Grey decision model for supplier evaluation and selection in process industry: a comparative perspective

Abstract

The supplier management is one of the key issues of supply chain management because the cost of raw materials and components constitutes the main cost of a product. Selection of right supplier to meet the production demand is a prime problem in all manufacturing and process industries. A critical part of the supplier selection process is the determination of the relative importance of each of the contributing factors. This work presents an alternative decision model to evaluate the relative performance of suppliers which has multiple outputs and inputs. In this study, the grey relational analysis which uses grey relational grade as performance index is specially adopted to determine the optimal selection of suppliers. Moreover, the principal component analysis and entropy methods are applied to evaluate the weighting values corresponding to various performance characteristics so that their relative importance can be properly and objectively described. The method has been employed to aggregate multiple performance measures for a real-world data set of suppliers of a medium-sized firm operating in the electroplating industry. The results reveal that grey relation analysis coupled with principal component analysis can effectively be used to obtain the optimal selection of suppliers. Hence, this study confirms that the proposed approach can be a useful tool to improve the performance of supplier selection process in process industries.