A Multiple Criteria Approach to Strategic Supplier Selection

Mohammad Reza AKBARI JOKAR Yannick FREIN Lionel DUPONT Laboratoire GILCO, Institut National Polytechnique de Grenoble Akbari-Jokar@gilco.inpg.fr Frein@gilco.inpg.fr Dupont@gilco.inpg.fr Abstract: This paper presents some necessary elements for a multiple criteria approach to the Strategic Supplier Selection (SSS). This approach has to consider the firm strategy, subjective and objective criteria, group decision making, supplier probabilistic behavior and supplier and buyer constraints. In this paper we analyze these necessary elements for a global approach and develop a two level approach that selects suppliers by considering these characteristics. In the first level this approach selects the strategic suppliers. In the second level a mathematical model propose the final solution by considering the objective and subjective criteria. Key words: Supplier selection, business strategy, supply chain management.

Introduction
For many firms, the purchasing cost is the most important cost of products. For example, in high-tech firms it accounts for up to 80% of total product costs (Burton, 1988). It shows the importance of purchasing decisions. The supplier selection is probably the most important purchasing decision (Nydick, 1992; Mobolurin, 1995). It is undoubtedly one of the decisions that determine long-term viability of the firm (Thompson, 1990). The Strategic Supplier Selection (SSS) has two different aspects. The first aspect is to select the number of suppliers. Considering the firm and market characteristics, the business strategy of the firm can encourage or discourage a large number of suppliers. For example, in a "Just in time" environment most firms prefer to pursue the strategy of mono supplier or a small number of suppliers (Ansari, 1986). Today we are in a co-operative logistics period" (Akbari et al., 2000-a; Akbari et al., 2000-b) in which the firm seeks a high level of cooperation with its important suppliers. Such co-operation requires a small number of suppliers because co-operation with a large number of suppliers is more difficult than with a few. Quayle (Quayle, 1998) shows the important factors in mono and multi supplier selection. The second aspect of SSS is the selection of the best suppliers. In this paper we consider this aspect of the supplier selection problem. Initially we will present the various supplier selection criteria. Secondly we present different characteristics of supplier selection. Thirdly the existing methods in the literature will be presented and analyzed. By considering the current research gap, we make a contribution to the development of a multiple criteria approach able to consider different SSS characteristics. A conclusion and some suggestions for future research complete this paper.

SSS criteria
Dickson's paper (Dickson, 66) is an interesting and seminal work. He proposes 23 criteria taken from a case study carried out in 170 firms. Table 1 presents the result of his work, in which the 23 criteria are ranked according to their weight. At that time (1966), the most significant factors in supplier selection were "Quality", "Delivery ", "Performance History" and "Warranties and Claim Policies ". The 23 criteria proposed by Dickson cover the majority of the criteria presented in the literature, but the importance of these criteria evolve according to the industrial context. For example Weber (Weber, 1991) shows the extreme importance of supplier location in a "just in time" environment. A vast study as well as Dicksons work is necessary to identify the importance of supplier selection criteria in today's industrial environment. As two examples of recent works, Ellram (Ellram, 1990) proposes 3 main criteria for supplier selection: 1) financial, 2) organizational culture and strategy and 3) technology issue. For each main criterion, he proposes several sub criteria. Barbarosoglu (Barbarosoglu, 1997) identifies the 3 following main criteria: 1) Performance, 2) business structure/manufacturing capability and 3) the quality system. Like Ellram, he proposes some sub criteria for each main criterion.
Rank 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 Criteria Quality Delivery Performance history Warranties and Claim policies Production Facility and Capacity Price Technical Capacity Financial Position Procedural Compliance Communication System Reputation and Position in Industry Desire for Business Management and Organisation Operating Controls Repair Service Attitude Impression Packaging Ability Labor Relation Record Geographical Location Amount of Past Business Training Aids Reciprocal Arrangements Mean rating 3.508 3.417 2.998 2.849 2.775 2.758 2.545 2.514 2.488 2.426 2.412 2.256 2.216 2.211 2.187 2.120 2.054 2.009 2.003 1.872 1.597 1.537 0.610 Evaluation Extreme Importance

Considerable Importance

Average Importance

Slight Importance

Table 1: Decision criteria and their importance according to Dicksons work (Dickson, 1966)

SSS characteristics
The different characteristics of the supplier selection problem are classed as follows:

