Decision-Making in Supplier Selection Process - Assignment Example

Multiple Criteria Decision Making for Supplier Selection: UK/UAE Application LR/2 1- Introduction The supplier selection process is where a firm identifies, assesses and enters into a contract with a supplier or suppliers (Beil 2009, 1). The process of supplier selection requires a firm to deploy a tremendous amount of financial resources due to the need to contract suppliers offering high value. A company invests lots of money in their operations. To ensure efficiency, companies are relying on outsourcing of complex services and products to different suppliers. This means that if a company needs to maintain or increase its place in the market, it has to choose suppliers who increase its value. This makes the supplier selection process very crucial for a firm. The importance attributed to the process also means that multiple criteria and processes are used in selecting the right suppliers. A company in need of suppliers must look at the performance of each supplier over the years, the financial standing, the cost of supplying goods among other factors. This makes the supplier selection process a multiple criteria decision-making problem (Beil 2009, 2). The competitive corporate environment experienced today means that certain dimensions such as product delivery, the quality of the product, the flexibility and cost of the operations must be incorporated in the supply chain. Due to the competitive environment in the business sector, the decision concerning the selection of a supplier is important for the success of the production management. The evaluation and selection of a supplier is an important factor that influences these dimensions and must, therefore, be handled with care. Supplier evaluation and selection has an influence on the long-term commitments and performance of a business or a company. Purchasers of products have to assess each supplier carefully due to the varying strengths and weaknesses of such suppliers (Yildiz & Yayla 2015, 158). A company’s multi-criteria decision-making process (MCDM) is important in the evaluation and selection of suppliers. The process is important because it helps the purchasers or companies to identify the challenges arising from the selection of a supplier (Yildiz & Yayla 2015, 159). The use of MCDM process makes it easy for the company to address the problems and promotes better decision-making. Further, selecting suitable suppliers helps a company reduce production costs, hence increasing the organization’s competition ability due to the low cost of raw materials. 2- Multiple criteria decision making Methodologies The current research intends to identify how decision-makers with different decision power can be involved in the supplier selection model. The answer to this question lies in the application of MCDM where there are different stages involved in the selection process where different decision-makers can be involved. The supplier selection process, as stated above, is a MCDM problem which can be solved through the application of the right approaches or methods. There are many criteria for the selection of the best supplier. These criteria include; quality delivery, price or cost, production capacity, technology, financial stability, reputation and position in the industry, flexibility, packaging quality among others. Such criteria can be used by a company to evaluate and select the appropriate supplier. There are also several methods that have been proposed for solving the problems associated with MCDM in the selection of suppliers. Some of these methods include a technique for order preference by similarity to ideal solutions (TOPSIS), analytical hierarchy process (AHP), and analytical network process (ANP). These techniques are mathematical models which have been used in different studies involving multi-criteria decision-making. The evidence presented in this section shows that these mathematical models have been applied in supplier selection. This means that a mathematical model can be developed for supplier selection. 2.1 - TOPSIS The TOPSIS method ranks the alternatives, for example, suppliers according to how far they are from the ideal solution. This means that, according to the method, the best alternative will be the one with the shortest distance from the ideal solution and the furthest distance from the negative ideal solution (Sarraf et al. 2013, 862). TOPSIS is applied where the selection process involves several alternatives. In applying this method, a decision matrix must be prepared before the process begins. The matrix contains alternatives placed in rows together with their ratings in terms of their attributes. These scores for each of the alternatives can be adjusted to conform to the standard required through a process known as normalization. The process can also be made in columns to allow the decision-makers to compare the available alternatives. The normalized value for the process is between 0 and 1. This method makes it easy to eliminate the computational issues that may result from the different measurements in the matrix (Sarraf et al. 2013, 863). The first step in the application of this method is to make the decision matrix standard. The goal for the standardization process is to transform the attribute dimensions into non-dimensional attributes making it easier for comparison. The second step involves constructing the weighted decision matrix that is standardized. This is done by multiplying the weight of the attributes to each rating. Once this has been done, the decision-makers then have to determine the ideal solution and negative ideal (Ding & Zeng 2015, 345). These two ideals are meant to help the decision-maker choose the best alternative. The fourth step requires the decision-makers to determine how far each alternative is from the ideal solution. This process helps to identify the alternative that is best suited for the situation. The fifth step involves measuring how far the alternatives are from the negative solution. The process is meant to choose the alternatives that are not suitable for the intended solution. The sixth step, on the other hand, determines the relative closeness of the alternatives to the ideal solution. One of the objectives for the current study is to review previous research in supplier selection using MCDM techniques to identify the method that is best suited for the research. TOPSIS has extensively been used in MCDM. TOPSIS has been used in a recent study to determine the performance of universities in China. The scope of the study was to assess the teaching and research, development ability and the performance of these universities. The research was conducted through a criterion that was based on the methods of teaching and research in every university (Ding & Zeng 2015, 356). In this study, TOPSIS was used together with information entropy weight (IEW). The results of this study show that the two techniques are compatible and effective. According to the research, an increase in the financing of the universities by the Ministry of Education does not affect the performance ((Ding & Zeng 2015, 357). The Universities continue to perform poorly even with increased funding. Chen et al. (2016, 279) uses the TOPSIS method to propose the construction of a new MCDM. The process also involves using similarity measures between the intuitionistic fuzzy values (IFV). Through the application of the TOPSIS technique, the researchers propose a new MCDM method that calculates the degree of the interdependency of the IFV. The new method also calculates the degree of positive similarity and negative similarity of the IFVs together with the positive and negative ideal solutions used for the criteria (Chen et al. 2016, 280). According to the results, the proposed method has a time complexity of O(mn) where m represents the alternatives while n represents the number of criteria used for the research. Through the use of TOPSIS, the researchers identify a new MCDM method which is capable of overcoming the drawbacks that previously existed (Chen et al. 2016, 294). 