Supplier selection study in a defence industry

Supplier selection is one of the most important task for a company. In order to reach manufacturing aims and ensure customer satisfaction, every company would like to work with a trustworthy business partner. Working with a strong supplier mitigates risks in the manufacturing process and enhances competitive capacity and profit. Therefore, supplier selection is a strategical decision making problem. In today's world producing all the sub-parts in the same company is an inefficient planning. For this reason, companies are in need of different suppliers. In this study, supplier selection problem for a project which will kick off in defence company producing air vehicles is considered. Our aim is to minimize purchasing cost and maximize quality level and total weight of the purchased products. Supplier selection problem is addressed by a three-phased method. In the first step, candidate suppliers are evaluated for their technical competences with TOPSIS (Technique for Order Preference by Similarity to Ideal Solution). Appropriate suppliers are scored subjectively with AHP (Analytic Hierarchy Process) method in the second step. During the assessment, quality, compliance requirements, price, risk, safety, technological level and brand image are considered. One of the most important criteria for the companies in the aerospace or space sector is the quality. Supplier firms have to satisfy certain quality management system standards. In the last phase, orders are assigned to suppliers using objective programming with company's aims and constraints. Material costs are handled with a piecewise linear function in programming and lead times with total demand requirements are also included in the problem constraints. For the first model, lead times consist of mean values, in the second model. Leads times are considered as stochastic, that are handled with an heuristic approach inspired from Markowitz method. Company's previous orders are solved with newly developed method and results are compared. In addition, we also solve the supplier selection problem with another method from literature and compare the results. Sensitivity and scenario analyses are done in order to evaluate situations that may occur in the future or decrease value at risk in decision processes assessed either objectively or subjectively. During analyses, weights of criterias in AHP method, priorities in goal programming and confidence levels are investigated. Keywords: Multiple criteria decision making problem, Supplier selection, Multi objective programming, TOPSIS, AHP, Taguchi method, Markowitz method