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Supplier evaluation and selection criteria in the construction industry of

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Information and Management Sciences
Volume 18, Number 4, pp. 403-426, 2007

Supplier Evaluation and Selection Criteria in

the Construction Industry of Taiwan and Vietnam

Chengter Ho Phuong-Mai Nguyen

National Kaohsiung University Hanoi University of
of Applied Sciences Business and Management
R.O.C. Vietnam

Ming-Hung Shu
National Kaohsiung University
of Applied Sciences
R.O.C.

Abstract

To improve the quality of construction projects, it is critical to establish a better in-

frastructure in the modern society. Also an effective supplier chain management (SCM) is
required in the construction industry to ameliorate the quality of construction projects. As
means of achieving successful SCM, the supplier relationship management which is the key
position of suppliers in construction supply chain should be enhanced first. In this paper, a
set of supplier selection and assessment criteria was adapted from Kannan and Tan (2002), to
design the questionnaire for practical survey in Taiwan and Vietnam. The questionnaire for
this survey was designed to find out how companies in the construction industry of Taiwan
and Vietnam manage their relationships with suppliers and the actual range and importance
of each criterion. Four hundred questionnaires were mailed to Taiwan and Vietnam con-
struction companies, 200 in each area. Data from the survey were analyzed by using SPSS
software version 12 for Windows. Descriptive data analysis was conducted to investigate
the actual rank of supplier evaluation and selection criteria. Hypothesis testing for equality
of means was also used to discover the differences between Taiwan and Vietnam in rating
the criteria. Findings from this research were consistent with the results of the study of
Kannan and Tan (2002). The results confirmed that non-quantifiable criteria play a very
important role in the selection process and that the construction companies of Taiwan and
Vietnam have come to an agreement in most of the criteria. It is implied in this study that
Vietnam construction companies can gain knowledge from Taiwan counterparts particularly
in management field in the coming future.

Keywords: Supply Chain Management, Supplier Evaluation Criteria, Supplier Selection

Criteria, Construction Industry.
Received September 2005; Revised January 2006; Accepted April 2006.
Supported by ours.
404 Information and Management Sciences, Vol. 18, No. 4, December, 2007

1. Introduction

Suppliers have always been an integral part of a company’s management policy. Fur-
thermore, when firms are allocating more resources to their core competencies and en-
couraging the outsourcing of non-core activities they have more reliance and dependence
on suppliers. It is increasingly important that companies have strong relationship with
their suppliers to stay ahead of competition. The establishment, development and main-
tenance of the relationship between exchange partners are crucial to achieving success
(Morgan and Hunt (1994)).
In the current international competitive environment, many manufacturers are focus-
ing on supplier management as a means for achieving sustainable competitive advantage.
Supplier management is defined as “organizing the optimal flow of high-quality, value-
for-money materials or components to manufacturing companies from a suitable set of
innovative suppliers” (Goffin et al. (1997)). It is crucial for several reasons. Suppliers can
have significant influence on a manufacturer’s performance through their contribution to
cost reduction, new product design and enabling the constant improvement of quality
(Monczka et al. (1998)). Consequently, studies of supply chain management (SCM)
are now increasingly concentrating on the relationships between organizations involved
rather than the traditional physical flow of materials and products. The supplier selec-
tion and evaluation processes draw even more concern from scholars and practitioners.
Many scholars have argued about what criteria should be considered when selecting and
evaluating suppliers and the importance of each criterion in the process. For examples,
Lambert and Pohlen (2001) indicated that traditionally many companies use logistics
focused metrics to evaluate their current and potential suppliers such as lead time, fill
rate, or on-time performance. Along with the development of SCM philosophy, the range
of criteria evolved a lot but the three core items are still to be used such as cost, quality
and delivery performance. Monzka et al. (1998) suggested eleven categories that should
be used in initial supplier evaluation process: supplier management capability; overall
personnel capabilities; cost structure; total quality performance systems and philosophy;
process and technological capability, including the supplier’s design capability; environ-
mental regulation compliance; financial capability and stability; production scheduling
and control systems, including supplier delivery performance; information systems capa-
bility (e.g., EDI, bar coding, ERP, CAD/CAM); supplier purchasing strategies, policies,
and techniques; and longer-term relationship potential. Tracey and Vodermebse (1999)
 Supplier Evaluation and Selection Criteria in the Construction Industry of Taiwan and Vietnam 405

studied supplier selection criteria and supplier involvement impact performance by us-
ing survey method. They focused on three primary relationships: supplier criteria and
supplier performance, supplier involvement and supplier performance, supplier perfor-
mance and manufacturing performance. The importance of supplier selection criteria
was tested through six items: product quality, product availability, delivery reliability,
product performance, product cost and service after sale. Besides, Juhantila and Viro-
lainen (2002) recognized that the process of managing business relationships during all
respective stages is a critical success factor. From this study, good supplier attributes
which clearly stand out are: high quality, delivery accuracy, responsiveness and service,
low competitive cost and competitive price. In addition, Kannan and Tan (2002) used
a survey (total of 4,500 surveys were mailed) to examine relationships between the per-
ceived importance of supplier selection and assessment criteria for items being used in
production and business performance. Based on literature sources, thirty criteria used
in supplier selection were identified. These items reflect a variety of supplier attributes
including costs, quality, delivery performance, capability and culture.
However there has not been any general set of standards for supplier selection and
evaluation. Purchasing firms use several criteria which do not seem to be identical even
though these firms are of the same industry. It is due to the characteristics of the firms,
the goals of their production and many other reasons. More effort should be therefore put
to study the application of supplier assessment and selection criteria in a real context.
The construction industry of Taiwan and Vietnam is then chosen for empirical study
in this research work. The main purpose of this study is to identify what criteria the
construction firms in Taiwan and Vietnam are deploying to evaluate and select suppliers.
Moreover, comparison will be done to see whether there are any geographical similarities
and dissimilarities.