2.2- AHP AHP is a technique applied in MCDM that helps to simplify a complex problem by dividing it into a multi-level structure. Through this method, the decision-makers can perform comparisons in pairs to determine the importance of the variables in the structure. The method can be applied where there is subjectivity and is also suitable where the criteria used can be divided into sub-criteria organized in a hierarchical manner. The method can also be used to determine relative priorities where comparisons are done in pairs within the structures (Deng et al. 2014, 157). Albert et al. (2016, 54) use AHP to develop a blueprint for the use of smartphone apps that have the potential to reduce road accidents or injury crashes. Experts’ opinions are evaluated through the Analytic Hierarchy Process (AHP), and apps mapping is also incorporated to identify apps that can help reduce accidents and also be easily acceptable to users. The criteria used for the research was risky driving behavior and general acceptance of apps. The criterion for general acceptance was divided into three; the willingness of the individual, support from the public and potential functionality. The research also involved thirty-seven experts who considered the alternatives against the criteria. The results of the research showed that apps that provided for collision warning, texting prevention and voice control were seen as potential apps that could be used to reduce or prevent injury crashes (Albert et al. 2016, 61). AHP has also been used to identify technology and practices that could be used in the design of ships to lower fuel consumption of such ships (Besikci et al. 2016, 392). Practices such as increasing energy awareness and system energy efficiency were seen as some of the measures that could help to reduce fuel consumption of ships. 2.3- ANP ANP, like AHP, is a technique used to measure intangible factors through the use of pairwise comparisons with judgments where one element is dominant than another in a shared property (Gorener 2012, 197). ANP, unlike AHP, allows interrelationships that are complex among decision levels and attributes. The method involves four steps. The first step is model construction and structuring of the problem where the problem is stated clearly and organized into a form of structure. Secondly, pairwise comparisons and priority vectors are made where decision elements are paired for comparison. There is also the supermatrix formation where the matrix is partitioned and finally the synthesis of the criteria and alternatives through a prioritized process where the best alternative is selected (Thanki et al. 2016, 294). ANP involves the generalization of AHP through evaluating the level of dependence between the different elements in the hierarchical structures or elements set up in AHP. The fact that there are some decision-making problems that cannot be structured in a hierarchical manner means that ANP has to be applied such that the problems will be structured in a network instead of a hierarchy. The structure consists of cycles that link the elements (Gupta et al. 2015, 84). The use of ANP requires the decision-maker to describe the decision problem in detail form. This means that the objectives, criteria and possible outcomes of the decision being made must be considered. The decision-maker then proceeds to determine the criterion that controls the structure. This process requires the decision-maker to consider the benefits, costs, opportunities and risks that are involved. The decision-maker proceeds to identify the general network of components or clusters together with their elements and apply them to the control criteria. Such application of ANP allows the decision-makers to deal with complex decisions where the elements involved are dependent on each other. The dependence and feedback has to be analyzed through looking at the benefits, risks, opportunities and costs. The supplier selection process is a difficult and complex process in supply chain management. The selection of suppliers is, therefore, considered as a multi-criteria problem. The use of ANP can help decision-makers to evaluate the best suppliers for a firm. As stated above, not all problems in MCDM can be solved through a hierarchical structure. For such circumstances, ANP comes in to address such challenges where the elements are evaluated and the criteria considered through a network structure (Gupta et al. 2015, 85). 2.4- Critic The studies discussed above highlight the success that has been achieved through the use of the techniques meant to address the challenges in MCDM. The TOPSIS and AHP techniques have been successfully used in different MCDM studies. One of the objectives of this research is to identify the technique that is most suitable for the model to be developed in the research. Based on the evidence submitted above, the use of a single technique may not be sufficient to deal with the challenges that arise in MCDM process. Despite the success highlighted in these studies, researchers have found the use of single techniques to be less reliable and are, therefore, incorporating more than one technique. Due to the complexity of the problems involved in MCDM, many researchers are adopting the use of hybrid MCDM technique to ensure better and accurate results. Wang et al. (2016, 194), for example, uses the hybrid OWA-TOPSIS technique to tackle problems arising from fuzzy multiple attributes. Rouyendegh and Saputro (2014, 3957) applied the fuzzy TOPSIS and Multi-Choice Goal Programming (MCGP) to deal with the qualitative and quantitative problems that arise from the criteria in the supplier selection process. The use of these two methods together enabled the researchers to address imprecise judgment of the decision-makers and the order selection process which could not be effectively done using one of the methods. Lima-Junior and Carpinetti (2016, 128), on the other hand, used the fuzzy TOPSIS and SCOR methods together. The researchers, Lima-Junior and Carpinetti as discussed above, listed some of the benefits of using the two methods together rather than using one of them as; the two facilitate the processes of performance evaluation of the suppliers, it does not limit the number of alternatives to be used and it allows benchmarking. The use of a hybrid method is, therefore, more appropriate and efficient in multi-criteria decision-making. The use of fuzzy TOPSIS and MCGP together in the research by Rouyendegh and Saputro (2014, 3957), as discussed above, revealed that the challenges encountered by decision-makers may not be effectively resolved using one tool. Challenges such as the imprecise judgment of the decision-makers could not be effectively resolved using TOPSIS alone. The available research provides evidence of on the use of the tools in different multiple criteria decision making processes. My research tends to add on to these evidence by showing that these tools can be used together in the selection of suppliers to ensure that all potential and real challenges encountered such as the differences in culture of the decision-makers are handled. This is to ensure that such challenges do not adversely affect the selection process. 