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International Supplier Selection:: A Multiattribute Utility Approach

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International Journal of Physical Distribution & Logistics Management

Emerald Article: International Supplier Selection:: A Multi-attribute
Utility Approach
Hokey Min

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Appropriate selection of foreign suppliers is

crucial to the success of the multinational firm.

International
Supplier
Selection:
A Multi-attribute Utility
Approach
Hokey Min

International Journal of Physical Distribution & Logistics Management,

Vol. 24 No. 5, 1994, pp. 24-33 MCB University Press Limited, 0960-0035

Introduction
Over the last few years, the world business community
has witnessed a series of revolutionary changes overseas
that are exemplified by three historical events:
(1) the official formation of the European Community
(EC) 1992 under the auspices of the Single
European Act;
(2) the demise of Communism in the Eastern bloc
countries; and
(3) the pending ratification of the North American
Free Trade Agreement.
These changes contributed to the globalization of the
world economy. As the market becomes globalized, an
increasing number of firms that once concentrated on
domestic sourcing are now seeking their supply bases
around the world.

Received March 1993

Revised September 1993

Globalization of a firms sourcing activity means the

establishment of long-term business relationships with
often unfamiliar and unproven foreign suppliers. Owing
to unfamiliarity and uncertainty involved in global
sourcing, international supplier selection is risky and
complicated. Besides, many factors influencing
international supplier selection decisions are in conflict
with one another. For instance, the low price of purchased
materials from a certain foreign supplier can be offset by
the firms loose quality standards or chronic financial
instability. On the other hand, the availability of more
advanced technology from a foreign source can be
undermined by the sourcing firms high purchasing costs
and excessive tariffs. These illustrate only a few
examples of obstacles that the firm has to face when
sourcing overseas.
It is obvious therefore that effective international supplier
selection must deal with a host of quantitative and
qualitative factors that are in conflict with one another.
As a useful tool for such selection, this article proposes
multiple attribute utility theory (MAUT) that can
effectively deal with both qualitative and quantitative
factors in multiple criteria and uncertain decision
environments.

Prior Studies
In contrast with the abundant literature dealing with
various domestic supplier selection problems, previous
analytical studies on international supplier selection are
virtually absent (see Weber et al.[1] for an excellent
review of supplier selection problems). This is
understandable, given that the significance of
international sourcing to a firms success was not fully
recognized by many practitioners and academicians until
recent years, when foreign trade barriers gradually
crumbled. To cope with worldwide challenges and
opportunities that were created by free trade movements,
an increasing number of multinational firms may require
an analytical approach for international supplier
selection.
The development of analytical approaches for
international supplier selection has been limited,
although many attempts have been made to develop
analytical approaches for evaluating various domestic
suppliers. Examples of systematic analyses for domestic
supplier selection include a categorical method,
weighted-point method, matrix approach, vendor
performance matrix approach, vendor profile analysis
(VPA), analytic hierarchy process (AHP), and multiple
objective programming (MOP) such as goal
programming. To elaborate, a categorical method rates
potential suppliers on a number of equally-weighted
factors and then allows the decision maker to choose
subjectively the supplier with the highest total score[2].

