A multinomial modeling approach to assess supplier delivery performance for buyer-supplier alignment

PurposeUntimely delivery of goods and services, especially in a post-COVID landscape, is a critical harbinger of end-to-end fulfillment. Existing literature in supplier delivery modeling is focused on penalizing suppliers for late deliveries built into a contractual transaction, which eventually erodes trust. As such, a holistic modeling technique focused on long-term relationship building is missing. This study aims to design a supplier evaluation model that analytically equates supplier delivery performance to cost realization while replicating a core attribute of successful supply chains - alignment, leading to long-term supplier relationships.Design/methodology/approachThe supplier evaluation model designed in this paper uses delivery deviation as a unit of measure as opposed to delivery duration to enhance consistency with enterprise resource planning protocols. A one-sided modified Taguchi-type quality loss function (QLF) models delivery lateness to construct a multinomial probability penalty cost function for untimely delivery. Prescriptive analytics using simulation and optimization of the proposed mathematical model supports buyer-supplier alignment.FindingsThe supplier evaluation model designed herein not only optimizes likelihood parameters for early and late deliveries for competing suppliers to enhance total landed cost comparisons for on-shore, near-shore and off-shore suppliers but also allows for the creation of an efficient frontier toward supply base optimization.Research limitations/implicationsAt a time of systemic disruptions such as the COVID pandemic, global supply chains are at risk of business continuity. Supplier evaluation models need to focus on long-term relationship modeling as opposed to short-term contractual penalty-based modeling to enhance business continuity. The model offered in this paper is grounded in alignment - a cornerstone of successful supply chain integration, and offers an interesting departure from traditional modeling techniques in this genre.Practical implicationsThe results from this analytical approach offer flexibility to a supply manager toward building redundancies in the supply chain using an efficient frontier within the supply landscape, which also helps to manage disruption and maintain end-to-end fulfillment.Originality/valueThe model offered in this paper is grounded in alignment - a cornerstone of successful supply chain integration, and offers an interesting departure from traditional modeling techniques in this genre. The authors offer a rational solution by creating an evaluation model that uses penalty cost modeling as an internal quality measure to rate suppliers and uses the outcome as a yardstick for negotiations instead of imposing penalties within contracts.