International Journal of Management and Applied Science, ISSN: 2394-7926 Volume-2, Issue-11, Nov.

-2016

SUPPLIER SELECTION AND EVALUATION OF SUPPLIER LINK IN

SUPPLY CHAIN MANAGEMENT
1
MD. ASIF EQUBAL, 2RAJKUMAR OHDAR
1
Department of Mechanical Engineering, Cambridge Institute of Technology, Tatisilwai, Ranchi – 835103, india
2
Department of Forge Technology, National Institute of Foundry & Forge Technology, Hatia, Ranchi- 834003, India
E-mail: 1Equbal.asif@yahoo.com, 2rkohdar@yahoo.com

Abstract— In today’s competitive manufacturing and service industries decision making is a critical process. Supply chain
management (SCM) is a network of businesses and in this network there are several critical decision making problems. One
of them is supplier selection decision. Also, managing the supply base is an important but complex issue for all industries.
One of the instruments companies use in this context is performance measurement and evaluation of supplier link. Supplier
link is the link between focal company and the upstream member i.e. suppliers. A number of performance measures have
been identified, and grouped under three specific performance criteria viz. effectiveness, efficiency, and quality. In this link
effectiveness, efficiency, and quality of incoming materials can be monitored. For the uninterrupted supply of items to the
successor entity in the supply chain, the role of supplier link is crucial, and to develop a performance measurement system
for this link is very much required.

Keywords— Supplier Evaluation, Performance Measurement, Supplier Link, Effectiveness, Efficiency, Quality.

I. INTRODUCTION technical capability, management organization,

With the increasing number of world class
competitors both domestically and abroad,
Organizations have had to improve their internal
processes rapidly in order to stay competitive. As the
demand for new products changes regularly,
manufacturing organizations are required to become
increasingly flexible and responsive to modify
existing products and processes or to develop new
ones in order to meet ever-changing customer needs.
So, managers realized that material and service inputs
from suppliers had a major impact on their
organizations ability to meet customer’s needs. This
led to an increased focus on the supply base and the
organizations sourcing strategy [1]. Supplier selection
is an important issue in supply chain management.
Typically, manufacturer spends more than 60% of its
total sales on purchased items, such
as raw materials, parts, and components [2]. In
addition, manufacturer purchases of goods and
services constitute up to 70% of product cost [3].
Therefore, the selection of suppliers is an area of
tremendous importance and should be considered a
strategic issue in the effective management of a
supply chain.
II. LITERATURE REVIEW
During the 1990s, many manufacturers sought to
develop strategic alliances with suppliers in order to
upgrade their management preference and
competitiveness [4, 5]. Since 1966, many criteria
have been employed to evaluate and select supplier.
Dickson identified 23 different criteria for supplier
selection, based on which Weber, Current, and
Benton suggested a number of selection criteria to
measure supplier performance, such as price,
delivery, quality, productive capability, location,
reputation, industry position, financial stability,
performance history, and maintainability [6, 7].
Evans proposed that price, quality and delivery are
key criteria for supplier evaluation in the industrial
market [8]. Shipley suggested that supplier selection
involve three criteria, namely, quality, price and
delivery lead time[9]. Ellram suggested that in the
supplier selection process, firms must to consider
whether product quality, offering price, delivery time,
and total service quality meet organizational demand
[10]. Tam and Tummala proposed an analytic
hierarchy process (AHP) based model and adopted
quality, cost, problem-solving capabilities, expertise,
delivery lead time, response to customer requests,
experience, and reputation in selecting
telecommunications systems [11].
Pi and low suggested a method for supplier
evaluation and selection based on quality, price, on-
time delivery, price, and service quality. Recently, the
supplier selection process has received considerable
attention in the marketing management literature
[12]. Chen et al. adopted a fuzzy decision making
approach to address the supplier selection problem in
the supply chain system. Five benefit criteria were
considered, including the profitability of supplier,
relationship closeness, technological capability,
conformance quality, and conflict resolution[13]. Lin
and Chang claimed that communication, reputation,
industry position, relationship closeness, customer
responsiveness, and conflict-solving capabilities are
important criteria in vendor selection [14]. In
addition, the role of organizational size in the supplier
selection process has been addressed by Wang,
Cheng, and Cheng [15]. Table 1 summarizes the
criteria that have appeared in literature since 1966;
most of the articles referenced below suggested that
quality, price, delivery performance