Number of decision makers: Single Decision Maker - Group Decision Makers A supplier selection procedure needs several actors (Mobolurin, 1995). Some decisionmaking methods imply several decision-makers (a group) in the supplier selection procedure. Nature of criteria: Objective (Easy or Difficult) - Subjective An objective criterion is one, which can be measured, directly in quantitative terms (such as dollar). An "easy" objective criterion can be measured directly. For example, criterion "price" is an easy criterion. Finding an "easy" measure for an objective criterion is not always possible. For example "quality" is a " difficult" criterion because it can't be measured directly: it must reflect the remaking cost, reject cost, after sale service cost, etc. A subjective criterion is a criterion that can't be measured quantitatively, for example, "desire expressed by supplier" or "supplier prestige"(Hoshyar, 92). Number of criteria: Single Criterion - Multi Criteria Suppliers can be selected according to one or several criteria. In the multi criteria case, criteria are often contradictory (such as quality and cost) and thus the best trade-off between the criteria is sought. Number of suppliers: Single Supplier - Multiple Suppliers When the best suppliers cannot satisfy the entire buyer's demands, the latter must resort to several suppliers. In a multi supplier problem, we are concerned with the following questions: which suppliers should be chosen? And what amount should each one supply? In certain cases, in spite of the sufficient capacity of the best supplier, the firm prefers to have more than one supplier (Quayle, 1998). Aim: Supplier ranking - Supplier selection In a "ranking" problem, we are concerned with generating a list of suppliers according to their score. In a "selection" problem, the aim of SSS can be to select the best suppliers without needing to know their relative score. In addition, the parameters of an SSS can be deterministic or probabilistic. This means that supplier behavior can be expressed by a probability function. Moreover, in a SSS there can be various constraints concerning the clients or suppliers such as limited capacity, minimum order size, etc.

SSS Methods
The solution methods can be classed in 5 main categories:

Elementary MCDM1 methods: Weight-oriented method (Wind, 68) - Categorical method (Busch, 63)

Modern MCDM method: AHP (Narasimhan, 1983), etc. In the weight - oriented method, one initially assigns a weight to each criterion according to its importance relative to other criteria. Suppliers are then compared with respect to each criterion. In the "categorical method", the weights of the criteria are identical and suppliers are evaluated with respect to such criteria as Good (+), Neutral (0) or Unsatisfactory (-). Based on these comparisons a total score is calculated for each supplier. The Analytic Hierarchy Process (A.H.P.) (Saaty, 1980) is a modern MCDM method that provides a framework to cope with the multiple criteria situation. There are other modern MCDM methods such as ELECTRE series (Roy, 1993), etc., but the AHP method is more utilized than other methods for supplier selection. The AHP first structures the problem in the form of a hierarchy to capture the criteria, sub criteria and the alternatives. All the criteria are compared in a pairwise fashion to determine their relative weights. Then the alternatives are compared in a pairwise fashion with regard to each criterion. In the end, the procedure determines a final score for each alternative. For example, the following works utilize the AHP in supplier selection. Hoshyar (Hoshyar, 1992) distinguished 3 types of criteria, "critical" criteria (their presence or absence precludes the supplier from further consideration, regardless of other conditions that might exist), "objective" criteria (that can be evaluated in monetary terms) and subjective criteria (which are difficult to quantify). For subjective criteria, he proposed the A.H.P method suggested for the first time for the supplier selection problem by Narasimhan (Narasimhan, 1983). Another example for AHP based work is the work of Korpela (Korpela, 1996) and Barbarosoglu (Barbarosoglu, 1997). They propose an A.H.P based Decision Support System (DSS). Cost Based Method In this model all the costs corresponding to each supplier are calculated and the least expensive supplier is selected (Timmerman, 1986). The firms which choose a " cost leadership strategy" (Porter 1980) are interesting for application of this method. Moreover Verma (Verma, 1998) shows that although company managers declare quality as the most significant criterion, a significant number of firms select their suppliers' based on cost or delivery conditions. Elimination Method: Conjunctive (Crow, 1980) Lexicographic (Wright, 75) In this method at each level, the suppliers who cannot satisfy supplier selection rule conditions are eliminated. In a "Conjunctive rule", the suppliers whose score with respect to a criterion is less than a minimum level will be eliminated. Therefore, one of the suppliers that satisfies the minimum levels will be selected. In a "Lexicographic rule", suppliers are first compared with respect to the most important criterion. If a supplier satisfies this criterion