3- Supplier selection Industrial Application Techniques such as AHP that are constantly used in supplier selection have also been used in the selection of green vendors for production outsourcing in the mining industry (Azarnivand & Azarnivand 2016, 51). The multi-criteria decision-making was used, in this case, to design a framework that could perform sensitivity analysis for the purpose of alleviating subjectivity in the judgments that would be made. The MCDM process that was developed through the research was also designed in a way that addressed uncertainty in green vendor selection process. The MCDM method and the mathematical techniques have also been used in identifying the factors that influence agile suppliers. The purpose of the research is to help suppliers from different sectors and industries to choose efficient ways of increasing their degree of agility and competitiveness (Beikkhakhian et al. 2015, 6234). One of the important points to note in studies is the fact that the use of hybrid methods produces better results as stated above. Researchers today are more willing to combine more than one technique in MCDM to ensure better results and the reliability of the information in the research. The use of the hybrid techniques has also led to the development of new MCDM methods that fit specific industries depending on the needs or the objectives of the researchers. The evidence submitted shows that the techniques used in supplier selection have been applied in different industries. There are different studies that have been conducted to guide decision-makers in different industries on how to apply the techniques in supplier selection to ensure that better solutions are identified. 4- Factors Affecting the Supplier Selection Process The supplier selection process involves several stages to ensure that a company selects suppliers who can increase its competitiveness in the market. The company or the decision-makers have to identify the decision characteristics which are to be used in assessing the suppliers. The suppliers then have to be assessed to ensure that they are appropriate or fit for the company. The decision-makers then assign weight to the attributes to identify the contribution of each criterion to the evaluation of the suppliers. Lastly, the suppliers are evaluated against the characteristics identified at the beginning of the process to determine the best-suited supplier (Mwikali & Kavale 2012, 190). During this process, there are several factors that affect supplier selection. 4.1- Cost and Price Cost is one of the factors that are considered in selecting a supplier. The decision-makers will be keen to look at the purchase price, taxes and the transportation cost relating to each supplier. This is because each company aims at maintaining a low cost of production as a way of maximizing profits. The cost of the raw materials for the suppliers must be assessed together with other costs such as labor cost and cost due to delay. The decision-makers are also keen on finding a supply base with the minimum price of raw materials or the product. Price, therefore, remains an important factor that affects the selection process (Roshandel et al. 2013, 10172). Other than cost and price, quality of products is also a factor that affects the supplier selection process. Decision-makers will be keen to assess the extent to which a supplier can improve or maintain quality and delivery performance. Maintaining the quality of products being supplied is important for the company to improve its position in the market (Beikkhakhian et al. 2015, 6226). 4.2- Organizational Profile The organizational profile of the supplier is also another factor that is considered in the selection process. The decision-makers look at the financial performance of the supplier, the achievement of sales and marketing goals, and the strategy that the supplier has regarding the use of technology (Beikkhakhian et al. 2015, 6226). The ease of communication between the firm and the supplier is also a factor that affects the supplier selection process. The negotiability and the ease of communication with the supplier has a great influence on the long-term relation between the firm and the supplier. The performance history of the supplier is also a factor that influences the selection process. The competitive nature of the supplier, production schedule and its response to the market are some of the issues that are considered (Mwikali & Kavale 2012, 192). These factors, among others, are considered in the supplier selection process. It is worth noting that each firm will give more weight to different factors depending on what they are looking for in the supplier. This means that the selection criteria will always differ especially where the firms operate in different industries or sectors. Though these factors majorly depend on what the company wants, the need to comply with the standards set in the respective industry also influences the decision-making process. 4.3- Standards in Supplier Selection Feurtey et al. (2010, 1455) in their research on the factors that influence strategic decision-making in energy highlighted the influence that government standards and social acceptance have on such decision-making. In Canada and France, the presence of unfavorable energy policies stood in the way of the introduction of wind energy. However, the deregulation of the energy sector and the pressure from social actions led to the change in the policies. The research highlights the importance that government support plays in critical decision-making in different sectors. Governments have the responsibility to set standards in all sectors of the economy to ensure that the end product that reaches the consumer is of high quality and safe for their use or consumption (Feurtey et al. 2010, 1457). The objective for the setting of the standards is to ensure that even in the midst of competition, both global and national, manufacturers of products and services maintain quality in their end products. These standards ensure that all people in the supply chain maintain quality. As a result, companies have to be careful when selecting the suppliers for their raw materials. Companies have to look at how each supplier complies with the standards to ensure that the final product made by the company meets the set standard. Companies must, therefore, look at the suppliers and their ability to deliver quality in line with the standards that have been set. 4.4- Quality The quality of the suppliers goods or products is one of the most important factors to consider in the supplier selection process. Where a firm contracts a supplier with poor quality products, such as raw materials, this reflects on the final product of the firm. This means that the product made by the firm ends up being of poor quality. As a result, the company loses business due to the lack of confidence by consumers. In the selection of suppliers, it is important for firms to consider whether the culture of each supplier is based on quality (Beikkhakhian et al. 2015, 6228). 