How do managers actually choose suppliers? Evidence from revealed preference data

Hayk Manucharyan ()
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Hayk Manucharyan: Faculty of Economic Sciences, University of Warsaw

No 2020-12, Working Papers from Faculty of Economic Sciences, University of Warsaw

Abstract: Supplier selection plays a pivotal role in the success of any organization as it significantly reduces purchasing costs and increases corporate competitiveness. At the same time, it is a very challenging task as decision-makers have to tradeoff among different supplier attributes. In this paper, a discrete choice model of supplier selection is developed, based on revealed preference data collected from an electrical equipment manufacturer in Poland. We explore the importance of different attributes for the initial choice and subsequent switching of suppliers. The proposed logit model is proceeded by a nonparametric analysis conducted through the Chi-square Automatic Interaction Detector (CHAID) framework, which serves exploratory purposes. We find that delivery and reliability play a crucial role in decision-making with regards to choosing suppliers and switching them if necessary.

Keywords: supplier selection; purchasing; supply chain management; revealed preferences; discrete choice analysis; logit model; CHAID prediction model (search for similar items in EconPapers)
JEL-codes: C01 C44 D22 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2020
New Economics Papers: this item is included in nep-dcm
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Persistent link: https://EconPapers.repec.org/RePEc:war:wpaper:2020-12

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