International Journal of Advanced Technology & Engineering Research (IJATER)

SUPPLIER SELECTION BY TECHNIQUE OF ORDER PREFERENCE BY SIMILARITY TO IDEAL SOLUTION (TOPSIS) METHOD FOR AUTOMOTIVE INDUSTRY
1

Ravendra Singh, 2Hemant Rajput, Research Scholar, 3Vedansh Chaturvedi, 4Jyoti Vimal, Assistant Professor Department of Mechanical Engineering, Madhav Institute of Technology & Science, Gwalior [email protected]; [email protected]

Abstract
A supply chain consists of all parties involved, directly or indirectly, in fulfilling a customer demand. The supply chain includes not only the buyer and suppliers, but also transporters, warehouses, retailers and even customers themselves. In supply chain supplier selection process determine the suitable suppliers who provide the right quality products at the right price, at the right time and in the right quantities to the buyer. The aim of this paper is developing a methodology for selection of suppliers in supply chain cycle in an automobile industry. For supplier selection different important criteria are taking in account. These criteria have different weights by different experts. Using these weights provide rank to every supplier with the help of Technique for Order Preference by Similarity to Ideal Solution (TOPSIS Method). Key words: Supply chain management, Multi criteria decision making, Supplier selection problem, Topsis method.

well managed and established supply chain, this relationship will have a lasting effect on the competitiveness of the entire supply chain. Because of this, supplier selection problem has become one of the most important issues for establishing an effective supply chain system. Besides, selection of suppliers is a complicated process by the facts that numerous criteria must be considered in the decision making process [7]. Supplier selection process is one of the most significant variables, which has a direct impact on the performance of an organization. As the organization becomes more and more dependent on their suppliers, the direct and indirect consequences of poor decision making will become more critical. The nature of this decision is usually complex and unstructured. On the other hand, supplier selection decisionmaking problem involves trade-offs among multiple criteria that involve both quantitative and qualitative factors, which may also be conflicting. In this paper, with the help of going over expertise of experts and their relevant specialized literature, we can recognize variables and effective criteria in supplier selection, with regards to this point that, considering all criteria for supplier selection is impossible, the main and important criteria have been extracted by expert judgment. Thereafter, we will evaluate and determine weight of each supplier and finally, by implementing TOPSIS method, the rank of each supplier is determined. TOPSIS has been a favorable technique for solving multi criteria problems. This is mainly for two reasons, 1) its concept is reasonable and easy to understand, and 2) in comparison with other MCDM methods, like AHP, it requires less computational efforts, and therefore can be applied easily. TOPSIS is based on the concept that the optimal alternative should have the shortest distance from the positive ideal solution (PIS) and the farthest distance from the negative ideal solution (NIS). TOPSIS method are powerful decision making processes which help people to set priorities on parameters that are to be considered by reducing complex decision to a series of one-toone comparisons, thereby synthesizing the result [2].

Introduction
Supply Chain Management and its demands on the firms in the value chain have led to the operational integration of suppliers within the supply chain [1]. Selecting an appropriate supplier (or vendor) among different suppliers is a critical issue for top management. In industries that are concerned with large scale production the raw materials and component parts can equal up to 70% product cost. In such circumstances the purchasing department can play a key role in cost reduction, and supplier selection is one of the most important functions of purchasing management [4]. Therefore, using an appropriate method for this purpose is a crucial issue; supplier selection has been shown to be a multiple criteria decision making (MCDM) problem [5]. The Technique for Order Preference by Similarity to Ideal Solution (TOPSIS) was first developed by Yoon and Hwang. In supply chains; Co-ordination between a manufacturer and suppliers is typically a difficult and important link in the channel of distribution. Once a supplier becomes part of a

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VOLUME 2, ISSUE 2, MARCH 2012

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International Journal of Advanced Technology & Engineering Research (IJATER)

Proposed Methodology
The proposed methodology for supplier selection problem, composed of TOPSIS method, consists of three Steps [3]: (1) (2) (3) Identify the criteria to be used in the model; Weigh the criteria by using expert views; Evaluation of alternatives with TOPSIS determination of the final rank.