4.5- Innovation The selection of a supplier is also determined by the ability of the supplier to innovate and keep up with the latest technology. Companies are interested in adopting technology or other measures that can ensure that production costs remain low while quality is maintained (Mwikali & Kavale 2012, 191). This is meant to ensure that such a firm maintains its competitiveness in the market. To achieve this, firms must always look for suppliers who are keen on innovating to ensure low cost of products, transportation, and other operations. Critic As stated above, there are different factors that affect the supplier selection process. One of the objectives of the current study is to conduct a sensitivity analysis to identify the effect of dynamic changes in the variables being used. The input variables such as cost, price, quality of products and the organizational profile of the suppliers are factors that affect the supplier scores and the supplier selection process as a whole. The weight attributed to these factors varies depending on the decision-makers. This is because the corporate culture of each firm may be different hence different decision-makers acting on behalf of different firms may give more weight to some factors than others depending on how such factors relate to the corporate culture. Though previous research has shown how these standards guide the selection process, there is not enough research on how such standards act as impediments to the decision-making process. Government standards can sometimes be excessive such that a company is not able to get the suppliers it desires since the standards indirectly recommend certain suppliers through the stringent policies put in place. However, firms must ensure compliance with existing government standards since they ensure that the consumers are protected from poor quality products and services. 5- Cultural Factors The current research seeks to determine the effect of changing the culture of the decision-maker on the choice of the supplier. The research is meant to focus on how having decision-makers from different cultures can affect the supplier selection process. Developing countries such as the US have embraced the practice of engaging patients in their healthcare through shared decision-making. This initiative in the health sector has been embraced by both national and international groups. However, there are challenges that have arisen in engaging patients from different backgrounds in shared decision-making. Research has shown that patients from different cultural backgrounds, whether racial or ethnic, appraise the decision-making process in a less positive manner as compared to the white people or the US-born patients (Hawley & Morris 2016, 5). People of different nationalities are likely to make different career decisions. Such differences in career decision-making can be attributed to the system of higher education in these countries. Another reason for the difference in decision-making is the culture and the different expectations that arise. The individualism and collectivism dimensions also highlight the differences in career decision-making. Individuals with different cultural backgrounds will differ in their decision-making regarding their careers due to the differences in timing of when such decisions are to be made and the individualistic, which is common in the US and other western countries, and the collectivism dimension, common among the Chinese people (Willner et al. 2015, 146). This difference arising from the cultural background of the decision-makers also affects the selection process of suppliers. The evaluation and selection of suppliers in companies and industries are done by procurement managers who, in many cases, originate from various cultures. These managers may at times perform their duties alone or at other times they work as members of a cross-functional sourcing team. The difference in the cultural backgrounds of the people involved in the selection process raises the question whether such people are influenced by their culture which also affects the selection decision. Research has shown that the decision-makers in the selection process which come from different national cultures do not reason or make similar business decisions (Carter et al. 2010, 354). Decision-makers from western nations such as Europe and America and those from eastern nations such as China, Japan, and Korea have continued to maintain different though systems for a long time. Cultures that originate from various levels of development either at the national or organizational level differ on decision-making. National cultures affect the decision-making process of the people involved in the selection process. Research has shown that eastern decision-makers have a different approach regarding labor costs as compared to western decision-makers. Eastern decision-makers look at low costs because the procurement environment in these countries is moving towards low-cost. Western decision-makers are not as concerned about labor cost as the eastern managers (Carter et al. 2010, 367). Carter et al. (2010, 368), provides a comprehensive discussion of the influence that national culture has on decision-making in the selection process. However, it is noteworthy that the company culture also affects the final decision in the selection process. The company culture differs from company to company, therefore; the perception of what makes up ethical culture differs. Most of the research has not addressed the conflict between the company and the national culture as challenges to the decision-making in the selection process. The research has also not shown whether the corporate culture can do away with the influences that arise from the national culture. The current research is meant to address these issues as a way to add to the current research. 5.1- Critic Research has shown that the decision-making process in supplier selection is affected by the culture of the decision-maker. This means that having decision-makers from different cultures in the supplier selection process could affect the selection process. The research has also shown that corporate culture can be used as a tool to eliminate the differences in national culture by ensuring that all decision-makers, despite the difference in national cultures, follow the culture of the company involved. However, corporate culture cannot be seen as an effective way to reduce the effect of national culture in decision-making. The impact of culture in the selection process remain factors that affect the choice of suppliers. 