Although this method is simple and intuitively appealing,

it often introduces subjective error into the decision and
oversimplifies the selection scenario by equally weighting
all factors. Timmerman[2] made some improvements by
introducing a weighted-total method which quantifies the
factors with relevant weights and then rates potential
suppliers according to these weighted factors.
Unfortunately, this method is not effective for taking
qualitative factors into consideration. Similarly,
Gregory[3] suggested a matrix approach which evaluates
suppliers based on weighted scores obtained from a set of
pre-determined benchmarks. To improve this matrix
approach further, Soukup[4] presented a vendor
performance matrix approach that can evaluate the
suppliers performance under various unforeseen
scenarios by estimating the probable deviations from the
original purchase plan. In other words, this approach
incorporates uncertainty in selecting the supplier. In a
similar manner, Thompson[5] developed a VPA to rate
suppliers in an uncertain environment on a number of
weighted factors by employing a Monte Carlo simulation
technique.
Regardless of their strengths, none of these approaches
can systematically measure both qualitative and
quantitative factors and structure complex problems
with a large number of criteria, attributes and
alternatives. Furthermore, none of these methods can
measure the degree to which a purchasing managers
judgements are consistent in evaluating suppliers. To
overcome these shortcomings, both Narasimhan[6] and
Nydick and Hill[7] applied the AHP originally proposed
by Saaty[8] to the supplier selection problem. In the
meantime, Buffa and Jackson[9] developed a goalprogramming (GP) model for scheduling purchase orders
and shipments under the buying firms quality, time,
demand and inventory constraints. The most important
merit of this GP model is its ability to handle the multiple
period supplier selection problem. Similarly, Sharma et
al.[10] proposed a non-linear GP model for a generic
industrial purchasing plan. More recently, Weber and
Ellram[11] developed a multi-objective programming
(MOP) model that helped the buyer find a set of bestcompromise solutions for suppliers to be selected, and
the purchasing volume to be allocated among suppliers.
Consequently, the MOP model has the capability to solve
both supplier selection and volume allocation problems,
while aiding the buyer in assessing trade-offs among total
purchasing cost, late delivery and the percentage of
rejected items.
Despite numerous advantages over other existing
approaches, both AHP and MOP have some shortcomings. For instance, AHP cannot effectively take into
account risk and uncertainty in assessing the suppliers
potential performance because AHP presumes that the
relative importance of attributes affecting the suppliers
performance is known with certainty[12]. In other words,

AHP was designed to deal with deterministic decision

environments. In contrast with scoring methods such as
AHP, MOPs inherent computational complexity often
prohibits consideration of many attributes essential for
supplier selection, although MOP can produce an optimal
result by adding explicit constraints which deal with the
prospective suppliers production capacity, ordering
policies, and so forth.
As the literature review reveals, all the existing
approaches are confined to domestic supplier selection
problems and consequently neglected a host of factors
relevant to international supplier selection. Furthermore,
most of the prior analytical studies considered only a
limited number of attributes such as price, quality,
delivery and service. Past empirical studies[13-15],
however, reported that more than ten different attributes
existed affecting the supplier selection decision. In
addition, all but AHP and MOP overlooked the multiple
objective nature of supplier selection problems, thereby
failing to analyse the important trade-offs among
conflicting factors. The current study goes beyond the
previous literature not only by considering all the
qualitative and quantitative factors relevant to
international supplier selection under risk and
uncertainty, but also by analysing the various trade-offs
among these factors in a multiple criteria environment.

Background to the Multiple Attribute Utility

Theory
As indicated in the previous section, international
supplier selection is a complex decision-making problem.
The complexity stems from a multitude of quantitative
and qualitative factors influencing supplier choices as
well as the intrinsic difficulty of making numerous tradeoffs among these factors. One analytical approach often
suggested for solving such complex problems is MAUT
(see Green and Wind[16] for various successful
applications of MAUT). MAUT enables the decision
maker to structure a complex problem in the form of a
simple hierarchy and to subjectively evaluate a large
number of quantitative and qualitative factors in the
presence of risk and uncertainty. The major strength of
MAUT is its ability to deal with both deterministic and
stochastic decision environments[17]. In particular,
MAUT has three distinctive advantages over MOP in
handling multiple and conflicting criteria. These are:
(1) MAUT requires less front-end analysis than
MOP as MAUT has no constraints to consider
explicitly.
(2) MAUT requires data than MOP as MAUT does not
necessitate parameters for constraints.
(3) MAUT poses less computational difficulty than
does MOP as MAUT is not burdened with
additional constraints.

