Application of multi criteria decision making technique to evaluation suppliers in supply chain management

Abstract

Supplier selection, the process of determining the suitable suppliers who are able to provide the buyer with the right quality products and/or services at the right price, at the right time and in the right quantities, is one of the most critical activities for establishing an effective supply chain. In other words, supplier selection is a multi-criteria decision making problem which includes both qualitative and quantitative factors. In order to choose the best suppliers, it is essential to make a trade-off between these tangible and intangible factors, some of which may conflict. The aim of this study is developing a methodology to evaluate suppliers in supply chain cycle based on Technique for Order Preference by Similarity to Ideal Solution method (TOPSIS). The authors, with the help of going over expertise of experts and their relevant specialized literature, could recognize variables and effectivecriteria in supplier selection. After, the weights for a number of criteria are calculated based on the opinions of experts; these weights are inputted to the TOPSIS method to rank suppliers. Finally, this methodology is done by a numerical example, then, the rank of each supplier is determined according to its results. Key words: Supplier selection problem, technique for order preference by similarity to ideal solution method (TOPSIS Method), supplier management, multi criteria decision making, outsourcing, supply chain management.