Multi Criteria Decision Making

much better than the other suppliers, then he will be selected. If not, the best suppliers are compared with respect to the second most important criterion Mathematical optimization methods: Single Objective (Moore, 73) - Multiple Objective (Weber, 1993). The purpose of a mathematical optimization method is to select several suppliers in order to maximize an objective function subject to suppliers/buyer constraints. The objective function can be "single" criterion (classical optimization models) or "multiple" criteria (Goal Programming or Multi Objective Programming). Weber (Weber, 1991) shows that up to 1991 there were 10 papers which used mathematical programming for SSS. Ghodsypour (Ghodsypour, 1998) presents 7 other papers which were published during 1991-1998. The methods used were Linear programming, Non-linear programming, Mixed-integer programming, Multi-objectives Programming. The objectives of the mathematical models were: Minimization of the total cost, Minimization of the number of defective parts, Minimization of the number of late or early deliveries, or minimization of the distance (or time) between supplier and buyer, etc. (Weber, 1993). Scenario Methods: Payoff Matrix (Soukup, 1987) - VPA (Vendor profiles analysis) (Ellram, 1990). In the Payoff Matrix method, several scenarios for future supplier behavior are defined. In each scenario a score is assigned to the suppliers. The selection is made according to the mean and variance score of suppliers. VPA is a simulation-based decision support system. For each criterion, a probabilistic function is associated with each supplier. Simulation can help the decision-maker to estimate the future behavior of a supplier in different conditions.

The characteristics of a global approach

Table 2 shows the advantages and disadvantages of the current methods. Table 3 summarizes the method-characteristics analysis. This analysis shows that current methods cannot cover the various characteristics of a real SSS. We need a method which can conform to the characteristics that are often present in a SSS: rules conjunctive, aspect of multiple decision makers, subjective and objective criteria, supplier and buyer constraints, multi suppliers and probabilistic characteristic of SSS. Below we present these characteristics which are essential in an SSS global approach. Group decision making The SSS is a problem which requires the intervention of various departments in the firm (Production, transport, storage, purchase, etc) (Smytka, 1993). In addition, as the majority of decision criteria are subjective, the consensus of a group of decision-makers with different opinions prevents the predominance of only one opinion on the final decision. The group decision making version of AHP (Golden, 1989) can be utilized for this aspect of SSS. This version of AHP is not present in SSS literature. The members of this group must consider the interests of all the departments in the firm, which is simplified by a discussion between them.

Methods
Weight oriented methods

Important Advantages
Simple Subjective and objective criteria Inexpensive Total supplier performance(considering all the criteria) Has not a subjective or human judgment Rapid Simple Subjective and objective criteria Inexpensive

Important Disadvantages
Subjective or human judgment Does not incorporate the supplier and buyer constraints in the model

Cost Based method Elimination Methods Mathematical methods Multiple objective

Enormous need for financial information. Ignores the subjective criteria.

Does not consider all the criteria in the final selection. Does not incorporate the supplier and buyer constraints in the model

Multi criteria Examination of different selections The supplier and buyer constraints are incorporated in the model

Ignores the subjective criteria Does not find optimal solution Can be difficult to understanding by manager

Single Objective

Find optimal solution The supplier and buyer constraints are incorporated in the model . Models the probabilistic behaviors of supplier

Ignores the subjective criteria Single criterion Does not find optimal solution Difficult to analyze Does not incorporate the supplier and buyer constraints in the model

Scenario Methods

Table 2: Advantages and disadvantages of the current methods

Methods Characteristics single criteria Multi criteria Single decision maker multi. decision maker Supplier selection Supplier ranking Objective criteria Subjective criteria Single supplier Multi supplier Without constraints With constraints Deterministic Probabilistic Weighted M. Categorical M. AHP Cost Ratio Elimination Single Obj. Prog. Multiple Obj. Prog. Scenario