The application of MAUT to the complex problem

usually involves the following steps[18,19]:
(1) Identify the objectives or goals of the decision and
define the problem scope.
(2) Define a finite set of relevant attributes affecting
the decision outcome and structure them into a
hierarchical form called a value tree.
(3) Elicit preference information concerning the
attributes from the decision maker(s) and
determine the relative importance of the attributes.
(4) Develop the decision makers utility function by
establishing functional relationships between the
attributes and the utility scores. If these
relationship are uncertain, the expected utility
score for each attribute will be determined by
using the appropriate type of probability
distributions.
(5) Compute the aggregate (overall) utility score for
each decision alternative and rank alternatives in
terms of aggregate utility scores.
(6) Perform sensitivity analyses.
The systematic nature of MAUT in tackling complex
problems under conflicting multiple criteria makes
MAUT especially suitable for selecting the most
appropriate foreign supplier.

Main Attributes of International Supplier

Selection
The selection of suppliers in foreign countries is not a
process to be taken lightly owing to its significant and
long-lasting impact on overseas sourcing. If the selection
is wrong, it may result in mounting material costs,
litigation, shoddy product quality, transport delays,
production bottlenecks, countertrade obligations, and
exchange rate fluctuations to name just a few of the
problems the firm can encounter. As such, the
international supplier selection decision is not trivial
because it involves a large number of closely interrelated
decisions regarding financing, negotiations, distribution,
procurements and product quality assurance at the
source. Owing to the large number of factors affecting the
decision, the decision should be made based on an orderly
sequence of steps. In fact, Miller[20] observed that most
decision makers cannot simultaneously handle more than
seven to nine factors when making a decision. As such, it
is necessary to break down the complex problem into
more manageable subproblems through the multi-levelled
decision hierarchy.
Figure 1 shows the structuring of the international
supplier selection problem into a hierarchy (or value tree)
of four levels. The top level of the hierarchy represents the
ultimate goal of the problem. The second level of the
hierarchy contains the general criteria which are usually

considered important in selecting the foreign supplier.

These criteria include financial terms, quality assurance,
perceived risks, service performance, buyer-supplier
partnerships, cultural and communication barriers and
trade restrictions. At the third level, these criteria are
decomposed into various attributes (factors) that may
affect the supplier choice. Finally, the bottom level of the
hierarchy is represented by various alternatives. The
main multiple criteria and a number of attributes relevant
to international supplier selection are described below.
Financial Terms
This criterion is one of the most important criteria in
assessing the foreign supplier because it will dictate
international procurement cost. The factors (attributes)
affecting this criterion are as follows:
Cost. Profit maximization cannot be achieved
without cost minimization. The firm must
therefore find a low-cost supply base where it can
minimize its purchase price, import duties,
documentation cost, transport cost, communication cost and cost of investigating the potential
suppliers past performances and financial
background.
Payment terms. In international sourcing, it is
customary for advance payments to be made prior
to commencing work. Such a provision (e.g. a letter
of credit) can tie up the buyers capital[21]. It is
therefore important for the buyer to negotiate for
favourable terms of payment such as open
accounts and sight drafts, rather than a letter of
credit.
Freight terms. Owing to a lengthy distribution
channel, transport expenses and insurance costs
are usually high in international sourcing.
Consequently, the buyer should carefully look into
the various freight terms, such as FOB destination,
FOB origin and CIF, provided by suppliers.
Quality Assurance
Min and Galles recent study[14] reported that the most
important factor leading to overseas sourcing is the high
quality of foreign products resulting from the emphasis
placed on quality-at-the-source (Jidoka). Accordingly,
the buyer should investigate whether or not potential
suppliers are certified for strict quality assurance and
have a strong commitment for preventing quality failures.
Furthermore, as Laske[22] suggested, the buyer needs to
examine whether they can establish a quality/
engineering team visit for an assessment of the suppliers
technical capability and quality commitment.
Perceived Risks
Owing to a number of exogenous factors influencing
international sourcing, international supplier selection is
much riskier than its domestic counterpart.
Consequently, the international supplier selection

Figure 1. A Hierarchy for International Supplier Selection

Select the best
foreign supplier

Level 1: Overall goal

Level 2: Criteria

Level 3: Attributes

Financial
terms

Perceived
risks

Cost

Quality
control

Freight
terms

Quality
team
visits

Level 4: Alternatives

Quality
assurance

Payment
terms

Mexican
supplier

Service
performance

Political
stability

Foreign
exchange
rate
Legal claims

Labour
disputes

Local price
control

Taiwanese
supplier

decision is most strongly affected by perceived risks.

