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By Cuneyt Altinoz, Full-time FacultyPublished June 2016
Selecting among many options is one of the most common decisions a manager faces. Selection situations range from the mundane to the very critical. You don’t need to worry too much about choosing the cover for the TPS reports. However, if you are selecting a new supplier or a new employee, the decision can be much tougher.
In this article, we look at some symptoms you may observe in your decision-making process. These may lead you to diagnose a particular problem you would need to address. We will use the context of supplier selection in the discussion, but the ideas will apply to many selection contexts. Choosing between suppliers is very similar to choosing between projects to undertake, candidates to hire, or equipment to buy—the process and issues that complicate are the same.
In significant selection decisions, it is often easy to recognize major errors but not so easy to recognize suboptimal decisions. When suppliers miss shipment dates or go bankrupt, everyone can see the problems. However, if there are no disasters, just subpar performance, it may not be easy to identify the need for improving the decision process.
There are generally signs of things not working as they should, but they may be easy to miss. If these are recognized as symptoms of a systemic problem, and not just happenstance events, then improvements can be made. Unfortunately, it’s difficult to recognize these as systemic problems when decision-makers are dealing with issue after issue— the “can’t see the forest because of the trees” complication. This article shows some of these symptoms that are easily discounted as “another day at the office.” If you are constantly experiencing these issues, there may be a good opportunity to improve on your supplier selection efforts.
The issues that arise in supplier selection can be symptomatic at three levels of supplier selection activities:
Supplier analysis is not only about which supplier to select. You desire more information, such as why some alternatives weren't selected, what they were lacking and how much. This may be useful as feedback to those companies that weren’t selected in a supplier development program or for your own tracking purposes. You find you cannot get this information because there's no system for recognizing and keeping track of these details or it is just not known.
You want to consider many different factors in preliminary evaluations, but can only focus on a few. You are aware of many additional significant factors and you would like to consider them in the evaluation process, but you cannot for several reasons: there’s no time to evaluate all of these factors for all of the alternatives; it gets too complicated to keep them straight and work through them; there is no tool that will help you.
You want to do ratings, rankings, and comparisons of the alternatives, or you wish to find out how things would change if you changed a few key parameters (scenario/sensitivity analysis), but you can’t. There’s no methodology in place to do consistent analysis, or no foundation on which to base all the evaluations.
Even when buyers seem to be doing their job well and there aren’t any major problems, there’s always someone complaining about the decisions. It seems like the concerns of one group (manufacturing, finance, etc.) are not being heard or factored into the evaluation fully. There is a lack of communication between the internal stakeholders and the decision-makers.
Although high-level management has set a supply chain strategy for the company, this is not reflected in the supplier selection efforts. This may be because the analysis is limited in its scope to take into account the strategy and the policies, there is a communication breakdown between the higher levels of management and the decision-makers, or simply because the decision-makers focus on other issues.
Everyone looks at a different set of attributes or has a different understanding of factors and priorities involved. Selections are not consistent between decision-makers, which makes it difficult to follow an overall strategy. It may be that each decision-maker has developed his or her own methodology and criteria instead of sharing in a common culture.
The decision-makers believe they are doing well and there are no major problems, but the goals set by the company are still not being met. This points to a breakdown between the goals of the company and goals of the decision-makers. Decision-makers’ performance is judged with criteria that doesn’t align with company goals. The fact that there are no major problems might suggest that it may not be entirely the decision-makers who are at fault.
You want to keep track of how the alternatives were evaluated and rated, but this information always gets lost. It is not possible to examine previous decision processes to improve upon them by discarding unnecessary steps or increasing focus on critical steps. This should be done for continuous improvement, before any problems arise.
Same problems come up time and again; decision-makers don’t seem to learn how to foresee/prevent some issues. This is similar to checking rationale, but here the goal is finding out why a poor decision was made and what additional factors need to be evaluated to prevent it from happening again.
Decision-makers leave the company all the time and they take their expertise with them. Particularly for buyers, the criteria that they follow and their knowledge of the potential suppliers are critical. When a buyer leaves a company, all of this is lost unless captured and documented in a useful form.
Simply recognizing that there are different levels to the decision-making process is a good start. Next, you will need to identify where the problem is coming from and involve the right people. The problems at a higher level will require more in-depth solutions and most likely a change in the overall process. It’s important that these decision processes are designed from the beginning to support all three levels of activity—but that’s for another article.
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