Supplier Selection and Evaluation of Supplier Link in Supply Chain Management

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International Journal of Management and Applied Science, ISSN: 2394-7926 Volume-2, Issue-11, Nov.-2016

Table 1: Supplier selection criteria literature review.

are the most important supplier selection criteria.
Over the years, a number of techniques have been
proposed to solve the supplier selection problem. The
long list of approaches includes linear programming
(LP), mathematical programming models, multiple-
objective programming, statistical and probabilistic
methods, data envelopment analysis (DEA), cost-
based methods (CBM), case-based reasoning (CBR),
neural networks (NN), AHP, analytic network
process (ANP), fuzzy set theory, and techniques for
order preference by similarity to ideal solution
(TOPSIS).Recently, the integration of different
methodologies to supplier selection process has
received considerable attention in the supply chain
management literature. Faez, Ghodsypour, and
O’brien presented an integrated fuzzy case-based
reasoning and mathematical programming method
[16]. Önüt, Kara, and Isik developed a supplier
evaluation approach based on the ANP and TOPSIS
methods to help a telecommunication company in
vendor selection [17]. Ha and Krishnan developed a
hybrid model that including AHP, DEA and NN
Supplier Selection and Evaluation of Supplier Link in Supply Chain Management
approaches to the supplier selection problem [18].
Kokangul and Susuz integrated AHP and
mathematical programming to consider both non-
linear integer and multiple-objective programming
under certain constraints to determine the best
suppliers. The integrated model uses source data
provided by a manufacturing firm to address a real
world supplier selection problem [19].
III. SUPPLIER SELECTION USING TOPSIS
METHOD
TOPSIS method was first developed by Hwang and
Yoon [20].TOPSIS is a multiple criteria method to
identify solutions from a finite set of alternatives. The
basic principle is that the chosen alternative should
have the shortest distance from the positive ideal
solution and the farthest distance from the negative
ideal solution [21]. The positive-ideal solution is a
solution that maximizes the benefit criteria and
minimizes the cost criteria, where as the negative
ideal solution maximizes the cost criteria and

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International Journal of Management and Applied Science, ISSN: 2394-7926
minimizes the benefit criteria. The TOPSIS procedure
can be expressed in a series of steps.
STEP 1: Calculate the normalized decision matrix.
The normalized value rij is calculated as
STEP 2: Calculate the weighted normalized decision
matrix by multiplying the normalized decision matrix
by its associated weights. The weighted normalized
vij is calculated as
STEP 3: Determine the positive ideal and negative
ideal solutions
Where I is associated with the benefit criteria, and J
is associated with the cost criteria.
STEP 4: Calculate the separation measures, using the
n-dimensional Euclidean distance. The separation of
each alternative from the positive ideal solution is
given as
IV. SUPPLIER LINK EVALUATION
Fig. Supply Chain Network Structure
The issue of how to design a useful performance
measurement system has received increasing
attention during the last decade, and various authors
have presented ideas about what an ideal
measurement system might look like. The scope of
performance measurement ranges from how a
comprehensive performance measurement system
should be designed, to ideas about which measures
should be used to maximize performance. The
increasing competitive imperatives in cost, efficiency
and customer responsiveness have urged
manufacturers to pursue a strategic alliance with both
upstream and downstream partners such as suppliers,
customers and even a host of logistics service
Supplier Selection and Evaluation of Supplier Link in Supply Chain Management
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Volume-2, Issue-11, Nov.-2016
Similarly, the separation from the negative ideal
solution is given as
STEP 5: Calculate the relative closeness to the ideal
solution. The relative closeness of the alternative Ai
with respect to A+ is defined as
As d-i ≥ 0 and d+i ≥ 0, then, clearly, Ci ∈ [0, 1]
STEP 6: Rank the preference order. In ranking the
alternatives using this index, we can rank the
alternatives in decreasing order. The basic principle
of the TOPSIS method is that the chosen alternative
should have the “shortest distance” from the positive
ideal solution and the “farthest distance” from the
negative ideal.
providers to exploit their capabilities and to create
new value to end customers (fig. 1).
In present global market place, to meet ever-changing
customer needs timely and accurate assessment of
overall supply chain and its individual component
performance is of paramount importance but the
process of choosing appropriate supply chain
performance measures is difficult due to the
complexity of these systems [22].Supplier link is the
link between focal company and the upstream
member i.e. suppliers..A number of performance
measures are identified, and grouped under three
specific performance criteria viz. effectiveness,
efficiency, and quality. In this link effectiveness,
International Journal of Management and Applied Science, ISSN: 2394-7926 Volume-2, Issue-11, Nov.-2016