There are various types of international risks including
risks of political instability, contract disputes or legal
claims, currency inconvertibility, unstable foreign
exchange rates, labour disputes, local price control, and
so forth. Since these risks can result in high hidden costs
for international sourcing, they should be factored into
the international supplier selection decision.
Shortages of hard currency in Russia for example can
limit cash transactions, thereby prohibiting import from
Russia. Government policy regarding imports can also
influence a firms ability to control production and
distribution planning. The Central Planning Commission
and the National Ministry of Commerce in China used to
classify goods into four categories according to the
degree of Government control exercised:
(1) exclusive distribution goods such as cotton
garments, petroleum and cooking oil;
(2) planned distribution goods such as bicycles,
sewing-machines and watches;
(3) contracted goods such as television sets,
toothpastes and soaps; and
(4) selectivegoods such as plastic wares, toys and
carrying bags[23].

Cultural and
Buyer-supplier
partnerships communication
barriers

Trade
restrictions

On-time
delivery

Financial
stability

Cultural
similarity

Tariffs and
customs
duties

Technical
assistance

Negotiability

Ethical
standards

Countertrade

EDI
capability

Korean
supplier

Japanese
supplier

Canadian
supplier

Since exclusive distribution goods are subject to tight

Government control, sourcing these goods from China
can create serious production and distribution problems.
Service Performance
On-time delivery. Recent surveys[14,15] on global
sourcing discovered that a major obstacle to global
sourcing is transport delays and the subsequent
increase in lead times which disrupt the successful
implementation of just-in-time principles. In
choosing the most appropriate supplier, the buyer
should assess the length of the supply chain as
well as the strength of the suppliers commitment
for on-time delivery services, which include followup or expediting services.
Technical assistance. With rapid technological
advances, todays purchased materials have
become more sophisticated. Furthermore,
suppliers are more likely to assume greater
responsibility for outsourced design, engineering
service, prototype development, and research and
development[24]. The suppliers ability to provide
the necessary technical assistance must be
factored into the international supplier selection
decision.

Buyer-Supplier Partnerships
Since the mid-1980s a large number of purchasing
organizations have been started to develop strategic
partnerships or alliances with their suppliers based on
long-term contracts, mutual support, non-adversarial
negotiations, and information and risk sharing[21, 25]. To
maintain long-term partnerships such as Keiretsu with
the supplier, the following attributes should be taken into
consideration:
Financial stability. Regardless of cost savings and
other benefits, a foreign suppliers shaky financial
situation will gradually weaken the long-term
business relationship with the buyer. This is often
the case in many less developed or developing
countries where only the selected suppliers in the
Government-protected industry receive preferential financial loans from the Government or
banks. In this regard, financial stability of the
supplier is a necessary requisite for long-term
partnership programmes.
Negotiability. Without narrowing the differences
between the buyer and the vendor through a series
of negotiations, the buyer cannot build mutual
trust with the supplier because of increasing
conflicts between them. If the supplier remains
stubborn during the negotiation process, the longterm collaborative relationship with the supplier
will be undermined. Buyers should carefully
consider the suppliers negotiation flexibility when
making sourcing decisions.
Cultural and Communication Barriers
Since languages, business customs, ethics and
communication devices vary from country to country, the
buyer should consider attributes such as cultural
similarity, ethical standards and Electronic Data
Interchange (EDI) capability in order to ensure effective
communication and negotiation with the foreign supplier.
Ethnocentricism can be detrimental to successful deals
and negotiations because communication breakdowns
with the potential supplier may result. For example, love
and respect for family and friends are prominent social
values in Spanish and Hispanic cultures. Because of this
great emphasis on friendships, Spanish-speaking people
prefer to build a social and emotional link before
establishing any business relationships[26]. The getdown-to-business-first style may therefore lead to
unwanted adversarial relationships with Spanish or
Latin-American suppliers. In less developed countries,
there is also the problem of communicating technical and
contractual information across the language barrier
because of lack of communication technology[27].
Consequently, the buyer should therefore take extra
precautions when sourcing from less developed countries.
Trade Restrictions
The prevalence of Government involvement is much
greater in the international than in the home field[28].

