Vendor selection in outsourcing

Vijay Wadhwa, Arunachalam Ravindran

Research output: Contribution to journalArticlepeer-review

272 Scopus citations

Abstract

In any large organization, millions of dollars are spent on outsourcing. Most large organizations are outsourcing those activities that are either not cost efficient if done in-house or not core to their businesses. One of the most critical steps in outsourcing is vendor selection, which is a strategic decision. We model the vendor selection problem as a multi-objective optimization problem, where one or more buyers order multiple products from different vendors in a multiple sourcing network. Price, lead-time and rejects (quality) are explicitly considered as three conflicting criteria that have to be minimized simultaneously. A pricing model under quantity discounts is used to represent the purchasing cost. We present and compare several multi-objective optimization methods for solving the vendor selection problem. The methods include weighted objective, goal programming and compromise programming. The multicriteria models and the methods are illustrated using a realistic example. Value path approach is used to compare the results of different models.

Original languageEnglish (US)
Pages (from-to)3725-3737
Number of pages13
JournalComputers and Operations Research
Volume34
Issue number12
DOIs
StatePublished - Dec 1 2007

All Science Journal Classification (ASJC) codes

  • Computer Science(all)
  • Modeling and Simulation
  • Management Science and Operations Research

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