Firm size determinants and their impact on supplier selection and evaluation

Abstract

In today’s competitive and interconnected business world supply chains and buyer supplier relationship has gained strategic importance. The supplier selection and evaluation part are no longer taken for granted and proper implementation of special tools and methods is applied for this process by buyer firms. This project has identified a few determinants of firm size that are of utmost importance to the procurement managers and should be considered in their selection and evaluation process. The seven firm size factors are both quantitative and qualitative in nature and this project takes into consideration some subjective terms that are otherwise ignored by practitioners. The competitive and growing paint industry of Pakistan was selected for this study and their suppliers were categorized into two groups. The procurement managers of the selected paint companies ranked the seven determinants identified according to their preference and AHP method was used for pairwise comparison of these factors. The next step was to rank the alternatives, which in this case are the chemical and packaging suppliers. After the ranking of criteria identified and choosing the best alternative, a qualitative study was conducted to validate the results. In addition to results validation, the years of experience of respondents and the years of relationship of buyer firms with the supplier firms was taken into consideration for further analysis of results. The results obtained from quantitative data and findings of qualitative study helps to establish a useful method for supplier selection based on firm size.