Supply Chain Engineering, 2nd Edition

6 Supplier Selection Models and Methods¹

DOI: 10.1201/9781003278979-6

6.1 Supplier Selection Problem1

6.1.1 Introduction

The contribution of the purchasing function to the profitability of the supply chain has assumed greater proportions in recent years; one of the most critical functions of purchasing is selection of suppliers. For most manufacturing firms, the purchasing of raw materials and component-parts from suppliers constitutes a major expense. Raw material cost accounts for 40%–60% of production costs for most US manufacturers. In fact, for the automotive industry, the cost of components and parts from outside suppliers may exceed 50% of sales (Wadhwa and Ravindran, 2007). For technology firms, purchased materials and services account ...