Balancing Sustainability Risks and Low Cost in Global Sourcing

Abstract

AbstractIn this chapter, we attempt to develop an integrated framework for simultaneously addressing the supplier selection and order allocation problems, considering the trade-off between supply chain sustainability (in environmental, social, and economic terms) related risks and procurement cost. First, we identify supply chain sustainability-related risks for evaluating suppliers based on practice and an extensive literature review. Secondly, these criteria are used to assess suppliers’ sustainability risk performance, using principal component analysis. Then, the min-max normalization is applied to the principal component analysis scores to generate the suppliers’ adjusted sustainability risk performance scores, which are then utilized to select a set of qualified suppliers. Subsequently, the specific supplier selection and order allocation decisions are determined via a bi-objective mixed-integer programming model, which attempts to maximize the supply chain’s sustainability performance while minimizing the procurement cost. This proposed framework forms a decision support system for our sustainable supplier selection and order quantity allocation. Finally, we present an illustrative example of outsourcing contract manufacturers in the apparel industry to demonstrate the applicability of the proposed framework in practice.