Multi-Criteria Decision Making (MCDM) Model for Supplier Evaluation and Selection for Oil Production Projects in Vietnam

Abstract

The following research utilizes Multi-Criteria Decision Making (MCDM) in order to build a business strategy to reduce product costs, improve competitiveness, focus on production planning based on actual operating capacity and flexible adjustment according to the market, maximize the labor productivity of technology workshops, reduce costs and inventory, and focus on producing many petrochemical products and products of high economic value. Selecting the right materials supplier is of paramount importance to the success of the organization as a whole. Supplier evaluation and the selection of a suitable supplier is a complex problem in which the decision maker must consider both qualitative and quantitative factors. Multi-Criteria Decision Making Models are an effective tool used to solve complex selection issues including multiple criteria and options, especially for qualitative variables. Thus, the author proposes an MCDM model including the Supply Chain Operation Reference (SCOR) model, analytic hierarchy process (AHP) and the Data Envelopment Analysis (DEA) method to evaluate and select the optimal supplier in the oil industry. The criteria used to evaluate potential suppliers are determined through the SCOR model, the weight of all criteria are defined by the AHP model through an expert’s opinion, and DEA is used to rank providers at the final stage. After the model implementation and the results, decision-making unit DMU_01, DMU_04 and DMU_10 are shown to be the best suppliers. This research provides a Multi-Criteria Decision Making model for supplier evaluation and selection in oil production projects. This research also presents useful guidelines for supplier selection processes in other industries.