Supplier selection and performance evaluation for formulating supplier selection strategy by MCDM-based approach

Effective supplier-base management demands many resources. The purchasing departments of many organisations believe that having more suppliers requires a higher cost. This investigation aims to evaluate the performance of existing suppliers to rationalise the supplier-base and find out top strategic suppliers who can ensure the full supply of products per the market demand. The analytic hierarchy process (AHP) was employed for evaluating the selection criteria and ranking the shortlisted suppliers. The technique for order preference by similarity to ideal solution (TOPSIS) was adopted as well for ranking suppliers based on the weights of the criteria obtained from the AHP evaluation approach. Both methodologies were compared and top performing suppliers were identified. Finally, gap analysis was carried out to determine the effective ranking tool between AHP and TOPSIS methodologies. The results of the study highlighted that volume flexibility is found to be the most significant evaluation criterion and supplier 'VA' is the best amongst all. This study is intended to guide the policy and decision makers in formulating the strategies for the effective supplier selection in highly competitive environments.