Assessment of Dynamics and Risks in Supplier Selection Processes

Increasing competitive pressure in the production sector has led to considerable changes in the global competitive structure. Currently, companies attempt to counteract cost pressure by increasing their global outsourcing activities as well as focusing on their core competencies. Hence, global procurement has gained increasing importance among general purchasing activities of companies and is predicted to have an increasing influence on future cost development. Due to this development, companies are looking for new suppliers in low-wage countries. However, companies have to consider negative effects in the fields of quality, service level, and counterfeiting or plagiarising of merchandise. Therefore, cost savings in low-wage countries can only be achieved through major efforts during the planning and the realisation phase of the supplier selection process. Purchasing companies lack systematic assistance in analysing the procurement object and the economic environment of potential supplier candidates. This paper presents a two-step approach dealing with the issue of global procurement in low-wage countries and how this issue is faced taking business environment into account. In the first step, a method is described using the help of a requirement profile for suppliers and a cost structure analysis to select potential suppliers. In the second step, an approach for modelling and identifying potential dynamics and risks related to the acquisition of new suppliers in low-wage countries is developed.