A data envelopment analysis approach to supplier selection in volume discount environments

Abstract

Many practitioners and researchers have presented the advantages of supply chain management. In order to increase their competitive advantage, many companies consider that a well-designed and well-implemented supply chain system is an important tool. Under this condition, building on the closeness and long-term relationships between buyers and suppliers is a critical success factor to establish the supply chain system. Therefore, the supplier selection problem becomes the most important issue in implementing a successful supply chain system. Traditionally, many optimisation models of supplier selection assume that the average unit price of procured items is a constant. This assumption is not realistic because suppliers usually offer quantity discounts to encourage the buyers to order more. For dealing with this difficulty and for selecting the best suppliers with regard to multiple criteria, this paper introduces an innovative algorithm, which is based on Data Envelopment Analysis (DEA). A numerical example demonstrates the application of the proposed method.

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