Supply Chain Management

Semester Project

Submitted by

Noor Ul Eeman 22-MSc-EM-01

Ayesha Keyani 22-MSc-EM-05

Beenish Yasmeen 22-MSc-EM-06

Submitted to
Dr Mirza Jahanzaib

University of Engineering and Technology, Taxila

Department of Industrial Engineering

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 Table of Contents
ABSTRACT .................................................................................................................................... 3

1 INTRODUCTION ................................................................................................................... 4

2 LITERATURE REVIEW ........................................................................................................ 5

3 METHODOGOLY .................................................................................................................. 5

3.1 TOPSIS Method ............................................................................................................... 5

3.2 Goal Programming Method .............................................................................................. 8

4 CALCULATIONS AND RESULTS........................................................................................ 8

4.1 TOPSIS Calculations........................................................................................................ 9

4.2 Goal Programming Calculations .................................................................................... 10

4.2.1 Parameters ................................................................................................................11

4.2.2 Constraints ...............................................................................................................11

5 CONCLUSION ..................................................................................................................... 12

REFERENCES ............................................................................................................................. 13

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 ABSTRACT

Supplier selection is an important issue in supply chain management. Generally, manufacturers

spend more than 60% of its total sales on purchased items, such as raw materials, parts and
components. The aim of the supplier selection is to choice of the suppliers to meet the needs of the
company with reasonable cost. Organizations must work with several suppliers to continue its
activities. Selection of the suppliers in a group of candidate firms is a difficult decision problem.
In this study, the supplier selection problem is discussed, which is operating in the automotive
production sector. Preemptive goal programming is used to solve the problem. TOPSIS methods
have been used to determine the ideal solution points. TOPSIS is very important for ranking and
selecting right supplier. In the light of these results, the structured model is solved by the help of
LINGO 14.0 and best suppliers are verified for the company.

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 1 INTRODUCTION

Organizations must work with several suppliers to continue its activities. Selection of the suppliers

in a group of candidate firms is a difficult decision problem. In this circumstances, supplier

selection is vital for the firms. Determining the best supplier is the key for success to the companies

with respect to strategic sense. This study has two main goals. The first one is to investigate the

problem and solution method of the selected company in the light of findings to the literature.

Second one is to suggest the alternative suppliers for the firms with the help of the TOPSIS Method

which is a methodology of multi-criteria decision-making period in the light of qualitative data

and quantitative data with Goal Programming method (Özcan & Çelik, 2021). In decision making

processes, there are some necessities about measuring conditions and interactions between the

elements which exist in supply chain. TOPSIS is a convenient technique for solving models based

on the principles of a closeness to the ideal solution of decision points. Goal Programming is one

of the developed models to measure the multi-objective decision-making methods. In this model,

while the decision makers finding the best solutions from a group of possible solutions, decision

makers are taking into consideration of many purposes (Moradi, 2022). A different perspective is

presented about supplier selection and evaluation problem in the study for supporting the decision

makers to choose and evaluate supplier. All supplier selection criteria are covered which are told

in the literature. The application of the study is done to an automotive factory that is searching for

a new guidance in the selection process. The criteria set for the selection of suppliers includes

numerous and conflicting situations. Therefore, in the planning supplier selection issue, usage of

scientific methods is required for the accurate results (Lundgren et al., 2021).

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 2 LITERATURE REVIEW

In (Nanayakkara, 2019) Analytic Network Process (ANP) and Mixed Integer Nonlinear

Programming Method (MINLPM) have integrated each other in supplier selection problem. The

main frequently mentioned criteria by (Meshram & Rawani, 2020) on the supplier selection

problems like cost, quality, delivery and service. They mixed analytic hierarchy process and

TOPSIS methods and chose supplier for the selected company. (Meshram & Rawani, 2020) study

ANP method is used for decision-making. (Yeh et al., 2002) has used ELECTRE and ANP

methods together. (Chede et al., 2021) worked and developed a model using the Analytic Network

Process method and made suitable third-party logistics company selection for a company. (Khan

& De Rosales, 2021) has been mentioned that supplier selection process which requires

consideration of many factors and arduous duration. On behalf of supplier selection problem

process, AHP, TOPSIS and ELECTRE methods used to create a solution for the company.

3 METHODOGOLY

In this project, the TOPSIS method and Goal Programming (GP) technique are used. All

methodology will be explained on previous chapters. TOPSIS method is applied with the help of

qualitative data and goal programming method is applied with the help of quantitative data.

