Supplier evaluation and demand allocation among suppliers in a supply chain

Abstract

This paper presents a hybrid algorithm that prioritizes the suppliers and then allocates the demand among the suppliers. The objective here is to maximize the total purchase value of the items taking into consideration budget constraint, demand condition, delivery lead-time and supplier capacity. Since the problem is multi-criteria decision making, we solve this problem by integrating the supplier rating with mixed linear integer programming method. The customer demand is allocated by using a hybrid algorithm based on the technique for order preference by similarity to ideal solution (TOPSIS) and the mixed linear integer programming (MILP) approaches. The effectiveness of the proposed algorithm is validated with computational results. Drawing to a case, a supplier S3 is identified as the best supplier by using the TOPSIS method for demand allocation under no restrictions. On the contrary, under constrained scenario, supplier S2 is selected as the best supplier by using the hybrid algorithm for demand allocation and maximum units are allocated to S2.