Applying Grey Relational Analysis to the Vender Evaluation Model

Abstract

Selecting a proper vendor to meet production demand is a common problem that most manufacturing enterprises have to face. Normally, manufacturers conduct a performance evaluation on each vendor before a new product comes into mass production. The selection process is based on their previous performance records, so the ranking determines which vendor will get this supply contract. However, a survey on current evaluation methods shows that they are all less objective and lack accurate data processing. For example, most commonly used evaluation methods are based on various characteristics of a good vendor as measurement parameters. Nevertheless, whether the characteristics are quantitative or qualitative, the method uses a rating scale for each characteristic. The numeric score for each characteristic will be weighted by a factor, and then summing all scores together. As a result, achieving the highest grade would imply the best vendor candidate. Therefore, this study will utilize the Grey relational analysis in the Grey theory (Deng, 1982) to establish a complete and accurate evaluation model for selecting vendors. This methodology will significantly reduce the purchasing cost and increase the production efficiency and overall competitiveness.

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