As supply chain and procurement professionals, we are regularly called upon to evaluate and select suppliers. This task comes into play in a wide variety of situations: trying to find a new contract manufacturer for an OEM, sourcing a part for a new product, selecting a new service provider for a data center, etc. Though the situations vary widely, and the specific requirements are different, the general process for supplier selection is the same. One interesting aspect about the process is the way people approach the decision making when it comes to selecting the final candidates. We can generally put people in two broad camps: the numbers people or the gut-feel people.

The numbers people like to translate everything into a grade and average the grades across a disparate set of attributes and let victory go to the highest score. A supplier with an overall grade of 91 must be better than one that gets an 89 – right? It is comforting to have an objective way to get to a black and white answer. In our experience though, a pure numbers play does not lead to the right answer. While having an objective means to evaluate suppliers on a consistent set of criteria is a good thing, the approach generally breaks down when you try to average across attributes. For example, a very high score in an area like Management and Leadership cannot necessarily balance out a poor score in an area like Product/Service Quality. Some people try to fix this by applying weights to different attributes. Again this is logical and may feel good to some people, but based on our experiences, numbers alone will not lead you to select the right supplier.

On the other extreme are the people who operate solely on their intuition or gut-feel. They eschew any type of grading. Even if they play along with some type of numbers based evaluation, they are convinced of their end decisions and simply fudge the numbers to get to their answer. Intuition can be a powerful tool. In his book titled “Blink: The Power of Thinking without Thinking”, Malcolm Gladwell dissects people’s ability to make very accurate decisions with incredibly thin slices of experience. Gladwell details numerous examples where a person’s snap judgments are more accurate than a decision made after careful and prolonged analysis. Also, there are characteristics that are hard to put into a pure objective measurement - for example organization cohesiveness or a sense of whether what you are seeing and hearing is just a sell-job. The downside of this approach is that it can be hard for a person who relies on gut-feel to explain or quantify it in a way that is understood by other team members. They know what they feel but they cannot necessarily explain why they feel it.

The best processes include a balance between these two extremes. We think there should be some structure and analytics when it comes to defining important characteristics, agreeing on a set of questions, establishing a means for measuring competency in those areas, and agreeing on the means of collecting the information (e.g. research, phone calls, meetings, on-site visits, etc.). There should also be some room for “gut feel” to be considered. There are different ways to incorporate this feedback. In our engagements, we typically ask participants to record their gut reaction on the various suppliers so that we have captured their initial reaction. Then we will go through a review of the more structured evaluation and facilitate the discussion that is always a part of the process. As a result of the dialogue, new information often surfaces. Based on this, people might adjust their scoring or it may influence their initial perceptions. In the end, we put the results up for everyone to see. When the numbers and the intuition align, the decision is easy. When they do not, it can be a clue that you need to keep digging.