Vendor selection problem: a multi-criteria approach based on strategic decisions

Many factors in the current scenario have influenced manufacturing organisations to have a competitive edge by concentrating on entire supply chains. Sourcing decisions are one of the strategic decisions because they enable companies to reduce costs and improve profit figures. The main task in sourcing is vendor selection. Recent challenges such as shortened product life cycle, just-in-time environment, and the importance of strategic partnerships in upstream chains always influence companies to prioritise vendor selection. In addition, outsourced parts and components account for a significant contribution in the cost of finished goods. Thus evaluating and selecting the right vendor is the key to business. Vendors are selected merely on the basis of cost factors in the traditional approach. However, companies eventually have understood that their approach which emphasises costs as the sole criterion is inefficient and needs to be changed. To deal with the complex process of vendor evaluation, multiple criteria decision-making techniques have evolved. This study presents the integrated approach of multiple multi criteria decision making (MCDM) techniques such as fuzzy logic, strength-weakness-opportunity-threat (SWOT) analysis, and data envelopment analysis. The efficacy of the proposed approach is evident from the case study of an automotive component manufacturer involving 20 vendors, comprising of pre-qualification by fuzzy SWOT and final selection by DEA.