Associated Technologies: An Analysis of Supplier Evaluation
Published on: Jan, 24, 2011
Given the variety of services and products that the economy provides, companies have varying needs for technological assistance with the supplier evaluation function. The functions of supplier evaluation technologies can be examined in three major categorical areas of assistance:
- time performance
Since the advent of computers and telecommunications networks, companies have been working toward a vision of creating operational efficiencies through the use of established business-to-business (B2B) networks. In theory, these networks can drastically reduce the variable cost of a thorough supplier evaluation (13). This would, in turn, decrease the risk of both buyer and supplier, which would further reduce the overall cost of the goods or services offered to the end consumer. But a problem with B2B networks is that no one “best” standard has emerged in the economy.
One common type of B2B network is an Electronic Data Interchange (EDI). Private or semi-private types of EDI networks that are popular include Value-Added Networks (VANs) and Electronic Trading Networks (ETNs). It is important to note that companies who have invested in VANs and ETNs and had some success with them may be somewhat reluctant to switch to relatively newer technologies (1).
Extensible Markup Language (XML) is another technology that is being promoted as the next standard in Internet communications among trading partners. It is believed to be a very important technology in supply chain management, where numerous technologies are often at war with each other. Promoters promise “better technology to enable easier and faster messaging of critical supply-chain information between disparate systems and organizations that participate and collaborate in supply-chain processes” (20).
Web exchanges have also emerged as a viable option. Because the Internet has become a common and efficient communication tool, many firms have attempted to take advantage of the new medium. They have adopted software and hardware and have linked up with their suppliers on web exchanges to share the information used in supplier evaluation. Many web exchange companies arose during the dot-com era in hopes of becoming providers for both simple and complex-product industries. Some examples of web exchanges that survived the dot-com crumble in the complex-product automotive industry are as follows:
Covisint world headquarters is located in Southfield, Michigan. The company was founded in 2000 by automotive OEMs General Motors, Ford, DaimlerChrysler, Nissan, Renault, and technology companies Commerce One and Oracle. Since the company began, PSA Peugeot Citroën has also become a stakeholder.
SupplyOn world headquarters is located in Hallbergmoos, Germany. The company was founded in 2000 by automotive supply companies Bosch, Continental, INA and ZF, and technology company SAP. Siemens automotive joined the company at the end of 2001. The company advertises its solution as “a platform run by suppliers for suppliers.”
FreeMarkets world headquarters is located in Pittsburgh, Pennsylvania. The company was founded in 1995 by Glen Meakam, who is now chairman of the publicly traded company. They are recognized for having “pioneered the reverse auction process” (8).
It makes sense that companies in complex-product industries have more to gain by means of a technology assisted supplier evaluation function because there is a greater variety of demand placed on their procurement function (6). However, exact ramifications of the technologies are unclear. Professors Handfield and Nichols state: “Until such fundamental issues as trust and information sharing are resolved with key suppliers and customers, no B2B technology is likely to ever have any significant impact on business processes” (10).
Furthermore, academics have published empirical evidence that supports this idea. Authors of a study found that trustworthiness creates value for both parties in a supplier-buyer relationship in the automotive industry. Their findings indicate that higher levels of trust create an increase in information sharing, which reduces transaction costs. More specifically, the authors found that, relative to the “most trusted automaker,” the “least-trusted automaker” spent significantly more of its face-to-face interaction time contracting and haggling with suppliers. This translated into procurement (transaction) costs for the “least-trusted automaker” that were five times higher than the procurement costs of the “most-trusted automaker” (6). So, despite advances in the technology employed in supplier evaluation, the human element remains indispensable.
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