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Economic Models for Vendor Evaluation with Quality Cost Analysis


Author Info

  • George Tagaras

    (Department of Mechanical Engineering, Aristoteles University of Thessaloniki, 54006 Thessaloniki, Greece)

  • Hau L. Lee

    (Department of Industrial Engineering and Engineering Management, Stanford University, Stanford, California 94305)

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    Successful vendor-vendee relationship is viewed as an important ingredient for maintaining competitiveness in the current marketplace. This calls for a careful and comprehensive approach in selecting vendors. The cost of quality (or better phrased as the cost of "unquality") resulted from imperfections of a vendor's incoming input materials is one component of the total costs in the evaluation of vendors. The purpose of this paper is to show that looking at only one dimension of the quality cost is not sufficient and to highlight the importance of having a high quality internal process. We explore the relationship between the vendor's quality cost, the vendor's input quality, and the imperfections of the manufacturing process. We analyze the properties of the resulting quality cost model, and draw managerial implications in the selection of vendors.

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    Bibliographic Info

    Article provided by INFORMS in its journal Management Science.

    Volume (Year): 42 (1996)
    Issue (Month): 11 (November)
    Pages: 1531-1543

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    Handle: RePEc:inm:ormnsc:v:42:y:1996:i:11:p:1531-1543

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    Related research

    Keywords: quality costs; vendor evaluation; production;


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    Cited by:
    1. Tang, Christopher S., 2006. "Perspectives in supply chain risk management," International Journal of Production Economics, Elsevier, vol. 103(2), pages 451-488, October.
    2. Tagaras, George & Zikopoulos, Christos, 2008. "Optimal location and value of timely sorting of used items in a remanufacturing supply chain with multiple collection sites," International Journal of Production Economics, Elsevier, vol. 115(2), pages 424-432, October.
    3. Luciana Echazu & Mark Frascatore, 2012. "Supply Chain Quality, Mandatory Insurance, and Recall Risk," International Journal of Business and Economics, College of Business, and College of Finance, Feng Chia University, Taichung, Taiwan, vol. 11(1), pages 1-11, June.
    4. Lee, Chang Hwan & Rhee, Byong-Duk & Cheng, T.C.E., 2013. "Quality uncertainty and quality-compensation contract for supply chain coordination," European Journal of Operational Research, Elsevier, vol. 228(3), pages 582-591.
    5. Xie, Gang & Wang, Shouyang & Lai, K.K., 2011. "Quality improvement in competing supply chains," International Journal of Production Economics, Elsevier, vol. 134(1), pages 262-270, November.
    6. Liu, Ke & Li, Jing-An & Lai, Kin Keung, 2004. "Single period, single product newsvendor model with random supply shock," European Journal of Operational Research, Elsevier, vol. 158(3), pages 609-625, November.


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