Abstract
Purpose
– Managing a supplier base can be both challenging and rewarding. Instances abound where the lack of attention to supplier management has caused once successful businesses great losses or even failures. Assessing a supply base using the combined approach of discrete choice analysis (DCA) and total cost of ownership (TCO) can help a company determine the necessary features required to alleviate the strain caused by doing business with poorly managed companies. The paper aims to discuss these issues.
Design/methodology/approach
– By combining a company's DCA with their TCO, manufacturing companies can create a strategically focussed scorecard that aligns their supplier requirements with high-performing companies. During the analysis, the paper chose to analyze an appliance manufacturer.
Findings
– As a result of the analysis, it was determined that a specific supplier that was labeled as strategic, should actually be considered for elimination. While this analysis can be extremely effective, three main limitations within the research do exist. First, the lack of alignment of DCA with the strategic business initiatives within each unit of a company can adversely affect its financial success. Second, implications for management which include all data used in the analysis through all three stages – identify and classify, consolidate, and maintain supplier base – must be up-to-date. Finally, trade-offs must be accepted as a means of doing business with a supplier.
Originality/value
– After reading this study, sourcing managers should realize the potential for aligning and managing their supplier base with the strategy of the company to assure a profitable future