Abstract
The Internet has become increasingly important to organizations for certain aspects of electronic commerce. Many organizations have set up Web pages to capture the attention of potential buyers and to develop new business relationships. Others have set up indexing services to provide easy search capabilities to prospective buyers. While the unit search and communication costs have been lowered dramatically by the Internet, the cost of evaluating potential suppliers may still be prohibitive, especially for certain types of products and services. Thus, although the Internet makes it possible to locate a large number of new suppliers, an organizational buyer needs to deploy appropriate supplier-selection strategies (such as sequential evaluation with stopping rules versus bidding systems) that consider all cost elements involved in choosing a vendor. We develop an analytical model that allows a buyer to maximize payoff (net of supplier search, communication, and evaluation costs) from the selection process. We analyze how the nature of the product and the buyer's expectations about supplier characteristics determine whether a sequential evaluation or bidding should be used in the selection process. The Internet, when used in conjunction with the proposed strategies, results in a lower total expected cost to the buyer, even though more suppliers are being evaluated, because a better supplier is selected. We describe how intelligent database searching can further increase the efficiency of the proposed selection strategies. We also develop a minimum requirements announcement mechanism, which makes supplier selection through a bidding strategy economically feasible in situations where legal restrictions may bar the use of sequential evaluation.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 117-137 |
| Number of pages | 21 |
| Journal | Journal of Management Information Systems |
| Volume | 13 |
| Issue number | 4 |
| State | Published - 1997 |
| Externally published | Yes |
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Keywords
- Bidding
- Electronic shopping
- Internet
- Search mechanisms
- Sequential evaluation
- Supplier selection
ASJC Scopus subject areas
- Information Systems
- Management Information Systems
- Library and Information Sciences
- Management of Technology and Innovation
- Strategy and Management
Cite this
Efficient selection of suppliers over the internet. / Barua, Anitesh; Ravindran, Suryanarayanan; Whinston, Andrew B.
In: Journal of Management Information Systems, Vol. 13, No. 4, 1997, p. 117-137.Research output: Contribution to journal › Article
}
TY - JOUR
T1 - Efficient selection of suppliers over the internet
AU - Barua, Anitesh
AU - Ravindran, Suryanarayanan
AU - Whinston, Andrew B.
PY - 1997
Y1 - 1997
N2 - The Internet has become increasingly important to organizations for certain aspects of electronic commerce. Many organizations have set up Web pages to capture the attention of potential buyers and to develop new business relationships. Others have set up indexing services to provide easy search capabilities to prospective buyers. While the unit search and communication costs have been lowered dramatically by the Internet, the cost of evaluating potential suppliers may still be prohibitive, especially for certain types of products and services. Thus, although the Internet makes it possible to locate a large number of new suppliers, an organizational buyer needs to deploy appropriate supplier-selection strategies (such as sequential evaluation with stopping rules versus bidding systems) that consider all cost elements involved in choosing a vendor. We develop an analytical model that allows a buyer to maximize payoff (net of supplier search, communication, and evaluation costs) from the selection process. We analyze how the nature of the product and the buyer's expectations about supplier characteristics determine whether a sequential evaluation or bidding should be used in the selection process. The Internet, when used in conjunction with the proposed strategies, results in a lower total expected cost to the buyer, even though more suppliers are being evaluated, because a better supplier is selected. We describe how intelligent database searching can further increase the efficiency of the proposed selection strategies. We also develop a minimum requirements announcement mechanism, which makes supplier selection through a bidding strategy economically feasible in situations where legal restrictions may bar the use of sequential evaluation.
AB - The Internet has become increasingly important to organizations for certain aspects of electronic commerce. Many organizations have set up Web pages to capture the attention of potential buyers and to develop new business relationships. Others have set up indexing services to provide easy search capabilities to prospective buyers. While the unit search and communication costs have been lowered dramatically by the Internet, the cost of evaluating potential suppliers may still be prohibitive, especially for certain types of products and services. Thus, although the Internet makes it possible to locate a large number of new suppliers, an organizational buyer needs to deploy appropriate supplier-selection strategies (such as sequential evaluation with stopping rules versus bidding systems) that consider all cost elements involved in choosing a vendor. We develop an analytical model that allows a buyer to maximize payoff (net of supplier search, communication, and evaluation costs) from the selection process. We analyze how the nature of the product and the buyer's expectations about supplier characteristics determine whether a sequential evaluation or bidding should be used in the selection process. The Internet, when used in conjunction with the proposed strategies, results in a lower total expected cost to the buyer, even though more suppliers are being evaluated, because a better supplier is selected. We describe how intelligent database searching can further increase the efficiency of the proposed selection strategies. We also develop a minimum requirements announcement mechanism, which makes supplier selection through a bidding strategy economically feasible in situations where legal restrictions may bar the use of sequential evaluation.
KW - Bidding
KW - Electronic shopping
KW - Internet
KW - Search mechanisms
KW - Sequential evaluation
KW - Supplier selection
UR - http://www.scopus.com/inward/record.url?scp=0031288369&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=0031288369&partnerID=8YFLogxK
M3 - Article
VL - 13
SP - 117
EP - 137
JO - Journal of Management Information Systems
JF - Journal of Management Information Systems
SN - 0742-1222
IS - 4
ER -