2. The Present Situations and Problems Faced of Construction Industry in

Taiwan and Vietnam

Fragmentation is one of big common challenges in construction industry particularly

in Taiwan and Vietnam leading to the demand for improvement in supplier relationship
management. Numerous projects have derailed from their original schedule, thereby
increasing the project cost to unrealistic values. One of the reasons being that the tra-
ditional model of planning, scheduling, controlling and contracting have each of their
406 Information and Management Sciences, Vol. 18, No. 4, December, 2007

functions, as different islands. The future wars in the construction industry would be
fought mainly on three grounds: technology, improvement in the value chain, and world-
class management practices. Any organization trying to win in the competition would no
longer have to change their traditional methods of conducting business. SCM in construc-
tion industry offers a way to integrate the traditional islands, particularly subcontractors
and supplier skills and competencies in order to achieve performance improvement and
thereby reducing the cost and rewarding the business supply chain with sustainable
growth (Dainty et al. (2001b)). The co-operation between main contractors (assembler),
subcontractors and suppliers are subjects of SCM, and development of these relation-
ships within the supply system towards arrangements of lean supply and partnerships
(e.g. Lamming (1996), Dainty et al. (2001a)).
Moreover, manufacturing sector has saved billions of dollars by suitably applying SCM
model and particularly managed well with their relationship with key suppliers. Cost
savings has led to better performance and sustainable growth because saved resources are
invested in core activities of the company. This fact urges construction companies to pay
more attention to supplier relationship management to overcome fragmentation problem.
Furthermore, the current situation of Taiwan and Vietnam construction industry also
raise a claim to enhance supplier relationship management.
Taiwan’s diplomatic isolation has resulted in local contractors trying to be as self-
sufficient as possible. However, Taiwanese construction companies have capacity to tackle
only a third of the major projects in this island1 . Thus there comes a need to attract
international contractors and raise construction standards to international levels. Since
the construction sector was opened to foreign firms in 1986, around 30 foreign companies
have been established in Taiwan. Nowadays, Taiwan construction market reports the
participation of more and more foreign companies. However, wide ranging opportunities
for equipment and material suppliers are recorded due to the scale of ongoing and planned
construction work in Taiwan. Although Taiwan produces its own materials such as
cement, steel, glass, ceramics, window and door frames, locks and hardware, Taiwan
manufacturers do not have the capacity to supply both the level of demand and meet the
increasing requirement for high quality products. Therefore, imports of products such as
plasterboard, tiles, cement, adhesives, paints, fillers and bathroom/kitchen fittings have
shown exceptional growth recently with US and Japanese products doing well and will
1A report on Taiwan construction industry
http://www.tradepartners.gov.uk/handouts/building/taiwan2 construction.html.
 Supplier Evaluation and Selection Criteria in the Construction Industry of Taiwan and Vietnam 407

continue to expand in the time to come. On construction equipment, Taiwan imports

several of its requirements and three main suppliers for Taiwan are Japan, US and
Germany, the main European supplier who are in fierce competition with one another.
Taiwan is striving to meet its aims of providing its citizens with a better way of life
and becoming a commercial and financial hub in the Asia Pacific. To attain these objec-
tives, infrastructure projects in Taiwan need to be completed in high quality standard,
on schedule, and within budget. Consequently, the input of overseas expertise will be
essential. Moreover, continued representations from Taiwan’s trading partners on the
need for a more equitable operating climate will also bring pressure for change.
Construction supply chains in Taiwan currently lack a set of business-to-business
(B2B) process standard in construction industry, which results in each member in supply
chains (including Supplier, Construction Companies, Customers and End User) paying
a great deal of additional cost. The construction industry has to recognize the B2B
process and the vital role of relationships between the firms and their suppliers in order
to help construction companies, suppliers and all the related parties to provide better
products and services. Consequently, better understanding of the mentioned issues will
lead construction companies to sustainable competitiveness through better supply chain
operations.
Although the construction industry of Vietnam has quite long time of development,
it is still weaker than neighboring countries’ counterparts such as Thailand, Malaysia,
and Indonesia etc. The industry thus aims to consolidate its position in the economy
and strengthen its capacity to compete better with other counterparts. The 1990-decade
marks a miracle change of this industry. During the 1991-1995 Five Year Plan, the
Vietnamese construction industry has done many attempts and created an active and
right change in its development duty. This change has taken an important part in the
implementation of the nation’s socio-economic development duties. Results of business
and production activities of the construction industry are shown through the following
branches: Construction material production, Building, Works of urban planning, Con-
struction management, Infrastructure and urban service development. Current promi-
nent features of this industry are labor redundancy and low quality of construction ma-
terial production. Moreover, one of the biggest issues in Vietnam construction industry
today is that the concept of supply chain seems to be equivocal to many managers. Con-
struction firms are operating independently and do not have long -term relationship with
suppliers. That situation explains why the industry is not developed as other countries.
408 Information and Management Sciences, Vol. 18, No. 4, December, 2007

The fact shows that it is very important to manage supplier relationship by choosing
the right criteria for the supplier evaluation and selection process particularly in con-
struction industry of Taiwan and Vietnam. Thus the research constructs are supplier
evaluation criteria and selection criteria. This research therefore attempts to discover
how supplier selection and evaluation criteria are used in the construction industry of
Taiwan and Vietnam. It adapts a list of criteria found from browsing previous studies
and checks the importance of each item in the list through an empirical study in Taiwan’s
and Vietnam’s construction industry. The research framework can be shown in Figure
1.

Figure 1. Research Framework.

