Supplier Selection

The Supplier Selection Problem is the systematic decision of which competing vendors a buyer (manufacturer, retailer, service provider) keeps on its approved list and how much volume each one receives in each order period. The classic multi-criteria decision making literature (Weber, Current, and Benton 1991; De Boer, Labro, and Morlacchi 2001) examines how to weight price, quality (defect rate), delivery performance, capacity, financial health, geographic location, certifications, and sustainability. The solution is typically two-stage: first MCDM methods such as AHP or TOPSIS produce weighted supplier scores; second, a MILP model allocates quantities under capacity, minimum order quantity, single-source risk, and volume-discount tiers. The total cost of ownership concept — adding quality, lateness, and non-conformance costs to unit price — is the defining feature of structured supplier selection.