Development of Supplier Evaluation and Selection Framework Bases on Theory of Constraint

Abstract

Supplier evaluation and selection is one of the key activities within supplier chain management. It is also viewed as one of the critical decision in supply chain management in order for organization to stay ahead of competition. The rapid change on business development and market demand had altered the supplier evaluation and selection criteria from time to time. The common supplier evaluation and selection criteria proposed by prior researchers are Cost, Quality, Delivery, Flexibility, Responsive and Technology. However, most of the frameworks proposed by prior researchers view supplier evaluation and selection as one off process. In addition, supplier evaluation and selection criteria were defined holistically without explore and categorize the important selection criteria bases on organizations competitive strategy (i.e., differentiation, cost leadership or response). As such, this paper argues that the definitive supplier selection criteria and framework should be driven by the organizations competitive strategy. Hence, this paper proposes a new supplier evaluation and selection framework that explore the impacts of each supplier evaluation and selection criterion toward organization competitive strategy. In addition, the framework adopts the concept of Theory of Constraint which views supplier evaluation as continuous improvement process with the ultimate objective to identify limitation for each competitive strategy, follows by exploiting and removing the limitation.