3. Study of Supplier Evaluation and Selection Criteria

To achieve effectiveness in supplier selection process, a set of proper and meaningful

criteria should be identified. Based on the Kannan and Tan (2002) research, we proposed
a list of 13 criteria for supplier evaluation process and 30 for supplier selection process.
Supplier evaluation criteria are grouped into 3 categories: delivery and service quality,
information sharing and responsiveness. In each category, several variables are raised to
measure performance of the whole category. As Kannan and Tan (2002) proposed, we
use four variables to measure performance of the whole category: quick response time in
case of emergency, problem, or special request; the flexibility to respond to unexpected
demand changes; willingness to change their products and services to meet purchaser’s
changing needs; willingness to participate in purchasing firm’s new product development
and value analysis.
A proper set of supplier selection criteria supports purchasing firms. The Supplier
selection criteria is divided into 6 groups namely the (1) Capability, (2) Ability to meet
 Supplier Evaluation and Selection Criteria in the Construction Industry of Taiwan and Vietnam 409

buyers’ needs, (3) Honesty and Integrity, (4) Price, (5) Buyer- Supplier Fit, (6) Strategic
Commitment of Supplier to Buyer. For each category, we followed the Kannan and
Tan (2002) and suggested some variables to clearly identify their importance in the
purchasing firm’s point of view. It is hard to apply any fixed set of criteria to evaluate
and select suppliers. SCM practitioners base their choices on different criteria. There is
no particular pattern for any firm. Therefore, purchasing firms must understand their
firm’s context to effectively deploy evaluation and selection process.

3.1. Survey methodology

To acknowledge the differences of supplier evaluation and selection criteria that are
being considered in Taiwan and Vietnam construction industries with those found from
the previous studies, two sets of hypotheses are raised.

H1a: There is a consistency in the range of supplier evaluation and selection criteria in
use, found from the empirical study in Taiwan and Vietnam with those of the previous
researches.

H1b: There is no consistency in the range of supplier evaluation and selection criteria
in use found from the empirical study in Taiwan and Vietnam with those of the previous
researches.

H2a: There is a consistency in the level of importance of supplier evaluation and selection
criteria in use found from the empirical study in Taiwan and Vietnam with those of the
previous researches.

H2b: There is no consistency in the level of importance of supplier evaluation and

selection criteria in use found from the empirical study in Taiwan and Vietnam with
those of the previous researches.

Moreover this research also aims to discover the differences in using supplier evalua-
tion and selection criteria in construction industry of two locations: Taiwan and Viet-
nam. Consequently the following hypotheses are initiated. Hypothesis H3 is to test the
difference in the range of the criteria.

H3a: The range of supplier evaluation and selection criteria used in construction industry
of Taiwan and Vietnam is the same.
410 Information and Management Sciences, Vol. 18, No. 4, December, 2007

H3b: The range of supplier evaluation and selection criteria used in construction indus-
try of Taiwan and Vietnam is not the same.

Hypotheses H4 and H5 are general hypotheses for all the evaluation and selection
criteria to test the differences in the level of importance of the criteria between Taiwan
and Vietnam.

H4a: The mean values of supplier evaluation criteria used in construction industry of
Taiwan and Vietnam are equal.

H4b: The mean values of supplier evaluation criteria used in construction industry of
Taiwan and Vietnam are not equal.

H5a: The mean values of supplier selection criteria used in construction industry of
Taiwan and Vietnam are equal.

H5b: The mean values of supplier selection criteria used in construction industry of
Taiwan and Vietnam are not equal.

Actually, for each criterion, there should be a pair of hypotheses to state the problem.
The hypotheses have the format as follow:

Ha: Mean value of this criterion in Taiwan construction industry is equal to that in
Vietnam.

Hb: Mean value of this criterion in Taiwan construction industry is not equal to that in
Vietnam.

The hypotheses can also be written in this statistical form by using abbreviations.

µ : Mean Value
Ha : µT W = µV IE TW : Taiwan
Hb : µT W 6= µV IE VIE : Vietnam

H4 and H5 that are mentioned above are got from the results of totalizing thirteen pairs
of hypotheses for evaluation criteria and twenty nine pairs for the selection criteria.
The first main part includes 8 questions required to gather general data from the
surveyed companies. These 8 questions are grouped into three subparts. All the questions
except the first are multiple choice questions. The first subpart has three questions i.e.
 Supplier Evaluation and Selection Criteria in the Construction Industry of Taiwan and Vietnam 411

questions 1 to 3. They are designed to know what industry the company is in, the position
of the respondent in the company and the length of business operation of the company.
The second subpart (question 4 to 6) has three questions relating to figures: (1) number
of employees in the company, (2) paid-in capital and (3) estimated annual total revenue.
Each question has four alternative answers ranging increasingly. The author intends to
raise these questions, as these three figures help to identify the size of the company for
further analysis in chapter 4. Then the author can decide whether these respondent
companies meet the requirements of small and medium sized enterprises (SMEs) or not.
A list of construction companies are randomly picked up from the industry indexes in
Taiwan and Vietnam and a total of 400 construction companies of Taiwan and Vietnam
are selected to be the sample for this study − 200 in Taiwan and 200 in Vietnam. The
target respondents are managers and executives who have high responsibilities for man-
ufacturing, and core activities in the company. These individuals are expected to know
their companies better than others so that the validity and reliability of questionnaire
surveys are ensured well.
A survey instrument using a self-administered approach is developed to collect data
for this study. Through literature review, a basic survey questionnaire is designed and
customized for construction firms, in two geographical areas of Taiwan and Vietnam.
Therefore the survey questionnaires are translated from English into Vietnamese and
Chinese, which are slightly different from the first part where a general company data is
gathered. These differences have been mentioned in questionnaire design section in this
chapter.
The survey’s first step was to pre-test the questionnaire for content validity and clar-
ity with the participation of 3 academic members (1 professor from Taiwan for English
and Chinese version and 2 professors from Vietnam for Vietnamese version) and 4 con-
struction companies. Pretest questionnaires are not be used in subsequent analysis. The
responses from the pre-test divulged that some minor items in the questionnaire should
be revised. The first part- company general data - at the first time had the same al-
ternative choices for both Taiwan and Vietnam then were changed to different ones. In
the second and third parts of the questionnaire, some variables were reworded (particu-
larly in Vietnamese version) for better clarity. No doubt for validity of the questionnaire
content existed. All academic members agreed with the structure and content of the
questionnaire.
412 Information and Management Sciences, Vol. 18, No. 4, December, 2007

