A Procedure for Choosing among Different Solutions to the Multi-Criteria Supplier Selection Problem along with Two Solution Methods

Abstract

Supplier selection is a multi-attribute decision-making (MADM) problem that is affected by often-conflicting factors (e.g., price, quality, and delivery performance). If a supplier selection problem (SSP) is solved by different MADM methods, different solutions are likely to be obtained. This can be advantageous for decision makers because they have a good choice of alternative solutions. However, it brings about the need for a comparison approach for choosing the solution that best fits the decision maker’s purchasing strategy. So, decision makers may have two needs: (1) a good choice of alternative solutions and (2) a comparison approach. To help decision makers with the first need, we make two contributions to the literature on SSPs. For one, we formulate an integer nonlinear optimization model that evaluates and sorts the suppliers based on similarity to the ideal solution. For another, we make enhancements to the existing Factor Rating (FR) method. For the second need, we propose a comparison procedure to rank different solutions by measuring their relative closeness, both Rectilinear and Euclidean, to the ideal solution. The first two proposed methods along with the existing FR and TOPSIS (Technique for Order of Preference by Similarity to Ideal Solution) methods are applied to a set of test SSPs, and then, the comparison procedure is used to identify the ‘superior’ method for each test problem.