Article on Supplier selection

Question

Write an article why Supplier selection has been a critical decision to be made for any company?

Answer 1

Supplier selection has been a critical decision to be made for any company since it may serve to be a competitive advantage and enhance the profits of the company. Thus it is necessary for the company to analyze the best out of the various methods available for supplier selection and employ that method in analyzing and solving their supplier selection problem through that best method. Liao & Kao (2010) had proposed a new integration technique which combines Taguchi loss function, Analytical Hierarchical Process (AHP) and Multi-criteria Goal Programming (MCGP) for assessing and choosing the suppliers, which process will end up in a competitive advantage for the company. Liao & Kao (2010) had assumed the existence of multi-choice aspiration levels, which led them to use a multiple choice method for solving the problem involving the assessment of different criteria or attributes.

They used criteria such as product quality, price, delivery time, service satisfaction and warranty degree in addition to experience and financial stability of supplier to evaluate the suppliers. Each criterion was given an upper as well as a lower limit. Taguchi loss function was determined for each criterion in addition to the degree and range of down loss. AHP was employed and pair wise comparisons were made between the criteria thus forming a matrix. Right eigenvector method was employed to allocate the priorities of the criteria. The results were calculated against a consistency index. The results proved that the judgments were acceptable. The loss and weights estimated were incorporated along with the values of other two criteria into the MCGP model, which had the goal of minimizing the losses and achieving the goals of all criteria based on weights estimated in AHP. Thus the best supplier was chosen.

Such a model was not only useful for supplier selection but also for location selection, product development, marketing or promotion activities, etc and even when the available data is uncertain. The main advantages of employing this model were that it allowed the decision maker to set multiple aspiration levels in criteria and the ability of the model to easily solve the problem. Liao & Kao (2010) had also recommended combining the above-proposed one with multi-segment goal programming, group decision making, analytic network process, and technique for order preference by similarity to ideal solution for future research in solving complex management problems.