Vendor evaluation and selection in a supply chain using fuzzy logic

Abstract

Vendor selection and management was not an important part in running a business in the past. It did not play a decisive role in determining the success of a business. But as competition started increasing companies have started implementing various supply chain management concepts to gain competitive edge. They are striving to increase efficiency in their supply chain by reducing all possible costs and also by improving flexibility. Evaluation and selection of good suppliers is a crucial aspect that has tremendous impact on supply chain management. Vendor management is done by the purchasing department whose role is to support production and business activities by ensuring continuous flow of materials and services. On an average raw materials contribute to 60% of the cost of a product in manufacturing industry. These costs can be reduced to some extent by effectively managing and selecting vendors. For most of the industries raw materials are supplied by external suppliers (Even in companies that produce raw materials in house, external suppliers are preferred at times because of logistic issues). This clearly shows the extent of impact that suppliers have on the sustenance of a company. With increasing dependency of organizations on external suppliers the results of making a bad choice during supplier selection are becoming more severe. Thus the purchasing strategy of a company needs to be compatible with other competitive strategies at different levels in an organization. To enable this, purchasing concepts and functions need to be customized to suit the real time environment in a company.