Examples of Government involvement are tariff barriers,

countertrade, free trade agreements and government
pressures for trade with most-favoured nations such as
China:
Tariffs and customs duties. A foreign government
wants to attract buyers from other countries to
boost its economy, whereas the importing country
would like to impose high tariffs to protect its
domestic industry. Therefore, despite the General
Agreement on Tariffs and Trade (GATT), tariffs
(or import duties) will be imposed on the goods
and services purchased from foreign countries.
Since tariffs or dumping duties can lead to a
substantial increase in purchasing price, the buyer
should carefully estimate these additional charges
before choosing the right source. The exceptions
may be sourcing from either Most Favoured
Nations or Caribbean Basin Initiatives, because
very little or no duties are paid on imported goods
from those countries.
Countertrade. Countertrade is a growing
worldwide practice as it brings numerous benefits
such as avoiding currency exchange, and
marketing products in less developed countries
[29]. Under countertrade agreements the buyer is
obligated to purchase a given percentage of goods
and services from the suppliers country to satisfy
offset requirements. The countertrade agreement
can therefore restrict the free choice of the supplier
in an international setting.
With regard to the aforementioned factors that contribute
to international supplier selection (see Figure 1), the
international supplier selection should address the
following issues:
Where to source?
How to evaluate the sensitivity of international
supplier selection strategy to changing company
policy?
How to analyse the trade-offs among a multitude
of conflicting attributes?

Application and Results

For illustrative purposes, the base-line scenario involves
selecting the most appropriate foreign supplier that
manufactures and sells the components of personal
computers. The base-line scenario considered five
potential suppliers from five different countries: Mexico,
Taiwan, Korea, Japan and Canada. Under this
hypothetical scenario, relative weights of attributes were
determined. These weights represent a decision makers
judgements on the relative importance or preference of
the attributes. Owing to the complex and time-consuming
mathematical calculations, determination of relative
weights calls for the assistance of a MAUT computer
program such as a PC-based LOGICAL DECISION
program[30]. LOGICAL DECISION is considered a

decision support system (DSS) that enables the decision

maker to structure a multi-faceted problem in the form of
a hierarchy and then allows him/her to provide his/her
judgements in interactive, graphic and verbal modes.
Applying LOGICAL DECISION to the international
supplier selection problem, relative weights were
obtained for the attributes as summarized in Table I.
These weights were determined by calculating the
scaling constant for each attribute and then establishing
a trade-off involving each attribute under the assumption
that an overall utility for each alternative can be
expressed as an additive multi-attribute utility function
(MUF) shown in equation (1). LOGICAL DECISION
therefore determined these weights indirectly (i.e. nonarbitrarily) based on the concept that equally preferred
alternatives must have equal overall utilities[30]. An
example of relative weight calculations can be found in
Table II.
(1)
U(x)= k1 U1 (x) + k2 U2 (x) + ... + kn Un (x),
where
U(x) = the overall utility for alternative x
ki = the weight for attribute i; also called
scaling constant small k for attribute i
Ui (x) = the utility of alternative x for attribute i
Ui (x) = ai + bie(cix)

