Formative measurement test of supplier evaluation indicators and weight models

Abstract

Supplier evaluation is very important for supply chain management, procurement management, cost accounting, and management accounting. The most critical step involved in constructing a supplier evaluation model is selecting supplier evaluation indicators and analyzing the corresponding weights. However, an effect will occur where supplier ratings moderate the correlation between supplier evaluation indicators and supplier performance. This study surveys 104 supplier evaluation specialists and collects evaluation data from 1028 suppliers. Statistical data analysis shows that, in the absence of supplier ratings, the supplier evaluation indicator can be considered as a reflective scale that represents supplier performance. If a supplier rating is in place, then the correlations between supplier evaluation indicators are significantly weakened, and supplier evaluation indicators are recognized as a formative scale. The study also finds, through an examination of six different weight models, that the importance of supplier evaluation indicators is ordered as: quality, price, delivery performance, customer service, and flexibility. The aforementioned research findings make a meaningful contribution to the literature on supply chain management and also serve as insightful references for business practices in supplier evaluation.