Assessing business impacts of agility criterion and order allocation strategy in multi-criteria supplier selection

Abstract

This paper formulates supplier evaluation and selection as a multi-criteria decision-making (MCDM) problem with subjective and fuzzy preferences of decision makers over evaluation criteria. As an outcome, this paper provides decision makers with a decision support system that presents the Pareto fronts, a set of best possible high-quality suppliers and optimized business operation levels from such suppliers. In addition, this paper quantifies the importance of the agility criterion and its sub-criteria in the process of evaluating and selecting agile suppliers by measuring the magnitude of bullwhip effect and inventory costs. The proposed system uses a fuzzy analytic hierarchy process (fuzzy AHP) and fuzzy technique for order of preference by similarity to ideal solution (fuzzy TOPSIS) to successfully determine the priority weights of multiple criteria and selects the fittest suppliers by taking the vagueness and imprecision of human assessments into consideration. More importantly, it presents approximated Pareto fronts of the resulting supplier chains for varying priority weights of the agility criterion and its sub-criteria. Finally, we compare business costs of agile and non-agile supply chains before and after reconfigurations of original supply chains in response to unexpected disruptions under two order allocation strategies, a skewed order allocation (SOA) strategy and an even order allocation (EOA) strategy.