(2)

where
ai , bi , ci = scaling constants for attribute i
e = the constant 2.718 whose natural logarithm is 1.
Prior to determining the overall utility score for each
alternative, we also calculated scaling constants ai, bi and
ci for the utility function equation (2) for each attribute.
These scaling constants are given in Table III.
Based on the weights (scaling constants) shown in Table
I, the attribute of quality control is most important,
followed by on-time delivery, quality team visits, tariffs
and customs duties, cost, and so on. Since these weights
can help establish the decision makers utility function,
we can compute the overall utility score for each
alternative and rank all the alternatives with respect to
their overall utility scores (see Table IV).
Table IV shows the most desirable supplier with reference
to each criterion. For instance, the Mexican supplier is
most preferable with respect to financial terms, while the
Japanese supplier is considered best in terms of quality
assurance, service performance, and buyer-supplier
partnerships. In summary, the Canadian supplier is most
preferred, with an overall utility score of 0.6581 owing to
the relative importance of quality assurance and

Table I. A Summary of Relative Weights for the Attributes

Attributes

Weights (scaling constants)

in percentages

Quality control
On-time delivery
Quality team visits
Tariffs and customs duties
Cost
Payment terms
Freight terms
Financial stability
Foreign exchange rate
Countertrade
Labour disputes
Technical assistance
Local price control
Political stability
Negotiability
EDI capability
Legal claims
Ethical standards
Cultural similarity

15.0
13.9
8.6
7.7
7.3
6.2
6.1
5.5
4.9
4.1
3.5
3.5
3.2
2.4
2.4
2.1
1.8
1.0
0.9

Total

100

Table II. Example of Relative Weight (Scaling Constant)

Calculation
Suppose the buyer has two competing suppliers, A and B,
who are the same except for cost and tariff. Sourcing from
supplier A costs $100 and requires $10 of import duty (tariff).
In contrast, sourcing from supplier B costs $110 and requires
$8 of import duty. Suppose also that suppliers A and B are
preferred and that utility functions for cost and tariff are
known to give the following utilities:
Supplier A

Supplier B

U cost ($100) = 0.5

U cost ($110) = 0.4

U tariff ($10) = 0.3

U tariff ($8) = 0.7

Since these two suppliers in the trade-off are equally

preferred, they must have the same overall utilities. This
means U(A) = U(B) so that a change in the utility of cost of 0.5
0.4 = 0.1 is just compensated for by a change in the utility of
tariff of 0.7 0.3 = 0.4.That is to say:
kcostUcost($100) + ktariffUtariff ($10) = kcostUcost($110)
+ ktariffUtariff($8)
Thus the ratio of relative weights for cost and tariff must be:
k tariff [U cost ($110) U cost ($100)]
=
k cost
[U tariff ($10) U tariff ($8)]
=

(0.4 -0.5)
(0.3 -0.7)

= 0.25

Table III. Summary of the Single Utility Function (SUF) for Each Attitude

Attributes

Range
Minimum Maximum

SUF Formulas
Mid-point
Level
Utility
a

SUF parameters
b

Quality control
0

10

100

500

4.5

0.5

3.017

3.017

0.04027

190

0.5

0.06309

2.154

0.007061

100

50

0.5

0.01

10

0.5

0.1978

0.1978

0.1801

20

0.5

0.09575

1.096

0.1219

100

20

0.5

0.03905

1.039

0.03281

1.5

0.5

1.198

1.198

0.3602

10

0.5

0.7841

0.7841

0.08222

10

0.5

0.1978

1.1978

0.1801

10

3.5

0.5

0.3858

1.386

0.1279

100

0.5

0.1978

1.198

0.01801

10

3.5

0.5

0.3858

1.386

0.1279

10

6.55

0.5

0.3609

0.3609

0.1327

10

5.5

0.5

0.1111

0.1111

0.3

0.5

0.1978

1.198

1.801

10

3.5

0.5

1.386

1.386

0.1278

0.25

0.5

0.09575

1.096

2.437

10

0.5

0.03905

0.03905

4.5

0.5

0.0009872

0.0009872 1.384

Cost
Ontime delivery
Payment terms
Freight terms
Tariffs and customs duties
Technical assistance
Quality/engineering team visits
Political stability
Legal claims
Foreign exchange rate
30

Labour disputes
Financial stability
Negotiability
Local price control
EDI capability
Countertrade
Ethical standards
0.34281

Cultural similarity
Note: for SUF parameters, if c = 0, then U (x) = a+bx,
otherwise, then U (x) = a+b (Exp (cx)

perceived risk. The Japanese supplier is a close second

with an overall utility score of 0.6502.