* * * * * * * *

* * * * * * * *

* * * * * * * * *

* * * * * * *

* * * * * * * *

* * * * * * *

* * * * * * *

* *

* * * * *

Table 3: Method-Characteristics comparison

Firm strategies The decision maker group must know the firms business strategies in as much detail as possible. This knowledge enables him to adapt to the firm strategy in decision-making procedure. Such adaptation is essential because this decision has a major influence on the firms strategic objectives. The strategy determines the activities in which the firm will be present and allocates resources to these activities (Strategor, 93). This definition identifies two levels of strategy: 1) corporate strategy determining firm activities. This strategy leads the firm to begin in one sector or to withdraw from another one, in order to constitute a balanced business portfolio; 2) business strategy defining the operations which the firm must

complete for each activity in order to find a favorable position in relation to its competitors (Porter, 1980). M. Porter (Porter, 1980) identified 3 basic types of business strategies: 1) cost leadership strategy 2) differentiation strategy 3) focus strategy. The cost leadership strategy envisages minimizing product cost. The second strategy aims to create a set of unique characteristics in the product or in its related services. For example, an original design, an effective distribution network, a fast after sale service, etc. The focus strategy proposes focusing on a specific segment, for example a specific customer group, a specific range of products, etc. In this strategy the firm can choose the cost leadership strategy (cost focus) or differentiation strategy (focused differentiation) for the selected segment. The business strategy of a firm affect extremely the supplier selection decision. For example a firm having a cost leadership strategy must select least expensive suppliers. Such selection rule can be tragic for another firm having a differentiation strategy. If the firm strategy is not explicitly defined, the decision making group must draw up these strategies in collaboration with firm management. Minimal threshold of the criteria. Failure to comply with the minimal threshold can have negative consequence on the service or the other constraints or objectives of the firm. A Delphi method (Dalkey, 69) can be used to fix a minimal threshold for each criterion. In any case, a sensitivity analysis on these minimal thresholds is necessary to choose a pertinent threshold for each criterion. The mathematical model developed in this paper offers the possibility of conducting this sensitivity analysis. Criteria weights and suppliers' score. AHP (Saaty, 1980) is a method commonly used for different multi criteria problems (Golden, 1989). It incorporates judgment and personal values in a logical way. In the field of supplier selection, various authors, such as Narasimhan (Narasimhan, 1983) and Hoshyar (Hoshyar, 1992) justified the use of this method for SSS. AHP is based on the following three principles: decomposition, comparative judgment, and synthesis of priorities. AHP starts by decomposing a complex multi criteria problem into a hierarchy where each level consists of a few manageable elements, which are then decomposed into another set of elements. The second step uses a measurement methodology based mathematical consideration to establish priorities among the elements within each level of the hierarchy. In the third step, through a mathematical logic, AHP summarizes the judgments into an overall estimate of the relative priorities of decision alternatives. As we already showed, SSS requires the intervention of various actors. Therefore we propose the group decision making version of AHP (Golden, 1989) to determine decision criteria weight and suppliers' scores. According to Saaty (Saaty, 1980) AHP forms a systematic framework for group interaction and group decision making. Dyer and Forman (Dyer, 1992) describe the advantage of AHP in a group setting as follows: 1) both objective and subjective criteria can be included in an AHP base group decision making. 2) With AHP discussion in a group can be focused on the objective rather than on alternatives. 3) With AHP the discussion can be structured so that every factor relevant to the decision is considered in turn, 4) in a structured analysis, the discussion continues until all relevant information from each member in the group has been considered and a consensus choice of the decision alternatives is achieved.

Analysis of the probabilistic behavior of suppliers The behavior of a supplier with respect to decision criteria is probabilistic (Soukup, 1987; Ellram, 1990). Therefore it is difficult to assign a fixed score to the supplier with respect to the decision criteria. A correct choice requires analysis of the probabilistic behavior of the suppliers. Simulation can help the decision-makers better understand supplier behavior. This knowledge helps the decision-maker to assign the pertinent scores to suppliers in AHP procedures. Moreover, simulation analysis results makes it possible to evaluate the final choices. Although it is very hard to find the supplier behavior probability function, in the absence of further data this can be accomplished easily by considering only optimistic, pessimistic and most probable scenarios. For this, decision-makers can use a numerical scale, for example from 1 to 10 where 1 is a very low score and 10 is a
 
   probability function is suitable for situations in which you want to consider the probabilistic behavior of a variable that can be prevented in 3 optimistic, most probable and pessimistic points. For example, this type of function is widely used to determine time activity in project management. Constraints In a SSS, there is different constraints that must be satisfied. For example, capacity constraints, demand constraints, etc. On the other hand the combination of different feasible solutions is very large. These characteristics show the importance of mathematical optimization methods in a global approach.