6- Conclusion The competitive nature of today’s business environment has made it mandatory for firms to ensure efficiency in all their transactions and to demand reliability among its external stakeholders. Suppliers are important stakeholders for companies and as a result, they impact on the success of the firm. Due to the need to maintain the quality of products, firms or the decision-makers in the firms have put in place stringent measures to ensure that they only deal with suppliers who have the potential to improve their position in the market. As a result, the supplier selection process has become an important part of the recruitment process of a company since the decisions made during the process have a great impact on the company’s performance. The selection of suppliers is made through a MCDM process to ensure that a firm gets the appropriate suppliers. Several techniques have been incorporated into this process to resolve the problems associated with MCDM. These techniques include TOPSIS, AHP, and ANP. Despite the success in the use of these techniques, researchers and decision-makers are opting to use hybrid methods made up of two or more of these techniques to ensure success in the decision-making process. 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PART 2 Introduction Supplier selection, as discussed in part 1, is a multi-criteria decision-making problem. The supplier selection process has received much attention due to its importance in the addition of value to a firm. The choice of suppliers for a buyer determines the quality of the final product, the price and its suitability to the consumers. The fact that firms continue to outsource more functions to suppliers further makes suppliers important players in the supply chain (Mohammaditabar et al. 2015, 2). Other than selecting the right supplier for a firm, the supplier selection process is also concerned with determining the order quantity that is to be assigned to each of the suppliers. This means that other than the supplier selection problem, the supplier selection process also focuses on solving the order allocation problem (Scott et al. 2015, 226). There are new demands or requirements from customers and other stakeholders in the supply chain that have further complicated the nature of the supply chain. These demands include the need to create more robust supply chains with low risks. Further, these demands have also contributed to research on sustainable and green supply chains which have also had an impact on the supplier selection process (Scott et al. 2015, 227). These new developments in the supply chain have created the need for firms to involve stakeholder groups in the supplier selection process and also in the designing of new products and services. This research looks at the impact of these new developments in supply chain management on the supplier selection process. Sustainable Supplier Selection Process Firms have adopted outsourcing initiatives where some of the functions or operations are awarded to suppliers. This has made it important for firms to evaluate suppliers through considering multiple objectives and criteria. The supplier selection process continues to evolve as more factors are introduced that affect the decision-making process (Amorim et al. 2016, 802). Today, decision-makers are not only required to consider the business operations of a supplier but also the environmental impact and social responsibilities of the suppliers. The emergence of the concept of green and sustainable supply chain has introduced environmental, social and economic characteristics of suppliers as important considerations in the selection process. Sustainable supply chain management requires that different dimensions of social and environmental sustainability be incorporated in supply chain management (Sarkis and Dhavale 2015, 178). Sustainability requires the current generation to use resources having in mind the needs of the future generations. Firms are increasingly setting a requirement that suppliers should ensure that they engage in sustainable practices. One of the practices that has been incorporated into the supply chain is corporate social responsibility where firms and suppliers are required to ensure that they engage in activities that confer public interest. Firms are, therefore, looking for suppliers who are not only engaging in sustainable practices but also can maintain these practices for a long time (Orji and Wei 2015, 2). Firms are engaging in activities that provide for opportunities to transfer and exchange knowledge on green practices such as green purchasing. Firms have also undertaken to transfer employees with green knowledge to suppliers who have not incorporated the practices to ensure that they also incorporate the new practices into their operations. There are firms that have also undertaken to offer training to their suppliers on environmental issues to ensure that these issues are considered in their operations (Awasthi and Kannan 2016, 101). The environmental performance of suppliers is an important factor in achieving a green and sustainable supply chain. Today firms are faced with the challenge of ensuring that their economic growth does not contribute to the pollution or degradation of the environment. There are pressures arising from government and other regulatory agencies requiring firms in the supply chain to ensure that their practices do not pollute the environment (Igarashi et al. 2015, 443). There are also pressures from the fact that the consumers are now aware of the need to purchase green products. This means that companies in the supply chain today have to manage their environmental burdens to ensure that they are competitive. In the intra-organizational operations, firms focus on factors such as greening production, transportation and storage operations (Igarashi et al. 2013, 249). Despite these efforts, company managers have realized that it is important to also focus on inter-organizational operations by focusing on the performance of suppliers. Buyers have introduced new criteria to evaluate suppliers. Other than price, cost, and quality which have been the dominant factors, energy efficiency, carbon emissions, recycling initiatives and water usage are other factors that have now been introduced. Organizations now utilize the multi-criteria decision-making tools to select suppliers who have met the requisite environmental criteria (Banaeian et al. 2016, 2). The need for firms to gain a competitive advantage in the market has contributed to the incorporation of green and sustainable supply chain. Companies in the supply chain will always pursue activities that ensure that they gain a competitive advantage. Consumers have warmed up to greener practices which means that firms must ensure that they adopt these practices if they are to maintain or gain more presence in the market. Greener practices such as eco-design and green marketing are some of the factors that are evaluated when evaluating and selecting suppliers (Trapp and Sarkis 2016, 2089). Multiple Stakeholder Requirements in Supplier Selection One of the objectives of the current research is to identify the impact that different decision-makers have in the supplier selection process. The involvement of