The second step was to deliver a revised survey questionnaire to choose construction
companies in Taiwan and Vietnam. A total of 400 questionnaires were mailed, 200 in
Vietnam, and 200 in Taiwan. The method of delivery here was mailing which proved to
have a higher response rate than the e-mailing but a lower rate than direct interviewing.
The author chose this method as it was the most suitable method for this study consid-
ering the constraints of time and cost. The total data collection period for this survey
took two months including the pre-test .Thanks to the high interest and valuable help
rendered by the respondents.
The survey started in September 2004 and ended in November 2004 including the pilot
test and the final survey. It took almost two months to gather all data required. For the
final survey, 400 questionnaires were mailed to construction companies in Taiwan and
Vietnam - 200 in each location. In Taiwan, 35 out of 200 questionnaires were completed
and returned to have a response rate of 17.5% and in Vietnam a total of 37 out of 200
questionnaires were returned back to have a response rate of 18.5%. These responses are
used for the data analysis in following steps.

3.2. Major findings and discussion

3.2.1. History of sample companies

37.1% of Taiwan involved companies were established before 1986 while Vietnam,
16.2%. Most of the companies which responded from Vietnam were established between
1986 and 1995 accounting for 40.5% of the total number of companies. A few started
their business after 2000. These figures reveal the fact that most construction companies
are big ones and have long history of doing business.

3.2.2. Type of enterprises

The type of enterprise is defined by either of two standards: number of employees and
paid-in capital or both of them. 54.3% of companies who responded where very small
companies with less than 100 employees while 22.9% where large companies as they had
more than 200 employees. Based on the paid-in capital criterion, 42.9% where large
companies as they had more than NT$80 million paid-in capital while 37.1% very small
and the rest where small and medium size enterprises.
For Vietnam construction companies, the two standards are slightly different. Most
companies are of large size with more than 300 employees (accounting for 35.1% of the
 Supplier Evaluation and Selection Criteria in the Construction Industry of Taiwan and Vietnam 413

total number of respondents), 5.4% has less than 100 employees (very small companies)
and others are SMEs. On the base of paid-in capital, 56.8% of the companies who
responded where large (more than VND 10 billion) and only 2.7% where very small
companies.
All these figures point out the responding companies where large and are better
representatives for construction industry as the characteristics of this industry is that
they call for companies which are large and having higher paid in capital.

3.2.3. Business situation of sample companies

Most Taiwan and Vietnam construction companies have high annual total revenue.
For the companies in Taiwan, 34.3% gets more than NT$50 million per year, another
34.3% more than NT$80 million. For Vietnam construction companies, 78.2% earns
more than VND 1 billion and 16.2% from VND 800 million to VND 1 billion. This is
explainable as construction companies have large amount of paid-in capital so that they
must earn a lot to compensate for the huge initial expense.

3.2.4. Relationship with suppliers

From the available data, it is clear that most Taiwan and Vietnam companies (65.7%
for Taiwan and 37.8% for Vietnam) have more than 20 suppliers, underlying that they
are big companies. Therefore, high number of current suppliers in one sense would
indicate that the company is doing good business with suppliers but would also mean that
potential buyer - supplier conflicts are looming somewhere, challenging the companies in
the future.
In addition to the number of suppliers, it is essential to know the change in the
number of suppliers in the recent years. 60% of Taiwan’s responding companies report
an expansion in outsourcing activities and an increase in their number of suppliers in
the last 5 years while Vietnam being 97.3%. In contrast, 40% and 2.7% Taiwan and
Vietnam companies cut their number of suppliers respectively. Among the companies
increasing the number of suppliers, most of Taiwan’s companies have only 1 to 3 suppliers
accounting for 28.6% of the total 35 responding companies. However, 22.9% Taiwan’s
companies end their relationship with more than 10 suppliers. The situation seems to
inverse in Vietnam, 38.9% increase the number of suppliers by more than 10 and only 1
company decrease its number of suppliers.
414 Information and Management Sciences, Vol. 18, No. 4, December, 2007

3.3. Test of validity and reliability

It is very important to verify the validity and reliability, which is also called the
trustworthiness of each dimension. Thus correlation analysis and coefficient (run in
SPSS 12 for Windows) are conducted for each factor of two dimensions in this study.
Then the reliability coefficients are taken square root to get the validity indices of the
factors. The point here is these tests are separately carried out for Taiwan and Vietnam
responses. The raw data for reliability test are from part 2 and 3 of the responding
survey questionnaires.

Table 1. Cronbach’s α and validity index of supplier evaluation factors.

Taiwan Vietnam
Factor Cronbach’s α Validity Index Cronbach’s α Validity Index
Delivery and
.537 .733 .521 .722
service quality
Inf ormation
.703 .838 .544 .738
sharing
Responsiveness .800 .894 .619 .787

Table 2. Cronbach’s α and validity index of supplier selection factors.

Taiwan Vietnam
Factor Cronbach’s α Validity Index Cronbach’s α Validity Index
Capability .718 .847 .623 .789
Ability to meet
.804 .897 .643 .802
buyer′ s needs
Honesty and
.764 .874 .658 .811
Integrity
Buyer - supplier fit .807 .898 .776 .881
Strategic
commitment of .841 .917 .800 .894
supplier to buyer

These two tables show that all factors have the Cronbach’s α in the limit range which
means they are reliable and valid for the research.

