Suppliers Selection and Evaluation Using Activity-Based Costing

The adoption of modern management philosophy and the increasing global competition force more and more enterprises to outsource their none-core business, and to establish and maintain a stable and long term supply relationship. It is extremely important to select, evaluate and combine suppliers using scientific approaches. Traditional approaches for selecting and evaluating suppliers have much more subjectivity in common. All the shortcomings can be overcome by adopting activity-based costing approach. The paper first gives the concise idea underpinning activity-based costing approach. A general supplier selection and evaluation model and a detailed example using activity-based costing approach are then presented. The pre-requisite conditions using activity-based approaches in supplier selection and evaluation problem is analyzed. Finally, a generic framework of a DSS to support supplier selection and evaluation based on actirity-based costing is proposed.