Irrational Feelings Play a Role in Selecting Suppliers
A new study has found that feelings of guilt due to supply disruption can play a larger than suspected role when it comes to selecting key suppliers.
“Supplier Selection in the Aftermath of a Supply Disruption and Guilt: Once Bitten, Twice (Not So) Shy” is forthcoming in the journal, Decision Sciences. The study was co-authored by M. Johnny Rungtusanatham, the Canada Research Chair in Supply Chain Management at Schulich, together with Thomas J. Kull and Mikaella Polyviou from the W.P. Carey School of Business at Arizona State University.
As part of the study, the researchers invited sourcing professionals to participate in an experiment in which they were asked to recommend between two suppliers for a new outsourcing opportunity following a supply disruption for a different, previously outsourced component. Analyses of the experimental data revealed the following: sourcing professionals who were responsible for selecting the previously outsourced component supplier that resulted in a supply disruption felt guilty. This guilt, in turn, motivated them to recommend a higher-risk, higher-reward over a lower-risk, lower-reward supplier for the new outsourcing opportunity.
“With data, models, and checks-and-balances in place, it is easy to fall into the trap of viewing supplier selection as a purely rational decision, unaffected by past events,” said Professor Rungtusanatham. “But our research questions both premises. We should be mindful that decisions are still made by humans. To reduce exposure to future supply disruption risks, sourcing firms must ensure that the selection of a higher-risk, higher-reward supplier over other lower-risk, lower-reward options by a human decision-maker is not due to guilt over his or her previous supplier decision gone awry.”