A Statistical Approach to Vendor Selection
PURDUE UNIV LAFAYETTE IN DEPT OF STATISTICS
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A common problem that arises in practice is the comparison of several Bernoulli processes or populations with unknown parameters p sub l, .... p sub k, respectively, where the p sub is denote the success probabilities. A particular realization of this problem is the critical issue of vendor selection. Deming 1982 notes the importance of vendor selection in a companys efforts to achieve high quality and productivity. In his 14 points, Demins point 4 suggests the reduction of the number of suppliers to a subset of vendors who can furnish statistical evidence of dependable quality. Vendor selection involves a consideration of many aspects -- cost, service, reliability, and quality. Pettit 1984 described the approach that 3M Corporation uses in the evaluation of prospective suppliers. It consists of evaluating potential vendors in four areas quality, price, performance, and facility capabilities. While quality is explicitly considered in this approach, it is not evaluated in a statistical sense. It is the intent of this article to indicate how statistics can be utilized as one objective evaluation tool in this decision setting.
- Statistics and Probability