Supplier Selection Methods

As mentioned earlier, the supplier selection activity plays a key role in cost reduction and is one of the most important functions of the purchasing department. Different mathematical, statistical, and game theoretical models have been proposed to solve the problem. References Weber et al. (1991), Aissaoui et al. (2007), De Boer et al. (2001), and Dickson (1966), provide an overview of supplier selection methods. De Boer et al. (2001) stated that that supplier selection is made up of several decision making steps as shown in Figure 6.3. 

Total cost of ownership (TCO) Total cost of ownership (TCO) is another supplier selection method used in practice for single sourcing. TCO looks beyond the unit price of the item to include costs of other factors, such as quality, delivery, supply disruption, safety stock, etc. Unlike the LWP method, TCO assigns a cost to each criterion and computes the TCO with respect to each supplier. 

Finally, the business is awarded to the supplier with the lowest total cost. General Electric Wiring Devices have developed a total cost supplier selection method that takes into account risk factors, business desirable factors, and measurable cost factors (Smytka and Clemens, 1993). TCO approach has also been used by Ellram (1995), Degreave and Roodhoft (1999, 2000, 2004). Example 6.2 illustrates the TCO approach for a simple supplier selection problem. 

Table 6.40 gives a brief summary of some of the other papers not reviewed in this section but have been published since 2000 dealing with supplier selection methods. 

Shore et al. (2004) classify supplier selection methods into data-based methodologies and experience-bas methodologies. 

In terms of analytical methods, Weber et al. (1991) present an important review of the most relevant articles in supplier selection. Out of these articles, only 10 of them used mathematical programming. Ghodsypour and O Brien (2001) also present a comprehensive review of the supplier selection methods. These methods vary in their level of complexity, from simple sourcing and matrix methods to advanced mathematical programming approaches. 

The quantitative methods for supplier selection were discussed in detail in Chapter 6 of this textbook. In Table 6.43, we presented a brief summary of some of the recent supplier selection methods published since 2000. Most of the supplier selection methods in the literature have been developed primarily for domestic supplier selection. A few of these mathematical methods have been used in global supplier selection. We believe that most of the domestic approaches can be extended to global sourcing by incorporating the global selection criteria discussed in Section 8.4.3. 

To illustrate the supplier selection method for tactical items with product bundling and to evaluate the effectiveness of GP as a solution method, we solved several supplier selection models with varying parameters and compared their solutions. This section describes how the problems were generated, computational results, and our recommendation on which GP method works better. In the case study, we assume that every supplier is... 

Supplier Selection Method for Other Quadrants of the Supply Matrix... 

In this chapter we presented a supplier selection problem for the tactical quadrant of the supply matrix. The supplier selection methods for other quadrants of the supply matrix are solved differently the solution method and the criteria chosen to evaluate suppliers depend on the price/risk. 

The hazards and safety precautions for selected common compressed gases are discussed below to illustrate the general approach. More details should be sought from suppliers. Some methods for their preparation in situ are noted full experimental details must be obtained from the literature. 

Supplier selection criteria and audit should cover working methods, system functionality, and GMP knowledge... 

The compound selection methods described thus far can be used to select compounds for screening from an in-house collection, or to select which compounds to purchase from an external supplier. In combinatorial library design, however, it is necessary to select subsets of reactants for actual synthesis. The two main strategies for combinatorial library design are reactant-based selection and product-based selection. In reactant-based selection, optimized subsets of reactants are selected without consideration of the products that will result and any of the compound selection methods already identified can be used. An early example of reactant-based design is that already described by Martin and colleagues which is based on experimental design and where diverse subsets of reactants were selected for the synthesis of peptoid libraries [1]. 

In Chapter 5 there is a supplier selection process to help identify the best supplier for the organization in its present situation. This detailed method works well regardless of volumes and priees by eonsidering maity variables that companies encounter when dealing with members of the supply chain. 

With regard to guidance on selection of application software design methods and techniques, systems with a safety requirement up to SIL 3 should be designed in accordance with the instructions given in the supplier s safety manual as part of a system conforming with lEC 61508. For SIL 4 systems, the developer should additionally confirm that the selected methods do conform with the requirements of lEC 61508-3. 

In this chapter, we discuss supplier selection models and the multiple conflicting criteria used in supplier selection. Multi-criteria ranking methods for the prequalification of suppliers are discussed in detail. Next, multi-criteria optimization models are presented to determine the optimal order alloca-hon among the shortlisted suppliers. Several variants of goal programming methods for solving multiple criteria mathematical programming models are presented with a case study. 

Pre-qualification is an orderly process of ranking various suppliers under conflicting criteria. It is a multiple-criteria ranking problem that requires the buyer to make trade-off among the conflicting criteria, some of which may be qualitative. There are a number of multiple criteria ranking methods available for pre-qualification of suppliers. Section 6.3 discusses in detail the various ranking methods available for supplier selection. 

To illustrate the LWP method, consider a simple supplier selection problem with two suppliers and five criteria (Quality, service, capacity, price, and risk) as shown in Table 6.3. Each criterion is measured over a scale of 1-10, with higher numbers preferred over lower ones. Note that Supplier A has higher quality, service, and capacity but costs more and has higher risk of supply disruptions. The ideal values in Table 6.3 represent the best values for each criterion. However, the ideal values are not achievable simultaneously for all the criteria, because the criteria conflict with one another. 

Multi-Criteria Ranking Methods for Supplier Selection... 

The analytic hierarchy process (AHP), developed by Saaty (1980), is a multicriteria decision making method for ranking alternatives. Using AHP, the DM can assess not only quantitative but also various qualitative factors, such as financial stability, feeling of trust, etc. in the supplier selection process. The buyer establishes a set of evaluation criteria and AHP uses these criteria to rank the different suppliers. AHP can enable the DM to represent the interaction of multiple factors in complex and unstructured situations. AHP does not require the scaling of criteria values. 

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