different stakeholders in the supply chain and the supplier selection process means that these stakeholders are also part of the decision-making team in the supplier selection process (Bruno et al. 2016, 273). The selection of the right suppliers for a firm will be determined by whether or not they meet the requirements set by the different stakeholders. The need to have sustainable and green supply chains have made firms consider involving different stakeholders in the supplier selection process and the entire supply chain as a whole. There are internal and external stakeholders in the supply chain whose needs must be incorporated in the selection of suppliers. Corporate social responsibility, for example, was previously seen as the responsibility that was bestowed upon firms. However, this requirement has moved to a focus on the supply chain (Scott et al. 2015, 227). This means that the need to incorporate sustainable and green supply chain practices has become a responsibility of all stakeholders in the supply chain. Critic The inclusion of environmental criteria in the selection of suppliers has brought complications to the decision-making process for buyers or firms. The supplier selection process is one that contains challenges due to the value that suppliers have in the supply chain (Chai and Ngai 2015, 216). Buyers have to ensure that they choose the right suppliers who will supply raw materials at a low cost and ensure that the products are of high quality. This means that the inclusion of green practices as criteria for the evaluation and selection of the suppliers further makes the process complicated. Further, the inclusion of these factors may tend to increase the costs to the firm due to the need to offer training to suppliers on sustainable practices. However, despite the pressures arising from these new requirements, firms have to ensure compliance especially where they arise from legislative standards. One of the objectives of the current research is to come up with a criterion to be used in the selection of suppliers when using a mathematical model. The current research, unlike the previous research, intends to demonstrate the importance of firms adhering to a criterion that involves ensuring that suppliers incorporate green practices into their operations. The research seeks to demonstrate that as the list of criteria for the evaluation of the suppliers increases, the possibility of a firm selecting the best supplier increases. This is because one the selection is made, the decision-makers will have ensured that the selected suppliers meet the stipulated requirements. Further, due to the demand for green products by consumers, firms have to ensure that the suppliers have incorporated these practices as a way to add values to their products. Total Supply Chain Cost One of the research questions in the current research requires the researchers to consider the effect of changing the culture of the decision-maker on the choice of the supplier. The culture of the decision-maker, as discussed earlier, can be changed by introducing the corporate culture which enables the decision-maker to make decisions based on the policies or the values adopted by the company. Although different companies have different corporate cultures, today firms are willing to take any opportunity to increase their ability to be competitive in the market. One of the strategies incorporated by firms is to ensure that the cost of production is minimized in order to deliver products that are of high quality and low prices to the consumers (Patra and Mondal 2015, 452). In most companies, more than half of the cost of a product comes from raw materials. This means that firms are always looking for suppliers that can provide low price and high-quality raw materials within the required time. As a result, the cost of the supply chain has become an important point to consider in the supply chain (Jadidi et al. 2014, 4214). Order Allocation Firms in the supply chain continue to outsource some of their functions to the suppliers. As a result, it has become impossible for a single supplier to meet the demands of a firm. Firms have resorted to placing orders with several suppliers. The different materials supplied by these different suppliers then have to be blended to make the final product. This has become a common problem in the supplier selection process because a buyer must identify suppliers who will supply materials of a similar quality to make one product. This must also be done by considering the price of the materials being supplied. The suppliers must be capable of supplying low-cost raw materials. The problem is further complicated by the fact that the decision-makers have to place the orders according to the requirements of the owners of the firm or other stakeholders in the firm (Memon et al. 2015, 7952). Scott et al. (2015, 233), in their research on how to conduct the supplier selection and order allocation process in a multi-stakeholder environment, recommended the use of a model based on the AHP and Quality Function Deployment (QFD). The incorporation of these two techniques is to ensure that appropriate suppliers are selected and that orders are allocated to them in an optimal manner. According to the research, the use of AHP-QFD ensures that the subjective judgments of the decision-makers are removed and replaced by the requirements set out by the stakeholders. The method also ensures that the stakeholders are consulted before the selection and allocation are done. This means that the decision-makers do not have to second guess the requirements of the stakeholders. Even though the research shows that there are techniques that can be used to resolve the problem that arises in supplier selection and placement of orders where there are multiple stakeholders, there is no doubt that there these factors bring in new challenges to the supplier selection process (Cebi and Otay 2016, 143). The primary objective of the current research is to develop a mathematical model that can be used in the supplier selection process by decision-makers in industrial settings. Previous research, as discussed above, has shown that mathematical models have been used in both supplier selection and order allocation. This means that a model can be developed from two mathematical techniques to address the owner’s needs in both supplier selection and order allocation. This supports the position discussed in part 1 that hybrid models, those that are made of more than one mathematical technique, give better results in supplier selection. Lot Sizing Purchasing is one of the strategic activities in supply chain management because it provides an opportunity for the company or the firm to reduce the cost of production and to increase its profits. Lot sizing and supplier selection are, therefore, issues of concern for a firm in the supply chain. Supplier selection mainly requires the firm to identify which suppliers to procure from and the periods in which to make the orders while the issue of lot sizes requires the firm to identify the lot sizes before making a purchase in such that a way that the firm can meet the demands and still minimize the cost of the purchase and the final product (Mazdeh et al. 2015, 33). A