3.4. Rank of supplier evaluation and selection criteria

The two main dimensions in this study are supplier evaluation criteria and supplier
selection criteria. Five point scales of the Likert are used to assess the importance of each
variable identified for each dimension. Respondents in construction companies are asked
to rate each criterion in the evaluation and selection process. As mentioned earlier, one
 Supplier Evaluation and Selection Criteria in the Construction Industry of Taiwan and Vietnam 415

of the writer’s aims is to test the differences of significance of supplier evaluation and
selection criteria between the results of this study and previous ones. This is implicit
in hypotheses 1 and 2. Descriptive data analysis will help to answer these hypotheses.
Data from the survey are put into SPSS software for analysis and produce meaningful
output for this study.

Table 3. Importance of supplier evaluation criteria in Taiwan construction industry.

Supplier Evaluation Criteria Mean Value
On time delivery 4.4571
Quick response time in case of emergency, problem or special
4.3714
request
Quality performance 4.2857
Quantity precision 4.2857
Service performance 4.1714
Cost of product 4.1143
Communication systems 4.0000
Flexibility to respond to unexpected demand changes 3.9143
Willingness to change their products and services to meet the 3.9143
firm’s changing demand
Use of advanced technology 3.7429
Willingness to participate in the firm’s new product 3.7143
development and value analysis
Presence of certification/ document 3.5143
Willingness to share sensitive information 3.4286

Table 4. Importance of supplier evaluation criteria in Vietnam construction industry.

Supplier Evaluation Criteria Mean Value
Quality performance 4.7027
On time delivery 4.6216
Flexibility to respond to unexpected demand changes 4.3243
Quick response time in case of emergency, problem or special
4.2973
request
Cost of product 4.2703
Service performance 4.2703
Presence of certification/ document 4.2162
Quantity precision 4.1351
Willingness to change their products and services to meet the 4.0000
firm’s changing demand
Willingness to participate in the firm’s new product 3.7027
development and value analysis
Communication systems 3.6757
Willingness to share sensitive information 3.4865
Use of advanced technology 3.4595

As shown in the two tables, the five most important criteria in evaluation process
416 Information and Management Sciences, Vol. 18, No. 4, December, 2007

are not the same between Taiwan and Vietnam. In Taiwan industry, they are: on time
delivery; quick response time in case of emergency, problem or special request; quality
performance; quality precision; and service performance (put into descending order). In
Vietnam, ranking from number one to number 5 in terms of significance, it is necessary
to name these variables: quality performance; on time delivery; flexibility to respond to
unexpected demand changes; quick response time in case of emergency, problem or special
request; and finally the cost of product and service performance because of their equal
mean values of 4.2703. In Taiwan, it is not surprising that on-time delivery (µ = 4.4571)
still takes the highest priority of firm’s choice, due to the fact that saving time from the
input supply step means a lot to a firm so that having goods in hand for selling means
higher competitiveness. However in Vietnam, quality performance (µ = 4.7027) ranks
the first place in supplier evaluation criteria. This indicates that most construction
companies in Vietnam pay more attention to the quality performance of suppliers as
quality is the first concern in production. Good quality of supplies will be an initial
condition for good products particularly in construction industry in which quality of
construction may influence hundreds of other social and economic activities.
For the least important criteria, two items are listed: for Taiwan - presence of certifica-
tion/ document (µ = 3.5143) and willingness to share sensitive information (µ = 3.4286)
while for Vietnam - willingness to share sensitive information (µ = 3.4865) and use of
advanced technology (µ = 3.4595).
For the second dimension of this research, similar analyses are done to find out which
variable is the most and the least important for each factor. Of the 29 criteria for supplier
selection, commitment to quality is defined to be of most importance in both the two
locations: Taiwan and Vietnam with the mean values approximately equal to each other.
Supplier’s ability to meet delivery due dates is claimed to be the second most important
item in Taiwan’s construction industry and prices of materials, parts and services takes
the third position. Interestingly, the positions of these two items are reversed in the
industry of Vietnam.
Among the 29 variables, company size (µ = 2.9429) is the least meaningful in selection
process of Taiwanese construction industry and in Vietnam percentage of supplier’s work
commonly subcontracted (µ = 3.0270) has the lowest position. For Taiwan construction
industry, company size is the least important item in supplier selection process as the
trend in today business is to be effective in operation of small scale rather than big one.
 Supplier Evaluation and Selection Criteria in the Construction Industry of Taiwan and Vietnam 417

Thus enterprises changes everyday to take advantage of small size but high technology.
Company size so that does not affect much the relationship between the purchasing firms
and their suppliers. The situation seems to be very different in Vietnam construction
industry. Although company size is the least important variable in capability factor in the
selection process, it is not the least meaningful criteria of the 29 supplier selection criteria.
Openness to site evaluation, geographical compatibility, and percentage of supplier’s
work commonly subcontracted are the three least important items. They have equal
mean value of 3.0270.

Table 5. Importance of supplier selection criteria in Taiwan construction industry.

Supplier Selection Criteria Mean Value
Supplier Selection Criteria Mean Value Commitment to quality 4.5429
Ability to meet delivery due dates 4.4286
Prices of materials, parts and services 4.2571
Reputation of supplier 4.2286
Supplier’s process capability 4.1143
Honest and frequent communications 4.0857
Ethical standards 4.0000
Commitment to continuous improvement in product and process 3.9143
Supplier’s effort in promoting JIT principles 3.8857
Technical expertise 3.8571
Testing capability 3.8571
Reverse capacity or the ability to respond to unexpected demand 3.6857
Flexible contracts terms and conditions 3.6571
Past and present relationship with suppliers 3.6571
Supplier’s ability to make decent profit for the company 3.6286
Supplier’s effort in eliminating waste 3.6000
Geographical compatibility 3.6000
Scope of resources 3.5143
Supplier’s strategic importance to purchasing firms 3.5143
Openness to site evaluation 3.4857
Financial stability and staying power 3.4571
Cultural match between the companies and suppliers 3.4571
Percentages of supplier’s work commonly subcontracted 3.4571
Supplier’s order entry and invoicing system 3.4571
Insurance and litigation history 3.4000
Supplier’s willingness to share confidential information 3.3714
Industry knowledge 3.3429
Suppliers’ annual orders as percentage of their overall business 3.2571
Company size 2.9429
418 Information and Management Sciences, Vol. 18, No. 4, December, 2007

Table 6. Importance of supplier selection criteria in Vietnam construction industry.