3.1 TOPSIS Method

TOPSIS Method (Technique for Order Preference by Similarity to Ideal Solution) is developed by

Yoon & Hwang in 1981. TOPSIS uses the similar approach with ELECTRE Method. TOPSIS

includes 6 steps.

Step 1

 Create a matrix consisting of M alternatives and N criteria. This matrix is usually called an

“evaluation matrix”.

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  As an example: M will be the number of our companies, while N, the number of metrics

(ROA, ROE, DR, CG).

Step 2

 Normalize evaluation matrix:

 Each metric j for each company i is normalized to be in between 0 and 1. The higher its

value the better the metric.

Step 3

Calculate the weighted normalized decision matrix. It is important to note that each criterion

should have its own weight so that all of them will sum up to 1. The weights can be derived

randomly (not recommended) or based on expert knowledge (industry standard).

Step 4

 After we assign a weight to each financial metric, we need to normalize those so that these

sum up to 1. Then we need to multiply each normalized metric from step 2 by

corresponding normalized weight.

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  Determine the best and the worst alternative for each criterion:

 We want to find the maximum and minimum value of each financial metric among all

companies.

Step 5

 Calculate the Euclidean distance between the target alternative and the best/worst

alternative:

 This is a calculation of the geometric distance between the value of each financial metric

for a given company i and the best/worst value of such a metric among all companies.

Step 6

For each alternative calculate the similarity to the worst alternative. The results are

our TOPSIS scores.

 We compute a score for each company that is based on distances obtained in a step before.

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  Rank alternatives according to the TOPSIS score by descending order. The company with

metrics closest to the best will obtain the highest score and therefore will be at the top of

our ranking. We obtained a ranked set of alternatives based on specified criteria

3.2 Goal Programming Method

In Goal Programming, objective criteria’s minimization or maximization cannot be done directly.

Instead of this, deviations between the goals are attempted to be minimized. Objective function is

created from only the devious variables (Pourhejazy et al., 2022).

Because of simultaneously both positive and negative deviations cannot occur, at least one or both

devious variables deviations must be zero. After determination of unwanted variables, deviated

goal programming formulation is made. Only one of these variables is desired to be minimized by

decision maker (Chakraborty, 2022).

4 CALCULATIONS AND RESULTS

TOPSIS and Goal Programming calculations are done in the following statements. The application

was carried out in a company operating in the automotive sector. The company has been operating

since many years in the automotive industry (Lundgren et al., 2021). One of the most important

parts are used in vehicle production car windscreen, which employs more than 1,000 people all

over the Turkey. The company has been supplying the outside of these materials. Then they

perform the installation on the vehicle. Vital tools for application for Windshield material selection

are discussed in this study. In four important suppliers for companies (x1, x2, x3, and x) will be held

for windscreen election in light of goal programming methods will be applied to the target

company under certain constraints (Lundgren et al., 2021). LINGO 14.0 program is used for the

calculations. Goal programming solutions built separately according to the multi-target method of

equal importance methods and results have been reached.

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4.1 TOPSIS Calculations
There are lots of study about supplier selection problem. In these studies, lots of selection criteria

are used. After a long time period research, 24 criteria have been chosen. Purchasing department

experts, engineering department deputy and managers of the company have decided to examine 4

main and 12 sub main criteria of them. These criteria determined by the needs of the carriers were

included in the model. Questionnaires were filled with specialists to determine these criteria.

Supplier selection criteria are given in Table.1.

Table 1: Supplier Selection Criteria

MAIN CRITERIA SUB MAIN CRITERIA

Product Performance (PP)

QUALITY (Q) Standards (S)

Production Experience (PE)

Reliabilty Score (RS)

Time Period of Working With (TPWW)

FIRM RATING (FR) Location (L)

Price (P)

Reputation (R)

Delivery Flexibility (DF)

FLEXIBILITY (F)
Product Quantity Flexibility (PQF)

Delivery on Time (DT)

LEAD TIME (LT)
Distribution Network Extensiveness (DNE)

TOPSIS calculations are made by order.

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 𝑐1∗ = (0,145503043)

𝑐2∗ = (0,959229336)

𝑐3∗ = (0,218317226)

𝑐4∗ = (0,107438828)

As it seen from the results, T2 Supplier has the biggest importance value in all suppliers. And now

this supplier selection problem is solved with the help of goal programming model.

4.2 Goal Programming Calculations

There are a number of constraints that must be taken into account in establishing the model. These

limitations include:

1. Capacity Constraint

2. Purchasing Cost Constraint

3. Quality Control Time Constraint

4. Supply Delay Time Constraint

5. Transportation Cost Constraint

6. Faulty Product Average Constraint

7. Return/Change Cost Constraint

Parameters will be used on the establishment of the model are given in Table.2.