Sensitivity Analyses
After obtaining the initial solution with the given weights
of the attributes, sensitivity analyses were carried out to
explore the response of the overall utility of alternatives
to changes in the relative importance (weight) of each
attribute or criterion. The sensitivity analyses are
necessary because changing the importance of attributes
or criteria requires different levels of cost, quality, risks
and sourcing opportunities for the alternatives. A series
of sensitivity analyses was conducted using the

LOGICAL DECISION program[30]. Owing to the

excessively large number of attributes, our discussion
will focus on the sensitivity of criteria that reflect the
collective measures of attributes.
As shown in Figure 2, the sensitivity analysis indicates
that, when the importance (weight) of quality assurance
was decreased by about 50 per cent or less, the Canadian
supplier turned out to be the most preferred choice.
Considering that the change in a ranking of the
alternatives is not that dramatic, however, the supplier
choice is moderately sensitive to changes in the
importance of quality assurance. Figure 3 shows that
when the importance of financial terms decreased 50 per
cent or more, the Canadian supplier dominated the others.

The supplier choice therefore seems to be very sensitive

to changes in the importance of financial terms, which in
turn were often dictated by changes in the company
policy. This is evident because in the weight range of 10
to 90 per cent the ranking of alternatives changes
constantly.

Table IV. A Ranking of Alternatives

Criteria

Alternatives

Utility

Ranks

Canadian supplier
Japanese supplier
Mexican supplier
Korean supplier
Taiwanese supplier

0.6581
0.6502
0.5079
0.5046
0.4615

1
2
3
4
5

Financial terms
Mexican supplier
Taiwanese supplier
Japanese supplier
Korean supplier
Canadian supplier

0.5668
0.4088
0.3709
0.3646
0.3592

1
2
3
4
5

Quality assurance
Japanese supplier
Canadian supplier
Mexican supplier
Korean supplier
Taiwanese supplier

0.7143
0.6727
0.4187
0.4001
0.3359

1
2
3
4
5

Canadian supplier
Korean supplier
Japanese supplier
Mexican supplier
Taiwanese supplier

0.4295
0.4289
0.4217
0.3881
0.3622

1
2
3
4
5

Service performance
Japanese supplier
Canadian supplier
Korean supplier
Taiwanese supplier
Mexican supplier

0.9200
0.8628
0.7583
0.6383
0.6325

1
2
3
4
5

Buyer-supplier partnerships
Japanese supplier
Canadian supplier
Taiwanese supplier
Korean supplier
Mexican supplier

0.8100
0.7310
0.5471
0.4993
0.2192

1
2
3
4
5

Cultural and communication barriers

Canadian supplier 0.8731
Japanese supplier 0.5567
Taiwanese supplier 0.4179
Korean supplier
0.3615
Mexican supplier 0.0999

1
2
3
4
5

Trade restrictions
Canadian supplier
Mexican supplier
Japanese supplier
Korean supplier
Taiwanese supplier

1
2
3
4
5

Overall

Perceived risks

0.4940
0.3467
0.2832
0.1833
0.1034

By the same token, a series of sensitivity analyses was

performed for five other criteria. Figures 4-7 show that a
ranking of the alternatives is sensitive to changes in the
importance of all the other criteria, except for cultural
and communication barriers, because the ranking varies
somewhat in the weight percentage ranging from
approximately 10 to 90. On the other hand, as shown in
Figure 8, we find that a ranking of alternatives virtually
remains the same throughout the entire weight range.
The overall utility of the alternatives is robust with
changes in the importance of cultural and communication
barriers.