efficiency, and quality of incoming materials is The quality measures identified for supplier link are
monitored. For the uninterrupted supply of items to given below.
the successor entity in the supply chain, the role of ADFDijt = Achievement of defect free delivery of
supplier link is crucial, and to develop a performance plant i, on tier j, in period t.
measurement system for this link is very much SBPijt = Supplier booking in procedure of plant i, on
required. tier j, in period t.
Effectiveness Measure ( EM 1t ): QMijt = Total quality performance of plant i, on tier j,
in period t.
Effectiveness is an output or accomplishment issue. It Assuming equal weightage to all the quality
is a measure of an organizational system’s measures,
performance which focuses on the output side of the
system, it is defined as the level of accomplishment QM ijt  1
2
ADFD ijt  SBPijt 
of functional values of products and services in
fulfillment of the desired goals and objectives. The
effectiveness measures identified for supplier link are
given below.
SDPijt = Supplier delivery performance of plant i, on
tier j, in period t.
SPMijt = Supplier pricing against market of plant i,
on tier j, in period t.
IDSijt = Inventory days of supply of plant i, on tier j,
in period t.
EM1ijt = Total effectiveness performance of plant i,
on tier j, in period t.
Assuming equal weightage to all the effectiveness
measures,

EM 1ijt  1
3
SDP ijt  SPM ijt  IDS ijt 

Efficiency Measures ( EM 2 t ):
Efficiency is an input-side or resource conversion
measure that is concerned with the conversion rate of
resources into products and services with the help of
technology, methods and manpower available in a
given period.
The efficiency measures identified for supplier link
are given below.
SLTijt = Supplier lead time against industry norm for
plant i, in tier j, in period t.
POCTijt = Purchase order cycle time for plant i, on
tier j, in period t.
EM2ijt = Total efficiency performance of plant i, on
tier j, in period t.
Assuming equal weightage to all the effectiveness
measures,
Fig. Flow chart of Performance Measures of Supplier Link
REFERENCES
[1] B.R. Handfield, L. E. Nichols, Introduction to Supply Chain
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International Journal of Production Economics, vol. 73, pp.
15–27, 2001.
[4] M. Kumar, P. Vrat, and R. Shankar, “A fuzzy programming
approach for vendor selection problem in a supply chain”

EM 2 ijt  1
2
SLT ijt  POCTijt 
Quality Measure (QMt):
Quality is pervasive throughout the entire system. It
is defined as the degree of conformation to
specifications of activities of an organization system
in relation to one or more of their desired values. It
can be defined more operationally and in a way that
facilitates measurement and that is consistent with the
concept of the extended system. It refers to the
quality of outputs or product produced or services
rendered by an organization or supply chain entity.
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[10] L. Ellram, “The supplier selection decision in strategic
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
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