Towards a global approach

According to this approach the decision making is made in two stages. With the first stage we choose the " strategic suppliers " based on the company strategy. The company business strategy is the manner by which the company plans to challenge their competitors; therefore the selected suppliers must be perfectly able to satisfy this strategy.

Alternatives
Company Business strategy

strategic Supplier selection

Minimal thresholds

Pre-selected Alternatives

mathematical optimization model

Probability theory

Proposed Solution

Multiple Criteria Decision Making

Figure 1: Proposed approach to Strategic Supplier Selection problem

Another parameter that has to be considered on this level is the minimal thresholds of the criteria. These are the minimal thresholds that the suppliers must be able to respect. Not to respect these thresholds can cause intolerable consequences on the service quality or other

company objectives. The suppliers chosen with this stage can support the company strategy on the one hand and on the other hand they can respect the minimal thresholds of various criteria. An analysis of sensitivity on these minimal thresholds can help the decision-makers to choose a suitable threshold for each criterion. In the second stage of this approach a mathematical optimisation model select the best suppliers and the supplied quantity by considering the suppliers and buyer constraints. The purpose of this model is to maximise the U function whose coefficients are the supplier scores. This total score can be calculated based on the objective and subjective criteria by a MCDM method as AHP. In the rest of this section this mathematical optimisation model is explained. The mathematical optimization model Below we explain the mathematical model to select the best suppliers and the order quantity of each supplier in the second step of proposed approach. This type of mathematical model is an essential element of any global approach to strategic supplier selection. The objective function of this model is a utility function whose coefficients are the supplier scores. This type of objective function is utilized by authors for different problems such as Ghodsypour's work in supplier selection (Ghodsypour, 1998). As it is showed, the scores of the suppliers (the coefficients of objective functions) can be calculated from the objective and subjective criteria by a MCDM method as AHP method. Therefore, the mathematical model maximizes the total utility of the supplier (all objective and subjective criteria) with respect to supplier and buyer constraints. Notation: F: number of supplier dp: demand of part p upf : score of supplier f for part p cpf min: : minimal order quantity from supplier f for part p cpf max: maximal order quantity from supplier f for part p dpf : percentage of late orders from supplier f for part p dpf : out of delays cost of part p purchased from supplier f qpf : defect percentage of supplier f for part p qpf : quality cost of a defect unit of part p purchased from supplier f ppf : purchasing cost (acquisition + transport +...) of supplier f per unit of part p d: maximum accepted delays cost q: maximum accepted quality cost p: maximum accepted purchasing cost. v: the total value of product vp= the value of part p n: number of suppliers to choose. Variables: Xpf: number of units of part p to be ordered from supplier f
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Ypf = 1 if supplier f is chosen for part p, 0 otherwise. Model:

Max U =


 upf Xpf



Subject to:


Xpf = dp
f

p

(1)

c pf min. Ypf
Xpf
Ypf cpf max

 dpf dpf Xpf
d p
f

p, f

(2)

(3) (4) (5) (6) (7) (8) (9)


 qpf qpf Xpf
q

p f


 ppf ppf Xpf
p

p f


 vp Xpf

v

p f=1 f

F-1



Ypf = np Xpf  0 Ypf = 0 ou 1

p
p, f
p, f

In this model, the objective function is a utility function whose coefficients are the supplier scores. Constraint 1 ensures that the total quantity of the provided parts is equal to demand. Constraint 2 specifies maximum and minimum order quantity. Constraint 3 ensures that the number of late parts from all suppliers does not exceed a threshold. Constraints 4 and 5 specify the maximum quality cost and the maximum purchasing costs (buy + transportation costs +etc.). If we suppose that the Fth supplier is company himself, so the constraint 6              !"# this constraint ensures that the value of the make parts in the firm will be greater than or equal of the value of the buy parts. For various reasons such as the public image of the firm, it may wish to limit the value of the buy parts(Padilo, 1996). In this paper we do not really want treat the make or buy decision. In another paper (Dupont et al, 2001) we showed that the make or buy decision must be approached in 2 levels. The first level can make the decision for a lot of the component parts, based on critical /strategic criteria. In the second level the decision is made based on operational criteria. The mathematical model in this paper can be used to the second decisional level. Constraint 7 ensures the predetermined number of suppliers. Constraints number 3, 4, 5 ,6 and 7 are optional. Application of these constraints depends on the problem context. A numeric example A firm decided to buy a component part. There are 20 potential suppliers for this part. To encourage competition between suppliers, the firm prefers to select 4 suppliers (n = 4). The most significant criteria of the firm concerning supplier selection are: delivery, quality, price, and after sale service. These 20 suppliers can support the company strategy and respect the criteria thresholds. The daily firm demand is 10 000 units. The maximum daily available capacities and minimum order size( minimal capacity) of these suppliers are given in table 4.