Supplier Selection Criteria Mean Value
Commitment to quality 4.8378
Prices of materials, parts and services 4.7027
Ability to meet delivery due dates 4.6486
Technical expertise 4.4324
Industry knowledge 4.3243
Supplier’s process capability 4.3243
Scope of resources 4.2973
Supplier’s effort in promoting JIT principles 4.2973
Supplier’s effort in eliminating waste 4.2432
Financial stability and staying power 4.2162
Supplier’s ability to make decent profit for the company 4.2162
Testing capability 4.1622
Reputation of supplier 4.1351
Reverse capacity or the ability to respond to unexpected demand 4.0811
Supplier’s strategic importance to purchasing firms 3.9730
Ethical standards 3.9189
Supplier’s order entry and invoicing system 3.9189
Flexible contracts terms and conditions 3.8378
Commitment to continuous improvement in product and process 3.7297
Past and present relationship with suppliers 3.7297
Company size 3.7027
Honest and frequent communications 3.6757
Suppliers’ annual orders as percentage of their overall business 3.5405
Supplier’s willingness to share confidential information 3.4054
Insurance and litigation history 3.3784
Cultural match between the companies and suppliers 3.1351
Openness to site evaluation 3.0270
Geographical compatibility 3.0270
Percentages of supplier’s work commonly subcontracted 3.0270

4. Comparisons of Research Dimensions between Taiwan and Vietnam Con-

struction Companies

Group statistics reveal that questionnaire items in the supplier evaluation and selec-
tion criteria have Mean scores greater than 3. This implies that responding companies
in Taiwan and Vietnam use all the criteria listed in the questionnaire survey and no
criterion is excluded.
To acknowledge whether there are any differences in the use of supplier evaluation
and selection criteria in construction industry of Taiwan and Vietnam, t-test for equality
of means is done for each criterion to get the results.
 Supplier Evaluation and Selection Criteria in the Construction Industry of Taiwan and Vietnam 419

As two samples are from two independent populations and each sample has more than
30 observations, they meet the requirements for using large sample test of means using
z-value for assessment. However, in SPSS software, t-test is carried out and it is still
valuable as there is almost no difference between these two types of tests.
Significance level is α = 0.05. Degree of freedom (df) is 70 because df = n1 + n2 − 2
(n1 , n2 are the number of observations in the test which are the number of responses in
Taiwan and Vietnam, respectively). In t-test, p-value is computed to make the decision
about the hypotheses. Two tailed t-test is conducted for each criterion so that any p-
value smaller than 0.025 will results in the rejection of the null hypothesis and adoption
of the other one. This following table shows the list of the criteria that their mean values
are not equal in the construction industry of Taiwan and Vietnam. The first two criteria
are used in evaluation process and the rest in selection process.

Table 7. List of criteria with p-values smaller than the significance level.
T -test for Equality of Means
Criteria Sig. Mean
t df (2-tailed) Difference
Quality performance 2.967 70 .004 .41699
Presence of certification/document 3.421 70 .001 .70193
Industry knowledge 5.650 70 .000 .98147
Scope of resources 4.263 70 .000 .78301
Technical expertise 3.645 70 .001 .57529
Commitment to quality 2.827 70 .006 .29498
Financial stability and staying power 3.849 70 .000 .75907
Supplier’s effort in eliminating waste 3.018 70 .004 .64324
Prices of materials, parts and services 2.867 70 .005 .44556
Supplier’s ability to make decent
2.682 70 .009 .58764
profit for the company
Supplier’s order entry and invoicing system 2.486 70 .015 .46178

Except for above 11 criteria, the rest have p-value greater than 0.025 so that null
hypothesis is not rejected. Mean values of these criteria are the same in Taiwan and
Vietnam construction industry. There is no significant difference in the use of these
criteria between the two geographical locations.

5. Discussion of Survey Results

The returned questionnaires show that no companies state any different criteria from
the listed ones in part 2 and part 3 of the questionnaire. Therefore there is enough
420 Information and Management Sciences, Vol. 18, No. 4, December, 2007

evidence to conclude that the range of the supplier evaluation and selection criteria used
in construction industry of Taiwan and Vietnam are the same with the criteria proposed
in the study of Kannan and Tan (2002). Hypothesis H1a is then not rejected. Moreover,
all criteria used in this empirical study in Taiwan and Vietnam construction industry have
mean values greater than 3 (data presented in previous part), no criterion is ignored in
evaluation and selection process. The conclusion then is the range of supplier evaluation
and selection criteria in construction industry is the same between Taiwan and Vietnam.
Hypothesis H3a is not rejected.
Previous studies on this field (Watts and Hahn (1993); Giunipero and Brewer (1997);
Kannan and Tan (2002)) have identified quality level, on-time delivery; response time
and service level the most important factors. They also named two least important
items which are willingness to share sensitive information and use of EDI. In this re-
search, terminologies such as “quality performance”, “service performance”, and “quan-
tity precision” are used instead of “quality level”, “service level” and “precise quantity”
to reduce ambiguity to surveyed managers but the meanings do not differ from the ones
used in previous studies so that comparison about the level of importance of criteria
between studies are shown in the two below tables.
As these two tables show, managers seem to agree to some common criteria in sup-
plier evaluation process even when the companies are in several different industries and
countries. Quality level ranks number one in USA and Vietnam but takes the third po-
sition in Taiwan. On-time delivery gets more priority in Taiwan and the next position is
for Quick response time in case of emergency, problem, or special request. Furthermore,
Service level has the second priority in the list of five most important criteria in USA
but it ranks the fifth in Taiwan and Vietnam. One of the reasons is that the survey
in USA was conducted in several industries rather than just one industry like in this
study. Descriptive data analysis in Vietnam proclaims that Cost of product and Service
performance has the same rating position in managers’ viewpoint.
Willingness to share sensitive information is one of the two least important criteria
in three of the regions - USA, Taiwan and Vietnam. Actually it is almost impossible
to request sensitive information sharing from suppliers. Therefore, this criterion doesn’t
have much meaning in supplier assessment.
 Supplier Evaluation and Selection Criteria in the Construction Industry of Taiwan and Vietnam 421

Table 8. Comparison of five most important evaluation criteria between studies.

