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An a posteriori decision support methodology for solving the multi-criteria supplier selection problem
Journal
European Journal of Operational Research
ISSN
0377-2217
Type
journal article
Date Issued
2019-01
Author(s)
Abstract
This research presents a novel, state-of-the-art methodology for solving the multi-criteria supplier selection problem considering risk and sustainability. The approach combines multi-objective optimization with the analytic network process to meet the requirements of a supplier portfolio configuration that takes into account sustainability. To integrate the aspect ‘risk’ into the supplier selection problem, we develop a multi-objective optimization model based on the investment portfolio theory introduced by Markowitz. The proposed model is a non-standard portfolio selection problem with four objectives: to minimize the purchasing costs, to select the supplier portfolio with the highest logistics service, to minimize the supply risk, and to order as much as possible from those suppliers with outstanding sustainability performance. The optimization model, which has three linear and one quadratic objective function, is solved by an algorithm that analytically computes a set of efficient solutions and provides graphical decision support through a visualization of the complete and exactly-computed Pareto front (a posteriori approach). The possibility of computing all Pareto optimal supplier portfolios is beneficial for decision makers as they can compare all optimal solutions at once, identify the trade-offs between the criteria, and study how the different aspects of supplier portfolio configuration may be balanced to finally choose the composition that satisfies the purchasing company’s strategy best. The approach has been applied to a real-world supplier portfolio configuration case to demonstrate its applicability and to analyze how the consideration of sustainability requirements may affect the traditional supplier selection and purchasing goals in a real-life setting.
Language
English
HSG Classification
contribution to scientific community
HSG Profile Area
None
Refereed
Yes
Publisher
Elsevier
Publisher place
Amsterdam
Volume
272
Number
2
Start page
505
End page
522
Subject(s)
Division(s)
Eprints ID
254559