Supplier selection and order allocation with process performance index in supply chain management

The need to gain a global competitive advantage on the supply side has forced businesses to search for effective supply network strategies. The effective selection of suppliers is the key ingredient for the success of supply networks. A variety of analytical methods ranging from simple weighted techniques to complex mathematical programming approaches have been proposed for supplier selection. However, these models are generally aimed at supporting a decision maker (DM) in the final selection phase and they have failed to consider a holistic view of the supplier selection process. Supplier evaluation and selection problems are inherently multi-criteria decision problems. Supply networks are now not only configured by suppliers, but also consist of manufacturers, retailers and customers. Therefore, a holistic and comprehensive approach for evaluating these elements in supply networks is required. We propose a multi-objective mathematical programming approach to select the most appropriate supply network elements. The process performance index (PPI) is used as an assessment tool for the supply network elements and the analytic hierarchy process (AHP) is used to integrate the objectives of the proposed mathematical program to a single one. The efficacy and applicability of the proposed methodology is demonstrated with a numerical example.