lot size refers to the quantity of a good that is produced at one time. Supplier selection is considered as an important issue in lot sizing because the choice of different suppliers may result in different purchasing costs (Pazhani et al. 2016, 615). Quantity discounts are also factors that affect the purchase price between different suppliers. Where a firm makes a large order, the supplier may reduce the unit price depending on the schedule for the supply of the products (Ayhan 2015, 2). There are price breaks that are offered by suppliers where the purchase price for each of the units ordered decreases as the quantity of the order increases (Cardenas-Barron et al. 2015, 225). The increase in the order quantity also ensures that the firm’s order is consistent with the lot size of the supplier making it easy for the supplier to offer quantity discounts. Lot sizing has become an important factor to consider in supplier selection because it enables the firm or the buyer to identify those suppliers who can offer quantity discounts whose effect is to lower the cost of the materials. The cost of production is always a concern for buyers because where the cost is low, the buyer makes more profit. This means that having suppliers who can offer quantity discounts on lot sizes means that the buyer ensures that the cost of raw materials is low hence lowering the cost of production (Cardenas-Barron et al. 2015, 226). In the supplier selection process, decision-makers have to consider multiple suppliers and quantity discounts that are offered in lot sizing (Cebi and Otay 2016, 144). These concepts get more focus because they are part of the purchasing operation of a firm which offers an opportunity to increase the revenue of a company by reducing the costs. The ability of the decision-makers to identify suppliers and lot sizes affects the production costs. The problem of lot sizing affects the supplier selection process due to the need for each firm to minimize the total supply chain cost (Mohammaditabar et al. 2015, 2). The selection of the right supplier using a mathematical model means that there must be a criterion that must be applied by decision-makers. One of the research questions for the current research is to identify how decision-makers with different decision power can be involved in the selection model. The presence of different decision-makers with different decision power ensures that each decision-maker is in charge of ensuring that the suppliers meet a particular condition. The assignment of the factors that each decision-maker will oversee depends on the importance of such a factor for the firm. Critic The need to maintain low cost of production will always be a factor in the supplier selection process. The need to ensure that the cost of the supply chain is low and lot sizing are all factors that have been put in place to ensure that suppliers who are contracted enable the firm to make high quality and low priced products. Though the weight given to the factors that decision-makers consider may differ, the cost of raw materials which affects the cost of production will always be given more weight. Supplier Behavior Supplier behavior or ethics is also a major concern in the supplier selection process. A firm seeking to contract a supplier or suppliers has to ensure that the suppliers do not have unethical behavior that could taint the name and reputation of the buyer (Moghaddam 2015, 6239). Today, the unethical behavior of suppliers in the supply chain has become a source of concern for many industries. Practices such as the use of unsafe processes such as unsafe working conditions for workers and the use of child labor in supplier activities and their transactions have become a challenge for firms seeking to contract suppliers. Even where suppliers ensure that the cost of raw materials is low, unethical practices can lead to loss of value of a firm as consumers shun products from companies that are associated with suppliers who have unethical behavior (Chen and Baddam 2015, 74). Other than the pressure from consumers who are ready to shun products where the firm has connections with suppliers with unethical behavior, government standards have also added pressure on companies to ensure that they include supplier ethics as a criterion in supplier evaluation and selection. Chen and Baddam (2015, 75) finds that although consumers may buy products from firms with unethical practices, they, however, punish them through demanding lower prices. For firms that maintain ethical conduct, consumers are ready to pay premium prices for products hence giving them a competitive edge over the other firms. This means that firms have to ensure that the suppliers they deal with maintain supplier ethics. Even where long-term contracts have already been made between a firm and an unethical supplier, contractual control enables the firm to demand that the supplier ensures that their practices and activities are in line with the standards set by the government. Contractual control regulates the behavior of the supplier through agreements and clauses where the responsibilities of each of the parties are stipulated. The fact that the punishment for breaches is well stipulated in the agreements means that the firm can ensure that the suppliers are ethical in their conduct (Xie et al. 2016, 3). There are different factors that may affect supplier ethics. In the selection process, the method used by a firm to select a supplier determines whether or not a firm is in a position to consider the ethics of the supplier. Buyers can evaluate suppliers through public selection and social relation. Public selection is where a buyer collects information about a supplier from sources that are open or public such as the media. The supplier then proceeds to compare the suppliers to determine the supplier that is best suited to supply the materials needed (Heidarzade et al. 2016, 214). One of the advantages of this method is the fact that it enables the buyer to evaluate and select a supplier from a wide pool of suppliers. This means that in such a situation, the buyer can evaluate the supplier ethics of all the suppliers and compare them to determine the supplier that is best suited (Xie et al. 2016, 3). There is also social selection where the firm chooses suppliers based on referrals and ties. This method relies on the network that the buyer has created with suppliers or with other players in the supply chain. Although this method may enable the firm to select a supplier with whom they have ties and good relations, it does not always guarantee that the buyer will get the most qualified supplier. There is also no guarantee that the supplier maintains ethical standards or conduct. Unlike in public selection, the pool from which the buyer chooses from is limited hence there is no guarantee that the firm will get the right supplier. Where the buyer ends up getting a supplier with unethical practices, the value of the business goes down and the competitive advantage that the buyer had diminishes. The method that the buyer uses to get suppliers to evaluate in the supplier selection process has an impact on whether or not the buyer gets the appropriate supplier who can increase the value of the firm (Xie et