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The values of dpf , qpf , ppf are given in table 5. In this example we have a single component part and so we can ignore the p index in the notions. Supplier 1 2 3 4 5 6 7 8 9 10 Capacity max. 5000 8000 6000 4000 8800 3000 7000 6500 9000 7500 Capacity min. 180 150 200 100 120 140 100 110 250 250 Supplier 11 12 13 14 15 16 17 18 19 20 Capacity Capacity max. min. 7000 6000 4000 4500 6800 9000 3200 7600 5000 8200 120 100 200 100 150 200 100 100 100 200

Table 4: The maximum available capacities of suppliers

Supplier 1 2 3 4 5 6 7 8 9 10

dpf 1.0% 2.0% 1.5% 0.9% 1.1% 1.8% 1.2% 2.9% 3.0% 2.8%

qpf 2.0% 1.0% 1.0% 1.0% 1.0% 1.0% 0.7% 3% 3.0% 2.6%

ppf 4.0$ 3.2$ 3.6$ 5.0$ 4.0$ 3.0$ 4.5$ 2.5$ 2.0$ 2.8$

Supplier 11 12 13 14 15 16 17 18 19 20

dpf 1.05% 1.2% 1.4% 0.8% % 3.0% 1.2% 1.1% 0.8% 1.1% 1.2%

qpf 0.8% 0.8% 1.0% 1.05 2.5% 0.9% 1.1% 0.9% 0.95 0.6

ppf 4.6$ 4.5$ 3.8$ 5.0$ 2.9$ 4.3$ 3.8$ 5.2$ 4.3$ 4.7$

Table 5: The values of dpf, qpf, ppf

The cost relating to an out of delay part (dpf )is 0.8 $ and 0.6 $ for a defect(qpf.)The values of d, q and p are respectively 80 $, 60 $ and 45000 $. The relative score of each supplier with respect to the criteria is presented in table 6. The elements of this table are "expected value" of  probability distribution function:  = (P+4M+O)/6. P is the pessimistic score, O is the optimistic score and M is the most probable score (the idea of  probability distribution function). For example, consider a group of 2 decision-makers that want to determine the score of supplier 1 with respect to the delivery
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criterion. The first decision maker considers the following values for the pessimistic, most probable and optimistic scores: 7, 9, and 10. The second decision maker assigns values 5, 7 and 10 as pessimistic, most probable, and optimistic scores. Therefore, the average of the pessimistic, most probable, and optimistic scores are 6, 8 and 10 and  is equal to 8. According to firm policy, the relative importance of the 4 criteria - delivery, quality, price and service - are 40%, 30%, 20% and 10%. Based on these data, the relative scores of suppliers (upf) can be calculated. For example, the score of supplier 1 is u11 = (0.4)(8) +(0.3)(8.1)+(0.2)(5) + (0.1)(7.1)=7.34 These scores are given in table 6. Supplier 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Delivery 8 5.5 6.1 8.1 7 5.9 6.5 4 4.1 3.9 6.8 6.5 6.2 8 3.9 6.5 7.1 9 7 6.5 Quality 8.1 8.3 8.1 7.9 8 8.2 9.1 4.2 4 5 9.3 9 8 8.4 3.8 8 6.8 7.8 8 8 Price 5 6.3 5.6 4 5 6.7 4.4 8 10 7.1 4.4 4.4 5.3 4 6.9 4.7 5.3 3.8 4.7 4.3 Service 7.1 7.5 6.9 8 8.2 5.5 7.2 4.5 4 5.2 6 7.1 7 8 6 6.9 6.3 9.2 5.1 5.5 Total score
7,34 6,7 6,68 7,21 7,02 6,71 6,93 4,91 5,24 5 6,99 6,89 6,64 7,32 4,68 6,63 6,57 7,62 6,65 6,41