Figure1. Schematic diagram of the proposed methodology

Topsis Methods
TOPSIS method was introduced for the first time by Yoon and Hwang and was appraised by surveyors and different operators [3]. As large number of potential available vendors in the current marketing environment, a full ANP decision process becomes impractical in some cases. To avoid an unreasonably large number of pair-wise comparisons, we choose TOPSIS as the ranking technique because of its concept's ease of use. Also, ANP is adopted simply for the acquisition of the weights of criteria. First, a general TOPSIS process with six activities is listed below [2]: ACTIVITY: 1) Establish a decision matrix for the ranking. The structure of the matrix can be expressed as follows: = (1) Where Bi denotes the alternatives i, i = 1...,m; Fj represents jth attribute or criterion, j = 1...,n, related to ith alternative; Pij is a crisp value indicating the performance rating of each alternative Bi with respect to each criterion Fj. ACTIVITY 2) Calculate the normalized decision matrix Q= [Sij]. The normalized value sij is calculated as; Sij = i= 1..n; j= 1m (2)
=

and

In the first Step, with the help of going over expertise of experts and their relevant specialized literature, we try to recognize variables and effective criteria in supplier selection and the criteria which will be used in their evaluation is extracted. Thereafter, list of qualified suppliers are determined and. In the last stage of the first step, the decision criteria are approved by decision-making team. After the approval of decision criteria, we assigned weights on them by organizing experts sessions in the second step. In the last stage of this step, calculated weights of the criteria are approved by decision making team. Finally, ranks are determined, using TOPSIS method in the third step. Schematic diagram of the proposed model for weapon selection is provided in Figure 1. Forming Decision Making Team

Determining qualified Suppliers Step- 1 Determining the Criteria to be used in evaluation

ACTIVITY 3) Calculate the weighted normalized decision matrix by multiplying the normalized decision matrix by its associated weights. The weighted normalized value vij is calculated as: Vij= Wij.Sij , j= 1.n; i= 1m; (3)

Approve criteria list?

Assigning Criteria Weight by experts opinion Step- 2 Approve criteria weights?

Where wj represents the weight of the jth attribute or criterion. ACTIVITY 4) Determine the PIS and NIS, respectively: V+= {v1+...vn+}

Evaluation of Suppliers by Implementing TOPSIS method Step- 3 Determine the final rank

= {(Max vij l j J), (Min vij l j J')} V- = {v1- ... vn-} = {(Min vij l j J), (Max vij l j J')}

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International Journal of Advanced Technology & Engineering Research (IJATER)

Where J is associated with the positive criteria and J' is associated with the negative criteria. ACTIVITY 5) Calculate the separation measures, using the m-dimensional Euclidean distance. The separation measure + of each alternative from the PIS is given as: Ei+ =
=(

ration measures, based on normalized Euclidean distance for each supplier is calculated and then final weight of each supplier is calculated [3].
Table 1. Selecting criteria for supplier evaluation and Weight of criteria

Code D1

Criteria (Material Quality) (On time delivery) (Ordering cost) (Product price) (Financial stability) (Delivery lead time) (Technical Capability) (Transportation cost) (Rejection of defective product) (Production facilities and capacity)

+ )

, i = 1m

Weight (%) 0.20 0.08 0.07 0.15 0.10 0.09 0.07 0.05 0.08 0.11

(4)

D2 D3 D4 D5 D6 D7 D8 D9 D10

Similarly, the separation measure of each alternative from the NIS is as follows: Ei- =
=(

_ )

, i = 1m

(5)

ACTIVITY 6) Calculate the relative closeness to the idea solution and rank the alternatives in descending order. The relative closeness of the alternative Ai with respect to PIS V+ can be expressed as:
=
+ +

Step-1 Developing decision matrix; (6)

Where the index value of Hi* lies between 0 and 1. The larger the index value, the better the performance of the alternatives.

Criteria Suppliers D1 (%) D2 (%) D3 () D4 () D5 (Grad) D6 (Day) D7 (%) D8 () D9 (%) D10 (Grad)

Numerical Problem
To apply this methodology, we have solved simulated numerical problem. Assume that the management of an Automobile industry wants to choose their best suppliers. Based on proposed methodology, 3 steps are applied for assessment and selection of suppliers. In this part we deal with application of these steps [3]. After forming decision making team, step 1 starts developing an updated pool of supplier selection criteria for the industry, using those accepted criteria given in the literature, as well as those criteria recommended by the experts. In this numerical example, the criteria are selected as shown in Table 1. Although, the criteria considered in supplier evaluation are condition-industry specific. Selection of criteria is totally industry specific and based on each case and the criteria are changed and replaced. Opinions of decision makers on criteria were aggregated and weights of all criteria have been calculated by organizing the expert meeting. Its results have Assuming 4 suppliers are included in the evaluation process, information of each of suppliers has been mentioned in Table 2. After normalizing information and considering weight of criteria in them, negative and positive sepa-

