reliability; order fulfillment speed; purchase price; demand uncertainty; cycle service levels.

DOI: 10.1504/IJPM.2007.015364

International Journal of Procurement Management, 2007 Vol.1 No.1/2, pp.238 - 259

Published online: 10 Oct 2007 *

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