Table 6: The total score of each supplier with respect to each criterion

We will now show the advantage of using the mathematical model to treat a SSS.. We will treat this example using the various methods already existing and then using the mathematical model. Directed Method Cost:

In this model, all the costs associated with a supplier are calculated and the least expensive supplier is selected. We know that the costs relating to an out of delay part and a defect are 0.8 $ and 0.6 $. The percentages of the out of delay parts, defect and suppliers prices are

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given in table 5. The cost of each supplier can be calculated from these data. For example, the cost of supplier 1 is calculated as: (0.01*0.8$+0.02*0.6$ + 4$) = 4.002$ The suppliers costs are given in table 7. Supplier 1 2 3 4 5 6 7 8 9 10 Cost
4.002 3.202 3.602 5.001 4.001 3.002 4.501 2.504 2.004 2.804

Supplier 11 12 13 14 15 16 17 18 19 20

Cost
4.6013 4.5014 3.8017 5.0013 2.9040 4.3015 3.8015 5.2012 4.3015 4.7013

Table 7: The suppliers costs

According to this table the 4 best suppliers are suppliers numbers 9, 8, 10 and 15. The firm takes 9000 units of supplier 9 (his maximum capacity), and 250 and 150 of suppliers 10 and 15 (their minimum capacity) and 600 units of supplier 8. Method of Conjunctive Elimination:

In this approach, suppliers whose score for a criterion is lower than the minimal score are eliminated. Therefore, suppliers that satisfy the minimum level of criteria are selected. Since these 20 suppliers respect the minimal thresholds of the decision criteria, there is no difference between these 3 suppliers. A choice of 5000 units from supplier 1, 4600 units from supplier 2, and 200 units from supplier 3 and 200 units from supplier 4, is acceptable. Method of lexicographical elimination:

In a lexicographical rule, on the first level, the most important criterion is selected and the suppliers are compared with respect to this criterion. If a supplier satisfies this criterion much better than the other suppliers do, then he will be selected, if not the suppliers are compared with respect to a second criterion. In this example, the most important criterion is delivery with a weight of 40%. As you see in table 6, supplier 18 respects this criterion much better than the other suppliers. Therefore, the firm purchases 7600 units from supplier 18 (its maximum capacity). Supplier 4 is in the second position, thus the firm can purchase the remainder of the demand (2400 units) from this supplier. However, 4 suppliers must be selected. We thus take the minimum capacity of the 2 following suppliers who have the best scores with respect to the delivery criterion. The final result is: supplier 18: 7600 units, supplier 4: 2120 units, supplier 1: 180 units (its minimum capacity), supplier 14: 100 units (its minimum capacity).

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Identical weights Method:

In this method, the weights of the criteria are identical and the scores good (+), neutral (0) or unsatisfactory (-) are assigned to each supplier for each criterion. From this comparison, a total score is calculated for each supplier. From table 6 we will deduce table 8 assuming: Good (+) for a score

  
 


  
  and 8. According to table 8, the best supplier is supplier 14, with 3 positive scores. In second position are suppliers 1, 4, 5 and 18 with 2 positive scores. Therefore, for example, the firm can take 4500 units from supplier 14 (his maximum capacity) and an amount of 1833.3 units from suppliers 1, 4 and 5 equally. Supplier 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 Delivery + 0 0 + 0 0 0 0 0 0 0 + 0 0 + 0 0 Quality + + + 0 + + + 0 0 + + + + + 0 0 + + Price 0 0 0 0 0 0 + + 0 0 0 0 0 0 0 0 0 Service 0 0 0 + + 0 0 0 0 0 0 0 + 0 0 0 + 0 0

Table 8: suppliers' scores for each criterion: Good (+), Neutral (0), Unsatisfactory (-)

A.H.P. method:

Let us assume that an A.H.P. analysis gave the total supplier scores as in table 6. The 4 best suppliers are suppliers numbers 18, 1, 14 and 4. The firm will take 7600 units from

