Efficient selection of suppliers over the internet

Anitesh Barua, Suryanarayanan Ravindran, Andrew B. Whinston

Research output: Contribution to journalArticle

47 Citations (Scopus)

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 languageEnglish (US)
Pages (from-to)117-137
Number of pages21
JournalJournal of Management Information Systems
Volume13
Issue number4
StatePublished - 1997
Externally publishedYes

Fingerprint

supplier
Internet
Costs
costs
evaluation
Communication
Electronic commerce
Websites
Analytical models
business relationship
electronic commerce
Buyers
Suppliers
World Wide Web
communication
indexing
Evaluation
Industry
efficiency
Selection process

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 journalArticle

Barua, Anitesh ; Ravindran, Suryanarayanan ; Whinston, Andrew B. / Efficient selection of suppliers over the internet. In: Journal of Management Information Systems. 1997 ; Vol. 13, No. 4. pp. 117-137.
@article{0ac6838cd8674ba1be81110f1ed03d9d,
title = "Efficient selection of suppliers over the internet",
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.",
keywords = "Bidding, Electronic shopping, Internet, Search mechanisms, Sequential evaluation, Supplier selection",
author = "Anitesh Barua and Suryanarayanan Ravindran and Whinston, {Andrew B.}",
year = "1997",
language = "English (US)",
volume = "13",
pages = "117--137",
journal = "Journal of Management Information Systems",
issn = "0742-1222",
publisher = "M.E. Sharpe Inc.",
number = "4",

}

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 -