Table 2: Goal Programming Constraints

T1 T2 T3 T4
Constraints
Supplier Supplier Supplier Supplier
Production Capacity (Weekly) 550 600 525 400
Purchasing Cost (£) 10.000 14.550 7.200 7.000
Control Time (Hour) 17 20 15 14
Maximum Supply Delay Time
6 3 4 5
(Day)
Transportation Cost (£) 4240 0 0 3750

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 Faulty Product Average 1448 10998 33847 34586
Return/Change Cost (£) 320 275 401 398

4.2.1 Parameters
X1 = T1 Supplier,

X2 = T2 Supplier,

X3 = T3 Supplier

X4 = T4 Supplier

Capacity Constraints = d1
Purchasing Cost Constraints = d2
Quality Control Time Constraint = d3
Maximum Supply Delay Time Constraint = d4
Transportation Cost Constraint = d5
Faulty Product Average Constraint = d6
Return/Change Cost Constraint = d7
Min Z = d-1 + d+2 + d+3 + d-4 + d+4 + d+5 + d+6 + d+7 + d+8

4.2.2 Constraints
Demand Constraint
250 x1 + 300 x2 + 225 x3 + 200 x4 + d-1 - d+1 = 300
Purchasing Cost Constraint
10.000 x1 + 14.450 x2 + 7.200 x3 + 7000 x4 + d-2 - d+2 = 15.000
Quality Control Time Constraint
17 x1 + 300 x2 + 225 x3 + 200 x4 + d-3 - d+3 = 15
Supply Time Const.
6 x1 + 3 x2 + 4 x3 + 5 x4 + d-5 - d+5 = 5
Transportation Cost Constraint
4240 x1 + 3250 x4 + d-6 - d+6 = 5000
Faulty Product Const.
1448 x1 + 10998 x2 + 33847 x3 + 34586 x4 + d-7 - d+7 = 3
Return/Change Cost Constraint

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 320 x1 + 275 x2 + 401 x3 + 398 x4 + d-8 - d+8 = 400
xi =0 or 1 (Choosing or not the supplier) i= 1, 2, 3, 4 d-i , d+i ≥ 0 i= 1, 2, 3, 4
After solution of the established model under the existing constraints, T2 supplier is suitable for
the purchasing in all suppliers.
5 CONCLUSION

In this project, the calculation algorithm is done properly, and the results were reached within the
framework of the objectives set for the supplier. In this study, two different methodologies are used
and results are given for the supplier selection topic which is vitally important for the company
nowadays. Selection problem is solved with two different methods and same result is found for
the supplier selection. TOPSIS method is used by the help of qualitative data. T2 supplier is found
for the suitable supplier. Then Goal Programming method is applied with the help of quantitative
data. Again T2 supplier is found for the suitable supplier. As it seen from the result, T2 supplier is
the best supplier for the firm because, it is verified with two different methodologies. This model
also established production site selection, machinery selection, and so on. It is believed may be
used in many fields. In future studies, this model can be further integration of multi-criteria
decision-making techniques and extensible.

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REFERENCES

Chakraborty, S. (2022). TOPSIS and Modified TOPSIS: A comparative analysis. Decision

Analytics Journal, 2, 100021. [Link]

Chede, S. J., Adavadkar, B. R., Patil, A. S., Chhatriwala, H. K., & Keswani, M. P. (2021). Material
selection for design of powered hand truck using TOPSIS. International Journal of Industrial
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Lundgren, M. C., Molitor, J. A., Spilseth, B., & Adeyi, O. (2021). A Fatal Case of Diffuse Alveolar
Hemorrhage in the Setting of Systemic Lupus Erythematosus: A Case Report and Review of
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Meshram, S., & Rawani, A. M. (2020). Entrepreneurial motivations: evidence from a developing
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Moradi, A. (2022). An analysis of the social distancing effects on global economy and international
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Nanayakkara, G. (2019). Separating the Singer from the Song. Performers’ Rights in Sri Lanka,
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Özcan, S., & Çelik, A. K. (2021). A comparison of TOPSIS, grey relational analysis and COPRAS
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of Production Management and Engineering, 9(2), 81–92.
[Link]

Pourhejazy, P., Thamchutha, P., & Namthip, T. (2022). A DEA-based decision analytics framework
for product deletion in the luxury goods and fashion industry. Decision Analytics Journal, 2,
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