Modeling and Optimization of Supplier Selection Process for Decreasing Total Cost of Projects

There are significant factors affecting the decisions about supplier selection for procurement in steel construction firms: parts prices and transportation costs, payment periods, parts lengths and considering penalty terms coming from firm’s clients. Therefore, in order to select optimal firms, each proposal must be considered on equal terms. As a result, ‘Net Present Value’ should be calculated in evaluating payment period, lead time, parts lengths and also transportation costs payment period. This evaluation may bring about decrease in costs of parts based on older procurements. For an optimal solution, a mathematical model which includes, demand of units, net present value of products, delay cost due to retardation of Project is required. Moreover, the possibility of making predictions for future scenarios may assist in mapping out a route for the decision makers in steel construction firms. On this account, this study is designed to develop a mathematical model for the supplier selection system using integer programming.