Performance-Based Supplier Selection and Order Allocation Model Incorporating Sustainable Development Strategies

Due to heightened concerns towards environmental issues and social responsibilities, manufacturers are becoming inclined towards investing in supplier development as suppliers play a crucial role in the sustainable performance of the supply chain. Hence, they are looking for effective supplier selection models which can also incorporate supplier development of underperforming suppliers. Since these decisions may have a huge financial impact, hence they must be taken after a strategic analysis of which suppliers to be developed. On how much cost will be incurred the manufacturer needs to perform another strategic supplier-related activity, i.e. supplier development for upgrading the performance of those underperforming suppliers. Hence, in order to maintain a network of competent suppliers and create a competitive advantage in the market, this study provides a framework for investigating the performance of suppliers under a sustainable environment, supplier development based on their performance and order allocation while optimizing the supply chain performance. The framework of this study consists of two integrated stages. First, the analytical hierarchy process (AHP) is utilized to calculate the weights of sustainable key performance indicators (KPIs) considered in the supplier evaluation process and the aggregated weights of each supplier. Second, these weights are then used as inputs to determine the appropriate development stage that should be assigned to each supplier for the development and optimal order quantities that should be ordered from each supplier by solving the optimization model through differential evolution (DE) algorithm. A real-life case study of an Indian home appliances manufacturing company is presented to show the validation of the proposed framework.