Risk adjusted multicriteria supplier selection models with applications

Arunachalam Ravindran, R. Ufuk Bilsel, Vijay Wadhwa, Tao Yang

Research output: Contribution to journalArticle

124 Citations (Scopus)

Abstract

Most manufacturers are continuously seeking their supplier base around the world and look for an opportunity to significantly reduce supply chain costs. Singular emphasis on supply chain cost, however, can make the supply chain brittle and more susceptible to the risk of disruptions. The objective of this paper is to develop multicriteria supplier selection models incorporating supplier risk and apply them to a real company. We develop two different types of risk models, value-at-risk (VaR) and miss-the-target (MtT). We model the risk-adjusted supplier selection problem as a multicriteria optimisation problem and solve it in two phases. Phase 1 is the pre-qualification step, where a large set of initial suppliers is reduced to a smaller set of manageable suppliers using various multi-objective ranking methods. In Phase 2, order quantities are allocated among the short listed suppliers using a multi-objective optimisation model. In the multi-objective formulation, price, lead-time, VaR type risk of disruption due to natural event and MtT type risk of quality are explicitly considered as four conflicting objectives that have to be minimised simultaneously. We solve the multi-objective optimisation problem using four different variants of goal programming. The models are illustrated with an actual application to a global IT company.

Original languageEnglish (US)
Pages (from-to)405-424
Number of pages20
JournalInternational Journal of Production Research
Volume48
Issue number2
DOIs
StatePublished - Jan 1 2010

Fingerprint

Supply chains
Multiobjective optimization
Suppliers
Supplier selection
Selection model
Multi-criteria
Costs
Industry
Lead
Supply chain
Value at risk
Disruption
Optimization problem
Multi-objective optimization
Goal programming
Prequalification
Ranking
Multicriteria optimization
Optimization model
Order quantity

All Science Journal Classification (ASJC) codes

  • Strategy and Management
  • Management Science and Operations Research
  • Industrial and Manufacturing Engineering

Cite this

Ravindran, Arunachalam ; Bilsel, R. Ufuk ; Wadhwa, Vijay ; Yang, Tao. / Risk adjusted multicriteria supplier selection models with applications. In: International Journal of Production Research. 2010 ; Vol. 48, No. 2. pp. 405-424.
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Risk adjusted multicriteria supplier selection models with applications. / Ravindran, Arunachalam; Bilsel, R. Ufuk; Wadhwa, Vijay; Yang, Tao.

In: International Journal of Production Research, Vol. 48, No. 2, 01.01.2010, p. 405-424.

Research output: Contribution to journalArticle

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