Conclusions and Suggestions for Future Research

Over recent years, international supplier selection has
been considered the most important procedure in global
sourcing. To help evaluate various international sourcing
strategies under dynamically changing scenarios, this
article proposed an analytical approach known as MAUT.
MAUT has both practical and theoretical advantages
over the existing analytical approaches. The main
advantages of MAUT are:
(1) MAUT is capable of handling multiple conflicting
attributes (e.g. lowest price, best quality, most
timely delivery, lowest risk) inherent in
international supplier selection; consequently, it
helps the purchasing manager to make various
trade-offs between competing attributes such as
cost versus quality, especially when the firm
should shift its priorities (e.g. from cost to quality)
in supplier evaluation.
(2) Through sensitivity analyses, MAUT enables the
purchasing manager to evaluate what-if
scenarios associated with changes in company
policy. MAUT can therefore be easily adapted to
frequent changes in the firms resource
commitment, quality standards, logistics strategy,
product design and organizational structure.
(3) MAUT has the capability to not only incorporate
the uncertainty involved in supplier selection, but
also to convert a normative procedure to a
Decision Support System (DSS) via a commercially-available PC-based program such as
LOGICAL DECISION.
In addition, MAUT is more capable of handling practical
size problems than the existing scoring methods such as
AHP because MAUT can handle more alternatives than
the latter; MAUT can in fact handle up to 500 alternatives
and 100 evaluation measures[30]. Despite the
aforementioned various advantages of the proposed
method, this study could be extended to the following
areas:
(1) More supplier alternatives which encompass both
domestic and international suppliers can be added
to the current research.

Figure 2. Sensitivity of Quality Assurance

Figure 6. Sensitivity of Buyer-Supplier Partnerships

Japanese

Best

Japanese

Best

Canadian

Canadian

Utility

Utility
Taiwanese
Korean

Mexican
Korean
Worst

Taiwanese
0

Percentage of weight on quality assurance

100

Worst

Percentage of weight on buyer-supplier partnerships

100

Mexican

Figure 3. Sensitivity of Financial Terms

Figure 7. Sensitivity of Trade Restrictions
Best

Best
Mexican

Canadian

Utility

Taiwanese

Utility

Mexican

Japanese
Worst

Japanese

Korean
Canadian
0

Percentage of weight on financial terms

100

Korean

Figure 4. Sensitivity of Perceived Risks

Worst

Percentage of weight on trade restrictions

100

Taiwanese

Best

Figure 8. Sensitivity of Cultural and Communication Barriers

Canadian

Best
Utility
Canadian
Korean
Japanese

Japanese
Mexican

Utility
Worst

Taiwanese
0

Percentage of weight on perceived risks

Taiwanese

100

Korean

Figure 5. Sensitivity of Service Performance

Worst
Japanese

Best

Percentage of weight on cultural and

communication barriers

100

Mexican

Canadian

Korean

Taiwanese
Mexican

Utility

Worst

Percentage of weight on service performance

100

(2) Future research into the dynamic (multiple-period)

treatment of international supplier selection would
contribute greatly to the knowledge base in this
area.
(3) Another untapped research potential includes
multi-objective treatment of international supplier
selection and order splitting among the chosen
suppliers.

(4) Rather than evaluating prospective suppliers

based on their past performance, an analytical
approach which can systematically predict the
potential suppliers ability to carry out the terms of
purchase contracts over the long term should be
developed in the light of strategic implications.
(5) Finally, the international supplier selection
decision may include environmental and ethical
issues. It is increasingly important to know
whether or not the chosen suppliers have complied
with both environmental and ethical guidelines set
by the buying firm.
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Hokey Min is Assistant Professor of Logistics and Operations Management, Department of Marketing and Transportation,
Auburn University, Auburn, Alabama, USA.