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How do managers actually choose suppliers? Evidence from revealed preference data

Author

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  • Hayk Manucharyan

    (Faculty of Economic Sciences, University of Warsaw)

Abstract

Supplier selection plays a pivotal role in the success of any organization as it significantly reduces purchasing costs and increases corporate competitiveness. At the same time, it is a very challenging task as decision-makers have to tradeoff among different supplier attributes. In this paper, a discrete choice model of supplier selection is developed, based on revealed preference data collected from an electrical equipment manufacturer in Poland. We explore the importance of different attributes for the initial choice and subsequent switching of suppliers. The proposed logit model is proceeded by a nonparametric analysis conducted through the Chi-square Automatic Interaction Detector (CHAID) framework, which serves exploratory purposes. We find that delivery and reliability play a crucial role in decision-making with regards to choosing suppliers and switching them if necessary.

Suggested Citation

  • Hayk Manucharyan, 2020. "How do managers actually choose suppliers? Evidence from revealed preference data," Working Papers 2020-12, Faculty of Economic Sciences, University of Warsaw.
    • Handle: RePEc:war:wpaper:2020-12
    as

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    File URL: https://www.wne.uw.edu.pl/index.php/download_file/5651/
    File Function: First version, 2020
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    supplier selection; purchasing; supply chain management; revealed preferences; discrete choice analysis; logit model; CHAID prediction model;
    All these keywords.

    JEL classification:

    • C01 - Mathematical and Quantitative Methods - - General - - - Econometrics
    • C44 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Operations Research; Statistical Decision Theory
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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