Recent Developments in Supplier Selection and Order Allocation Process

Recent Developments in Supplier Selection and Order Allocation Process

Ezgi Aktar Demirtas (Eskisehir Osmangazi University, Turkey) and Ozden Ustun (Dumlupinar University, Turkey)
DOI: 10.4018/978-1-60566-856-7.ch005
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Because the purchasing department can play a key role in cost reduction, supplier selection and order allocation are the most important functions of purchasing management. In view of its complexity, it will be focused especially on the final selection stage that consists of determining the best mixture of suppliers and allocating orders among them so as to satisfy different purchasing requirements. In recent years, many researchers used new integrated models for supplier selection and order allocation. They combine multi-criteria approaches such as AHP/ANP and linear programming (LP), mixed integer programming (MIP), non-linear programming (NLP), mixed integer non-linear programming (MINLP) and goal programming (GP) with different achievement scalarizing functions. In this chapter, after the stages of supplier selection process are explained, these new integrated models are introduced and their constraints, variables, and goals/objectives of these models are explained in detail. Then the solution methods of these integrated models are given. Finally, different integrated models are compared by considering their advantages and disadvantages.
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Supplier Selection Process

As reported by De Boer et al. (2001), several decision-making steps make up the supplier selection process. At first, a preparation step is achieved by formulating the problem and the different decision criteria. After that, prequalification of potential suppliers and final choices are successively elaborated. De Boer et al. (2001, 2003) present an interesting overview of the literature on supplier selection models. It specifies the published works treating every stage of the selection process for every purchasing situation. In this section, every stage of the selection process (problem definition, decision criteria formulation, pre and final selection of potential suppliers) is demonstrated.

Problem definition

Due to shortened product life cycles, the search for new suppliers is a continuous priority for companies in order to upgrade the variety and typology of their products range. On the other hand, purchasing environments such as Just-In-Time, involve establishing close connections with suppliers leading to the concept of partnership, privileged suppliers, long-term agreement, etc. Thereby, decision makers are facing different purchasing situations that lead to different decisions. Consequently, in order to make the right choice, the purchasing process should start with finding out exactly what we want to achieve by selecting a supplier.

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