Rank Kannan and Tan (2002) This study

USA
1 Quality level
2 Service level
3 On-time delivery
Quick response time in
4 case of emergency,
problem, or special
request
Flexibility to respond
5 to unexpected demand
changes
Source: Study of Kannan and Tan (2002) and this research.
Taiwan Vietnam
On-time delivery Quality performance
Quick response time in
case of emergency, On-time delivery
problem, or special
request
Flexibility to respond
Quality performance to unexpected
demand changes
Quick response time
Quantity precision in case of emergency,
problem, or special
request
(1) Cost of product
Service performance (2) Service
performance

Table 9. Comparison of two least important evaluation criteria between studies.

Rank Kannan and Tan (2002) This study

USA Taiwan Vietnam
2 Willingness to share Presence of Willingness to share
sensitive information certification/document sensitive information
1 Use of EDI Willingness to share Use of advanced
sensitive information technology (EDI . . . .)
Source: Study of Kannan and Tan (2002) and this research.

For the criteria in supplier selection process, previous study of Kannan and Tan (2002)
exclaimed that due date performance, quality and price are the most significant criteria
while company size and percentage of supplier’s work commonly subcontracted are the
least significant ones. These following tables present the comparison between the results
of this study and the previous one.

Table 10. Comparison of five most important supplier selection criteria between studies.

Rank Kannan and Tan (2002) This study

USA Taiwan Vietnam
1 Ability to meet delivery Commitment to quality Commitment to
due dates quality
2 Commitment to quality Ability to meet delivery Prices of materials,
due dates parts and services
3 Technical expertise Prices of materials, Ability to meet
parts and services delivery due dates
4 Prices of materials, Reputation of supplier Technical expertise
parts and services
5 Honest and frequent Supplier’s process Industry knowledge
communications capability
422 Information and Management Sciences, Vol. 18, No. 4, December, 2007

In the following table, the criteria are put into reverse order indicating the descending
level of importance for the criteria. USA and Taiwan companies think Company size is
the least meaningful criterion in selecting suppliers while Vietnam companies pay least
attention to Percentage of supplier’s work commonly subcontracted.

Table 11. Comparison of two least supplier selection criteria between studies.

Rank Kannan and Tan (2002) This study

USA Taiwan Vietnam
Percentage of
Supplier’s annual
2 supplier’s work Geographical
orders as percentage of
commonly compatibility
their overall business
subcontracted
Percentage of
1 Company size Company size supplier’s work
commonly
subcontracted

From the above tables, it is clear that the results in this study are consistent to what
Kannan and Tan (2002) and other authors found in their researches. In other word,
hypothesis H2a is not rejected since there is insufficient evidence to conclude that it is
incorrect.
The more important part in this study is the test of differences between Taiwan and
Vietnam construction industry. T -test is done with all variables to see whether mean
values are equal or not. As explained in the research, 11 criteria have the unequal mean
values indicating that they are rated of different importance in Taiwan and Vietnam.
The remaining 21 criteria are proved to have equal mean values. Results from the t-test
show that there is enough evidence to reject null hypotheses H4a and H5a and accept
H4b and H5b. The mean values of evaluation and selection criteria are not the same in
construction industry of Taiwan and Vietnam.

5.1. Major findings

It is essential for any company to cooperate effectively with counterparts and suppli-
ers. In today’s business environment, this notation seems to have greater significance.
Consequently, right decisions should be made on the base of deep consideration about
the purchasing firm and supplier relationship. The most concern for managers then is
how to evaluate and select the right suppliers for the company. As a result, the decision
of supplier evaluation and selection criteria plays a key role. This research has identi-
fied what criteria construction industry in Taiwan and Vietnam choose to involve in the
evaluation and selection process. It brings about some main findings.
 Supplier Evaluation and Selection Criteria in the Construction Industry of Taiwan and Vietnam 423

Above all it is not easy to manage buyer - supplier relationship, particularly the overall
commitment of supplier to the buyer including quality, information sharing and readiness
in case of changes. In this research, the survey results reveal that in the construction
industry of Taiwan and Vietnam, these criteria are of priority. Thus, these items should
be paid more attention in the evaluation and selection process.
There is no doubt that strategic commitment from suppliers is a vital determinant of
business success. This criterion has both direct and indirect impact on the performance
of the company. Therefore, it is required that firms develop relationship with suppliers
who are willing to have tight link and communication and commitment to the firm’s
long-term goals and needs. To achieve this goal, the company must consider suppliers as
an essential part of the firm itself rather than just short-term cooperators. Investment
then should be planned to push the firm and suppliers relations. Purchasing firms can
raise a fund to nurture the relationship with suppliers via several activities such as annual
meetings for key suppliers to introduce about the development of the firms and attract
more suppliers in the future. Other kinds of activities in terms of social and human focus
should be celebrated to strengthen the relationship. Taiwan and Vietnam construction
firms need to notice these issues to push their relationship with suppliers. In Vietnam,
construction companies sometimes do not trust their partners due to the traditional way
of doing business. This is a barrier in developing the buyer-supplier relationship. Thus it
is suggested that Vietnam businessmen in construction industry should erase that kind of
concept and tighten their relationship with suppliers. In Taiwan construction industry,
that kind of problem is rare so it seems to be easier for purchasing companies to deal
with their suppliers.
From this study, it is also mentioned that there is a need for review of supplier
management tactics and initiating solutions for poor tactics and enhancing strong ones.
Manager training then is the first choice. However, it is a must to make sure that training
courses for managers should provide them with new trends and knowledge in the industry
and business administration field so that they can become better practitioners than
before. This kind of activity cost much. So companies need to use cost-benefit model to
analyze any training project before making decisions. One solution for companies is to
co-operate with universities and institutes in construction field so that the companies can
order these education centers to open some short- period training course for managers.
The companies can recruit excellent students in universities to be trained so that they will
become the company’s managers after their graduation. This is a long-term investment
424 Information and Management Sciences, Vol. 18, No. 4, December, 2007

