Supply chain focus dependent supplier selection problem

Abstract

Increasing globalization, diversity of the product range, and increasing customer awareness are making the market(s) highly competitive thereby forcing different supply chains to adapt to different stimuli on a continuous basis. It is also well recognized that overall supply chain focus should be given an overriding priority over the individual goals of the players, if one were to improve overall supply chain surplus. Among all the possible order winners, ‘cost’ and ‘responsiveness’ seem to be the most significant metrics based on which majority of the supply chains compete with each other. Supplier selection problem is one of the crucial problems that need to be addressed in configuring a supply chain that could have far reaching ramifications on the total supply chain costs and order winnability. Our model, that considers inventory costs and the supply chain ‘cycle time’ reduction costs, would aid a supply chain manager to make informed decisions with regard to supplier selection problem at any stage, dependent upon the priorities attached to supply chain costs and cycle time. Inventory related costs and responsiveness related costs are the two primary cost elements that are considered in this model. We are also making use of a novel dimensionless quantity called the ‘coefficient of inverse responsiveness’ that not only facilitates the introduction of responsiveness related costs into the model but also improves the scalability and simplifies the analysis and interpretation of the results. Based on the strategic model developed, we offer some very interesting managerial insights with respect to the effect of cost efficient operations and/or location and cost of volume related flexibility at a stage on alternate suppliers, which in turn affects the overall supply chain performance.