95 90 135 2800 5 12 46 650 .02 5

94 96 150 3500 3 15 52 470 .03 4

96 94 145 3000 6 14 38 550 .01 6

90 91 140 3100 3 10 40 700 .02 7

Step-2 Calculating the normalized decision matrix Sij = Pij / (P2ij)

0.51 0.49 0.47 0.45 0.56 0.47 0.52 0.54 0.47 0.45 0.50 0.52 0.53 0.56 0.34 0.58 0.59 0.39 0.71 0.36 0.51 0.51 0.51 0.48 0.68 0.54 0.43 0.46 0.24 0.53

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International Journal of Advanced Technology & Engineering Research (IJATER)

0.48 0.49 0.49 0.50 0.34 0.39 0.45 0.58 0.47 0.62

Step-3 Calculating the weighted normalized decision matrix; Vij = Wij. Sij
Table-4
Criteria Supplier 1 2 3 4 D1 D2 D3 D4 D5 D6 D7 D8 D9 D10

Conclusion
For an automobile industry it is necessary to maintain the good coordination between management and supplier in terms of material quality, quantity, cost, and time By above mathematical treatment it is clear that the supplier selection for an automobile industry involves multiple criteria which show the important role in selection of suppliers. Technique for Order Preference by Similarity to Ideal Solution is a simple and understandable method for selecting a suitable supplier. Using this method we select the different alternatives according to the importance of different criteria. Thus, TOPSIS method used for different multi-criteria decision problems in a suitable manner.

.1020 .1000 .1020 .0960

.0392 .0416 .0408 .0392

.0329 .0371 .0357 .0343

.0675 .0840 .0720 .0750

.0560 .0340 .0680 .0340

.0423 .0522 .0486 .0351

.0364 .0413 .0301 .0315

.0270 .0195 .0230 .0290

.0376 .0568 .0192 .0376

.0495 .0396 .0583 .0682

Step-4 Determining the PIS and NIS. V+ = {.1020, .0416, .0371, .0840, .0680, .0522, .0413, .0290, .0568, .0396} V- = {.0960, .0392, .0329, .0675, .0340, .0351, .0301, .0195, .0192, .0682} Step-5 Calculating separation measure
Table-5

References
[1] Ronnie Fanguy, Khurrum Bhutta. Supplier Selection with the Upstart Algorithm. [2] C. ElanchezhianB, Vijaya Ramnath, Dr. R. Kesavan, Vendor Evaluation Using Multi Criteria Decision Making, International Journal of Computer Applications (0975 8887) Volume 5 No.9, August 2010. [3] Mohammad Saeed Zaeri, Amir Sadeghi, Amir Naderi, Abolfazl Kalanaki, Reza Fasihy, Seyed Masoud Hosseini Shorshani, and Arezou Poyan, Application of multi criteria decision making technique to evaluation suppliers in supply chain management, African Journal of Mathematics and Computer Science Research Vol. 4 (3), pp. 100-106, March, 2011. [4] William Ho, Xiaowei Xu, Prasanta K. Dey. Multicriteria decision making approaches for supplier evaluation and selection, European Journal of Operational Research (2010), Volume: 202, Issue: 1, Publisher: Elsevier, Pages: 16-24. [5] Charles A. Weber, John R. Current, W.C. Benon. Vendor selection criteria and methods, European Journal of Operational Research 50 (1991) 2-18, North-Holland. [6] Pragati Jain and Manisha Jain, Fuzzy TOPSIS Method in Job Sequencing Problems on machines of unequal efficiencies, Canadian Journal on Computing in Mathematics, Natural Sciences, Engineering and Medicine Vol. 2 No. 6, June 2011. [7] Chen-Tung Chen, Ching-Torng Lin, Sue-Fn Huang, A fuzzy approach for supplier evaluation and selection in supply chain management. International Journal of Production Economics, Volume 102, Issue 2, August 2006, Pages 289301.

Supplier 1 2 3 4

E+ = [(Vj+ - Vij)2]1/2 .0320 .0353 .0462 .0534

Calculating separation measure

Supplier 1 2 3 4

E- = [(Vj- - Vij)2]1/2 .0367 .0544 .0388 .0219

Step-6 Separation measures and the relative closeness coefficient;

Suppliers Supplier 1 Supplier 2 Supplier 3 Supplier 4

Closeness Coefficient Hi* = E-/(E- + E+) 0.534 0.606 0.456 0.290

Rank 2 1 3 4

Thereafter, the relative closeness coefficients are determined, and four suppliers are ranked. Obtained results have been mentioned in Table-7. Thus, supplier 2 has the best score amongst 4 suppliers.

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