Supplier selection in the Malaysian telecommunications industry

Abstract

Supplier selection plays an important role in any organisation. This study investigates and examines supplier selection criteria and the impacts on buying firm performance; specifically focusing on the telecommunications industry in Malaysia. Previous studies in this area have focussed on the criteria such as quality, price, delivery, supplier relationship management and decision making tools and techniques. However, little research has been undertaken to include government policies and business ethics as elements in the supplier selection criteria. After a literature review and interviews, the development of conceptual frameworks and a number of hypotheses were put forward. To achieve an in-depth study, four major telecommunications service provider companies in Malaysia were chosen as a case study. A questionnaire was used as the main instrument in gathering data. The questionnaire is principally concerned with the understanding of supplier selection and its criteria; based upon the variables that are used for the model and hypothesis testing. The study also investigates the relationship between supplier selection and the impact of supplier selection to the company performance. This model was tested using Structural Equation Modelling (SEM) technique with the AMOS software application. Results indicated all of the criteria include quality, price, delivery, supplier relationship management, decision making tools and techniques, government policy and business ethics as valid constructs. A good model fit was also established. The findings of this research conclude that the influencing criteria to supplier selection in the telecommunications industry in Malaysia are supplier delivery performance standards and supplier relationship management even when considering the remainder of the above mentioned elements.The price factors were found to be less important due to this factor possibly leading to unhealthy competition in the market in terms of price wars among the suppliers in order to win the business. Most of the criteria are also interrelated to each other and affect the supplier selection decision. This model has added new perspectives to the study of supplier selection in the supply chain management field. As for future research it is suggested that intangible elements such as political, cultural and social influences are included in the conceptual framework; as this would offer important insight for management bodies in organisation, academia and public policy fields alike.