Supplier selection problem: An application of goal programming in a firm

ABSTRACT Companies often rely on outside suppliers for many of their components and materials. In a competitive market there are many suppliers available for these inputs of the firm. The question of 'who to buy from and how much' is simply the supplier selection problem that every firm faces. In this problem, there is more than one concern that the decision maker needs to deal with. Some of these concerns are the quality, lead-time and price aspects of the parts to be purchased. Also, there can be other concerns depending on the firms strategies. As can be seen, supplier selection problem is a multiple-objective problem in nature and hence need careful analysis. This thesis presents a goal programming approach to solve the supplier selection problem of a company operating in textile industry in Turkey, Sun Tekstil. Sun Tekstil faces supplier selection in two different activities of the firm. One is materials' purchasing and the other is outsourcing. These two problems are handled separately in this study. The proposed approach determines the companies' objectives and assigns their relative importances. Weighted goal programming approach is used to develop mathematical models concerning firm's objectives and their relative importance weights. Four alternative models are developed. First two models have no restrictions on the number of suppliers selected for each item where the last two restricts the number by two suppliers. Also, two of these models use the weights assigned by analytic hierarchy process and the other two use the weights determined by firm's managers subjectively. All models are solved by the Lingo Optimization Software to give the selected suppliers and the quantities to be ordered from them. In the result, the operating system in Sun Tekstil is compared with the solutions of the models in terms of the objectives determined at the beginning.