Appication of ahp and topsis method for supplier selection problem

Abstract

––Supplier selection, the process of determining the suitable suppliers who are able to provide the buyer with the right quality products and/or services at the right price, at the right time and in the right quantities, is one of the most critical activities for establishing an effective supply chain. In other words, supplier selection is a multi-criteria decision making problem which includes both qualitative and quantitative factors. In order to choose the best suppliers, it is essential to make a trade-off between these tangible and intangible factors, some of which may conflict. The aim of this study is to develop a methodology to evaluate suppliers in supply chain cycle based on Technique for Order Preference by Similarity to Ideal Solution method (TOPSIS). In this paper, I have taken into consideration some important criteria which affect the process of supplier selection, that is, product quality, service quality, delivery time and price. I have calculated the weights for each criterion based on Analytic Hierarchy Process (AHP) and then inputted these weights to the TOPSIS method to rank suppliers. The entire methodology is illustrated with the help of a numerical example and finally the rank of each supplier is determined according to its results. Keywords––Analytic Hierarchy Process (AHP), multi-criteria decision making, supplier selection, Technique for Order Preference by Similarity to Ideal Solution method (TOPSIS)