An integrated supplier selection and procurement planning model using product predesign and operational criteria

Abstract

The literature of supply chain management and concurrent engineering indicates that many benefits can be achieved if suppliers are involved in product design and development. This paper proposes a single product, multiple sourcing model for evaluating and ranking potential suppliers using a multi-criteria decision making tool, the analytic hierarchy process (AHP). In addition to the criteria related to the operational aspects of the production process, such as quality and price, AHP considers other criteria related to the early stage of product design, such as end customer requirements satisfaction, technical product specifications, and supplier flexibility. The integration between operational criteria and predesign criteria, gives the decision makers the opportunity to select the suppliers that have the potential to satisfy their future demand of raw materials, components, subassemblies or services effectively and efficiently, as well as the capability to satisfy the end customers’ requirements by positively affecting the design of the finished products. The output from AHP is then used in a two-stage optimization model where a utility function that includes suppliers’ relative weights is first maximized to select the best suppliers, then a cost function is minimized to determine the amounts of raw materials, components, subassemblies or services to be ordered from every selected supplier. An application to the lubricants industry is carried out where predesign criteria such as base oil dynamic viscosity and kinematic viscosity are taken into account in the supplier selection phase to show the effectiveness of the model.