but seems to have good results because through the investment on students, the company
establishes a link with them and after that achieve their commitment to the company.
Another way is that the construction companies hire some agents to help them seek for
talent managers. This kind of human resource strategy costs less and is less risky than
the previous one.
The need to tighten the relationship with suppliers always exists. So focus should be
put on expanding and improving communication system with suppliers. Advanced tech-
nology helps the companies a lot to solve this problem. Taiwan construction companies
have more advantages in this problem as the national-wide communication and internet
network systems are very developed - ranking in the top 10 Asian countries. In contrast,
Vietnam construction companies meet more difficulties as technology infrastructure still
needs a lot of improvement. Moreover, a lot of managers in construction industry of Viet-
nam do not recognize the importance of advanced technology in doing business. Some
don’t have comprehensive understanding of the concepts of supply chain management
in general and supply chain relationship management in particular. Traditional way of
doing business is more common. It is hard to make the old-thinking managers change
their attitude. These are barriers in development.
In addition, a proper set of metrics needs developing so that managers have a con-
sistent and reliable measurement to evaluate the firm’s relationship with its suppliers.
It is required that theoretical researchers and practitioners co-operate and support one
another so that any new ideas and discoveries can be applied and examined in reality at
the right time. This will help the industry to grow and theories to be proved in a shot
span of time.

5.2. Achievement of research purposes

As presented previously, there is a consistence to some extent between the findings

from previous studies in the field and those from this study. However, the context and
location of the studies are different. So there is no strong evidence to conclude that the
range and level of importance of supplier evaluation and selection are always the same.
H1a and H2a hypotheses are then just partly proved for academic significance. Despite
not totally achieving the first proposed aim, this study has given a clear picture of the
situation of supplier evaluation and selection process in construction industry of Taiwan
and Vietnam which means the second objective of this study is attained.
Descriptive data analysis reveals the actual rank of supplier evaluation and selection
criteria in the construction industry. On-time delivery and quality performance are in the
 Supplier Evaluation and Selection Criteria in the Construction Industry of Taiwan and Vietnam 425

highest position in evaluation process. In addition, commitment to quality and ability to

meet delivery due dates are of the most importance in supplier selection process. This
confirms the idea mentioned in previous study that non-quantifiable criteria usually have
much more impact on the evaluation and selection process.
The t-test for equality of means help to answer the question about the dissimilarities
between Taiwan and Vietnam construction companies in rating the criteria. As the
sample size is large enough, the results of the survey have statistic significance. Therefore,
decisions about the hypotheses H3a, H4a and H5a are believed to be confident. The third
research objective is obtained with enough evidence.

6. Implications for Further Research

This research to some extent has completed the initial goals and made some contri-
bution to Taiwan and Vietnam construction industry and academic studies. However,
small sample size and time constraint are the limitations. In light of this research, there
is much room for further investigation. Firstly, each industry has their own features
and may have several different requirements from suppliers. Hence, further study should
adjust the range of criteria to adapt to changes in the real context of construction indus-
try. Secondly, further study will have more academic and practice value if it can expand
the sample size. This study is limited in sample size due to the constraints of time and
money so that survey results may neglect some minor aspects such as regional differences
in the same location and differences caused by variety of enterprise size. Thirdly, the
collected data in this study can be part of further study on the relationship of supplier
evaluation and selection criteria with the construction company’s performance. Thus
it is suggested to add some questionnaire items about the viewpoint of company man-
agers of how these criteria are related to its business performance. Some of the factors
to assess the firm’s business performance are: product quality, market share, financial
ratios (return on assets, return on equity, and average inventory ratio, etc.), and overall
competitive position in the market.

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Authors’ Information
Chengter Ho is currently an Associate Professor in the Department of Industrial Engineering and Man-
agement, National Kaohsiung University of Applied Sciences. He received his PhD in Industrial and
Systems Engineering from the Ohio State University. His research interests are supply chain manage-
ment, knowledge management, and product data management.
Department of Industrial Engineering & Management, National Kaohsiung University of Applied Sci-
ences, Kaohsiung 807, Taiwan.
E-mail: hoc@cc.kuas.edu.tw TEL : +886-7-3814526 ext. 7113

Phuong-Mai Nguyen is currently a Lecturer in the Department of Business Management, Hanoi University
of Business and Management, Vietnam. She received her MBA from National Kaohsiung University of
Applied Sciences. Her research interests are operations management, supply chain management.
Department of Business Management, Hanoi University of Business and Management, Hanoi, Vietnam
E-mail: phuongmai2581@fpt.vn TEL : +84-4-9712898.

Ming-Hung Shu is a professor of Industrial Engineering and Management in National Kaohsiung Univer-
sity of Applied Sciences, Taiwan. He received his PHD in industrial & manufacturing system engineering
in 1996 from the University of Texas, Arlington, USA. He teaches quality engineering and management,
fuzzy statistics, and logistics. His current work is to integrate the quality monitoring and diagnosis into
the enterprise production management system.
Department of Industrial Engineering & Management, National Kaohsiung University of Applied Sci-
ences, Kaohsiung 807, Taiwan.
E-mail: workman@cc.kuas.edu.tw TEL : +886-7-3814526 ext.7105

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