A hierarchical vendor selection optimization technique for multiple sourcing

The paper addresses a crucial objective of the strategic function of purchasing in supply chains, i.e., vendor rating, proposing a hierarchical model for supplier business intelligence. A three-level optimization process for supplier selection in a multiple sourcing strategy context is proposed. First, the Data Envelopment Analysis, the most widespread method for supplier selection, is used to evaluate the efficiency of suppliers. Second, the well-known Analytic Hierarchy Process is applied to rank the efficient suppliers given by the previous step. Third, a linear programming problem is solved to find the quantities to order from each efficient supplier. We show the model effectiveness on a simulated case study of a C class component.