al. 2016, 3). Critic Though there is mounting pressure on firms to deal with those suppliers that practice supplier ethics, firms continue to enter into contracts with suppliers who associated with unethical behavior. Firms give priority to low cost raw materials, lead time and efficiency of suppliers and give less weight to supplier ethics. This has discouraged many suppliers from adopting ethical practices such as ensuring safe working conditions for workers. In a situation where a firm has been dealing with certain suppliers for a long time due to the low cost of their products or their efficiency in their operations, such a firm may be less willing to replace such suppliers even though they engage in unethical conduct. This is because the firm is more concerned about the economic gains of their arrangement. Where the unethical conduct of the suppliers does not have much effect on the competitive nature of the firm or where the firm is already a market leader, the unethical conduct of the supplier is not given much consideration. However, the current research proposes that once the decision-makers have laid down all the necessary factors to be considered in the selection of a supplier, it becomes easier for the decision-makers to give weight to ethical conduct compared to when there is an already existing relationship between the supplier and the firm. Project Delivery Method and Supplier Selection The role of a project delivery system (PDS) is to describe the manner in which participants in a project are organized and how they interact as a way to ensure that the goals and objectives set out by the owner are achieved. In the China Construction Industry there are various PDSs such as design-build, design-bid-build among others (Mahdi and Alreshaid 2005, 565). The project delivery system affects the cost of the project, its schedule, its quality and the management of the project. Some of the factors that are considered when selecting the right PDS include the objectives of the project, cost certainty, complexity of the project, project characteristics, quality performance among others. The system determines the success of the project. This means that the project owners are concerned about the choice of the right PDS (Chen et al. 2011, 5457). PDS can be likened to the supplier selection process which has an effect on the final product to be produced by the firm. The suppliers selected will determine the cost of production, the quality of the product, its price and the overall success of the production process (Hedarzade et al. 2016, 216). The importance that is accorded to the supplier selection process is similar to that involved in selecting the right PDS. There are different methods that have been used in the selection of the right PDS such as the use of judgment to eliminate those methods that are unfavorable and the use of graphical guidelines (Khalil 2002, 470). However, recently there has been the application of mathematical techniques such as analytical hierarchical process in selecting the right PDS. AHP is used to solve problems that are unstructured in multi-criteria decision-making. The application of AHP is done in two stages that is, the formulation of the hierarchic design and the evaluation stage. Al Khalil (2002, 472), conducted a research where AHP was used to determine the right PDS for a construction project. According to the research, AHP is a suitable technique to ensure that the needs of the owner of the project are evaluated and the appropriate PDS selected. The method ensures that the factors that affect the choosing of a PDS are considered in the process. Research has shown that the technique is simple to use and the selection process is a success (Al-Harbi 2001, 20). The main objective of the current research is to develop a framework that consists of a mathematical and experimental foundation that can be used in supplier evaluation and selection. AHP is a mathematical model which has successfully been used in a multi-criteria decision-making process in the selection of the appropriate PDS for a project (Wood 2016, 611). This means that a mathematical model can be developed to be used for supplier selection in the current research. Galankashi et al. (2016, 98) successfully utilized fuzzy AHP in selecting suppliers in the automotive industry. The success in the use of these models in the selection of suppliers means that the objective of the current research can be achieved. Previous research has demonstrated the need to use more than one technique in creating a mathematical model. The use of more than one technique in creation of the model ensures that all factors raised by the firm owner are assessed against each supplier in an objective way. Further, the shortcomings in one technique are eliminated by combining it with another technique. Scott et al. (2015, 233), in using a combination of AHP and QFD in the creation of a mathematical model states that while AHP is used to evaluate the suppliers, QFD ensures that the subjective judgments of the decision-makers are removed. Conclusion Traditionally, price, the cost of transportation and the quality of the raw materials being purchased are some of the factors that were given great consideration in the selection of a supplier. However, today other factors have been introduced such as green and sustainable supply chain and supply ethics. Lot sizing where a firm benefits from quantity discounts also receives much attention today. The effect is that the supplier selection process has become more complex, and new challenges have arisen for the decision-makers. Despite these challenges, firms are obligated to ensure that these factors are considered as a way of ensuring that they get a competitive advantage. The supplier selection process is a multi-criteria decision-making process. This means that there are different factors that are involved in evaluating the suppliers to ensure that the firm selects the suppliers who can add value to its products and business. The additional factors in the evaluation of the suppliers ensure that the firm gets the suppliers who can increase its competitive advantage. Research has shown that there are different mathematical techniques such as AHP, TOPSIS among others that have been used in the creation of a mathematical model for the selection process. The use of two techniques in the creation of a model ensures that the selection process is credible and that all the factors are considered objectively. References Al-Khalil, M 2002, Selecting the appropriate project delivery method using AHP, International Journal of Project Management, Vol. 20, 469-474. Al-Harbi, K 2001, Application of the AHP in project management, International Journal of Project Management, Vol. 19, 19-27. Amorim, P, Curcio, E, Almada-Lobo, B, Ana, P, Barbosa-Povoa, Grossmann, I 2016, Supplier selection in the processed food industry under uncertainty, European Journal of Operational Research, Vol. 252, 801-814. 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Xie, E, Liang, J and Zhou, K 2016, How to enhance supplier performance in China: An integrative view of partner selection and partner control, Industrial Marketing Management, http://dx.doi.org/10.1016/j.indmarman.2016.01.004 Read More