Procedural rationality in supplier selection

Abstract

Purpose The purpose of this paper is to present three heuristics for choosing supplier selection criteria. By considering the balance between the expected relative effort and benefit of using different selection criteria, the heuristics suggest which criteria should be prioritized. The heuristics serve to develop our understanding of the search and evaluation heuristics used in supplier selection and to facilitate further research. Design/methodology/approach The research is primarily theoretical, yet draws on empirical studies of supplier selection. The theoretical basis is Simon’s notion of procedural rationality (Simon, 1976). The author makes the general notion of procedural rationality more concrete for supplier selection by formally describing three heuristics for choosing selection criteria. The heuristics share the same logic but differ in terms of the precision of the input information required from the purchaser. The paper provides illustrations of the heuristics. Findings It appears that procedural rationality can be specified for the process of designing the supplier selection process by explicitly recognizing the cost and value of selection criteria. There is no one way of doing this, but at the most basic level, it requires an ordinal ranking of criteria. Already such a rudimentary, qualitative, assessment can help identifying suitable criteria. The heuristics developed appear compatible with established approaches for the subsequent selection of suppliers. Originality/value The paper addresses the early stage of supplier selection which has been largely ignored in the literature.