SUPPLIER EVALUATION IN A DYADIC RELATIONSHIP: AN ACTION RESEARCH APPROACH

Journal of Business Logistics, 2006 by Ross, Anthony, Buffa, Frank P, Dröge, Cornelia, Carrington, Donald

This article describes an Action Research (AR) framework applied to the supplier evaluation environment of a telecommunication company. Within this AR framework, data envelopment analysis (DEA) was used because the methodology can successfully delineate evaluation problems and then outline a desirable path. This leads management to continuously review and improve complex systems or processes. The DEA methodology coordinates the supplier evaluation inputs and reconciles what can be very diverse performance measures and even more diverse weights applied by evaluation team members. Finally, dyadic interdependence can be demonstrated by identifying the impact of changes in buyer performance attributes on each supplier's capacity to accommodate and adjust.

Key Words: Action Research; Data Envelopment Analysis; Dyadic Buyer-Supplier Relationship; Supplier Performance Evaluation

INTRODUCTION

The purpose of this article is to describe a Data Envelopment Analysis (DEA) methodology that buying firms can use to evaluate suppliers given a relational dyadic context. This DEA methodology fuses together both buyer and supplier performance attributes and provides measurable and actionable outputs. We present the DEA methodology as the core of a broader, iterative analytical framework - namely Action Research (AR). AR is used to emphasize the evolving nature of buyer-supplier relationship management within a strategic supply chain sourcing program.

Our first overall goal is to present an approach that enables a clearer understanding and incorporation of the mutual reciprocal needs and capabilities of buyers and suppliers in a relationship dyad. Such understanding becomes critical in view of shortened lead times and cycle times, pressure for improved quality and cost reduction, and lean processes (Carr and Pearson 1999; Cooper et al. 1997; De Toni and Nassimbeni 1999; Minahan 1999; Urioste 1999). Relationships between buyers and suppliers have received much attention during the last decade (Anderson, Hakansson, and Johnson 1994; Anderson and Narus 1990; Bowersox, Closs, and Stank 2000; McHugh, Humphreys, and McIvor 2003), and recent works emphasize that the buyer-supplier dyad is key to effective supply chain management (Chen and Paulraj 2004; Dyer and Singh 1998; Gadde and Hakansson 1994; Hahn, Watts, and Kim 1990). Thus the approach we propose focuses on the buyer-supplier dyad and provides a DEA methodology within an AR framework that integrates and analyzes the performance attributes of both dyad partners.

Our second overall goal is to present an approach for dyad performance evaluation that will yield, for the purpose of long term relationship management, actionable output for both buying and selling firms. Effective evaluation of dyad performance is a critical managerial function (Hartley, Zirger, and Kamath 1997; Stank, Goldsby, and Vickery 1999; Waters-Fuller 1995). But evaluation analysis is complex because it generally depends on a diverse set of input and output criteria that are quantitative, qualitative, and/or financial (Golicic et al. 2003; Rinehart et al. 2004; Weber and Desai 1996; Whipple, Frankel, and Daugherty 2002).

We begin by describing the AR framework and the firm/industry context within which we model buyer-supplier dyad performance evaluation. We then focus on the supplier evaluation problem by considering both buyer and supplier attributes. Next, we describe the DEA methodology and the diverse importance weights provided by the evaluation team members. Through iterative analysis, we demonstrate how team member importance weights and buyer performance attributes both affect the evaluation of suppliers. We conclude by discussing: (1) the contributions of this research to the performance evaluation of the buyer-supplier dyad; and (2) how this approach comprising DEA within an AR framework can be generalized to any buyer-supplier dyadic evaluation situation.

OVERVIEW OF THE ACTION RESEARCH PROCESS

The AR framework considers that complex social systems (like buyer-supplier dyads) are best studied as whole units where change can be introduced and its effects studied by a team of co-participants (such as researchers and managers). The approach is characterized by intervention experiments that operate on practical problems and assumes that observing the effects of change brings understanding. Applied in information systems research, AR has four distinguishable characteristics applicable to the study of the buyer-supplier dyads: (1) it emphasizes the complex and multivariate nature of the problem domain; (2) it simultaneously addresses solving of the practical problem (e.g., supplier evaluation) and expanding research knowledge (application of new approaches to the problem); (3) it is a collaborative effort between researchers and managers based on participatory observation; and (4) it is primarily applied to understand the effects of change (e.g., new methods of supplier evaluation in the buyer-supplier dyad). The ideal problem domains for AR are those where the researcher is actively involved, the knowledge can be immediately applied, and the research process links theory and practice (Baskerville and Wood-Harper 1996; Susman 1983; Susman and Evered 1978). We adapt the five phases of AR (Susman 1983; Susman and Evered 1978) to the problem of evaluating suppliers within the buyer-supplier dyad. For a more detailed explanation of the background of AR and its application in a business setting focused on information system problems, the reader should see Baskerville (1999).