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supplier 18 (his maximum capacity), 2200 units from supplier 1, 100 units from 14 (its minimum capacity), 100 units from 4 (its minimum capacity). The above-mentioned methods have 2 main disadvantages. Initially they cannot take into account the firm and suppliers constraints. In this small example, we could consider suppliers constraints (maximum capacity). Consideration of other constraints (constraints relating to l, q and p), even in this small example, is not easy. The above methods do not consider all criteria or in other words they do not determine total supplier performance (except A.H.P method). For example, the "cost oriented" method only considers the " cost criterion; the lexicographical elimination method only considers the "delivery" criterion; according to the categorical method all criteria have the same importance. The significant difference between the solutions suggested by these various models shows the importance of " total performance " for supplier selection. Mathematical model:

Our linear model gets round these 2 main disadvantages of the existing methods. It considers the total performance of the suppliers and selects the best suppliers with respect to the firm and the suppliers constraints. The mathematical model solution is in table 9. Supplier Quantity 1 180 5 5294 6 195.6 18 4329.6

Table 9: mathematical model solution

Table 10 summarizes the solutions and the performance of the above-mentioned methods. Costoriented S1 S2 S3 S4 S5 S6 S7 S8 S9 S 10 S 11 S 12 S 13 S 14 0 0 0 0 0 0 0 600 9000 250 0 0 0 0 Conjonc. 5000 4600 200 200 0 0 0 0 0 0 0 0 0 0 Lexico. 180 0 0 2120 0 0 0 0 0 0 0 0 0 100 Identical 1833.3 0 0 1833.3 1833.3 0 0 0 0 0 0 0 0 4500 A.H.P 2200 0 0 100 0 0 0 0 0 0 0 0 0 100 Mathemat. 180 0 0 0 5294 195.6 0 0 0 0 0 0 0 0

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S 15 S 16 S 17 S 18 S 19 S 20 U2 Diff.3 Const. d

150 0 0 0 0 0
52058 -28%

0 0 0 0 0 0
70364 -3%

0 0 0 7600 0 0
75163,6 3%

0 0 0 0 0 0
72484,28 0,4%

0 0 0 7600 0 0
75513,6 3,7%

0 0 0 4329.6 0 0 72794.76
0%

239.12<= 100 -

170.4<= 100 61.2<= 100 36440<= 45000 +

204.8<= 100 55.5<= 100 + 51340<= 4500 -

206.24<= 91.68<= 100 100 61.92<= 100 46333<= 45000 56.16<= 100 + 49320<= 45000 -

80<= 80 + 60<= 60 + 45000<= 45000 + *

Const.q

178.98<= 100 -

Const. p

20635<= 4500 +

Optim. Solution
Table 10: the performance of different methods

Table 10 shows that the proposed solution of mathematical model respects all firm and suppliers' constraints. In this example, the lexicographical, categorical and A.H.P. methods propose a utility higher than mathematical method utility, but these 3 methods do not satisfy problem constraints.

Summery and future research

In this paper, we initially analyzed the SSS state of the art by presenting the decision criteria, problem characteristics and the existing methods in the literature. An analysis allows us to identify the gap in the literature such as the absence of a global approach, which can treat different characteristics of SSS. To help fill this void we proposed the following essential elements that must be considered in such an approach: firm strategy, conjunctive rules, multiple decision makers, subjective and objective criteria, supplier and buyer constraints, multiple suppliers (selection of suppliers and order quantities) and the probabilistic aspect of SSS. In this paper we analyze these necessary elements of a global approach and develop an approach that selects suppliers by considering these characteristics. In the first level, this approach selects the strategic suppliers. In the second level a mathematical model propose the final solution by considering the objective and subjective criteria. In our opinion, an
2 3

Utility = u11X11.+ u12X12+ u13X13 (Utility-72794)/72794

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interesting area for future research would be to develop a toolkit that contains different subjective tools (such as A.H.P.), objective tools (classical optimization methods) and effective heuristics for solving the mix integer programming in the large size cases. A simulation model can be utilized in this toolkit in order to analyze the random behavior of each supplier and the stochastic consequences of a solution. The supplier selection decision is a strategic decision. There are inter-actions between this decision and other firm strategic decisions, for example the location of the production site, the make or buy decision, etc. We consider that an opportunity for future research in supply chain management is to develop models and approaches integrating several strategic decisions. To achieve this goal, it is initially necessary to make an impact analysis between the various decisions. Since a feature of strategic decisions is that most of the criteria are subjective, the models must be able to take into account subjective as well as objective criteria.

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