International Journal of Production Research
International Journal of Production Research
To cite this article: N. Viswanadham & A. Samvedi , International Journal of Production Research (2013): Supplier selection
based on supply chain ecosystem, performance and risk criteria, International Journal of Production Research, DOI:
10.1080/00207543.2013.825056
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                                                                             International Journal of Production Research, 2013
                                                                             http://dx.doi.org/10.1080/00207543.2013.825056
                                                                                       Supplier selection based on supply chain ecosystem, performance and risk criteria
                                                                                                                             N. Viswanadham* and A. Samvedi
                                                                                             Department of Computer Science and Automation, Indian Institute of Science Bangalore, Bangalore, India
                                                                                                                  (Received 27 March 2013; final version received 5 June 2013)
                                                                                    A supply chain ecosystem consists of the elements of the supply chain and the entities that influence the goods,
                                                                                    information and financial flows through the supply chain. These influences come through government regulations,
                                                                                    human, financial and natural resources, logistics infrastructure and management, etc., and thus affect the supply chain
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                                                                                    performance. Similarly, all the ecosystem elements also contribute to the risk. The aim of this paper is to identify both
                                                                                    performances-based and risk-based decision criteria, which are important and critical to the supply chain. A two step
                                                                                    approach using fuzzy AHP and fuzzy technique for order of preference by similarity to ideal solution has been proposed
                                                                                    for multi-criteria decision-making and illustrated using a numerical example. The first step does the selection without
                                                                                    considering risks and then in the next step suppliers are ranked according to their risk profiles. Later, the two ranks are
                                                                                    consolidated into one. In subsequent section, the method is also extended for multi-tier supplier selection. In short, we
                                                                                    are presenting a method for the design of a resilient supply chain, in this paper.
                                                                                    Keywords: supply chain risk management; supply chain ecosystem; supplier selection; fuzzy AHP; fuzzy TOPSIS
                                                                             1. Introduction
                                                                             Over the last two decades, companies had worked hard to reduce costs and improve efficiency of the supply chain
                                                                             processes by which they delivered products to their customers at the right cost and at the right times. They had done
                                                                             this by implementing techniques such as the lean production, just-in-time manufacturing, single-source suppliers and
                                                                             global outsourcing from low-cost countries (Viswanadham and Kameshwaran 2013). The supply chains were highly
                                                                             connected making the flow of goods, information and funds very smooth and easy. The biggest supply chain challenge
                                                                             pursued was the supply demand matching avoiding obsolescent inventory or loss of sales and customer confidence. The
                                                                             supply chains of today face much more challenges because of their increased complexity (Luo, Zhou, and Cauill 2001;
                                                                             Dotoli et al. 2006).
                                                                                 In integrated supply chain networks, connectedness makes individuals, services and organisations accessible over
                                                                             distance, sourcing from single supplier helps protect the intellectual property, lean operations lead the way to reduce
                                                                             costs and inventory. But on the negative side, the leaner, global and more integrated supply chains are less resilient to
                                                                             uncertainties and accidents in any link. Also, the rising costs of human and other resources and the environmental
                                                                             concerns of transport of raw materials and other goods around the globe are counteracting the low-cost production
                                                                             advantages. Efficiency encouraged and created giant firms through mergers and acquisitions and geographical concentra-
                                                                             tion through cluster concepts (e.g. low-cost manufacturing in China, IT clusters in India, etc. Auto and Electronic
                                                                             clusters in Japan). Damage due to an accident is higher for a concentration rather than for separate owners in several
                                                                             locations. Protectionism, the insolvency of suppliers or their banks are other concerns.
                                                                                 Supply chains are complex networks of suppliers, contract manufacturers and third-party service providers with
                                                                             interdependencies among these firms, hence inter-organisational coordination of risks a critical requirement. Many com-
                                                                             panies are making considerable investments in monitoring the security, continuity, regulatory and performance risks of
                                                                             their key suppliers (Asar et al. 2006). However there are no appropriate governing structures in place for monitoring
                                                                             and control of the globally dispersed manufacturing and service networks during normal as well as abnormal times.
                                                                             There is a high level of awareness of the potential risk arising from interaction and relationships between supply chain
                                                                             partners. In recent years, a number of writers have sought to broaden the scope of disruption risk management process
                                                                             from the level of the single company to the level of the entire supply chain (Gaonkar and Viswanadham 2007).
                                                                                 Managing supply risk, thus has become a critical component of managing the supply chain. Consequently, it is
                                                                             important to an organisation’s success to understand the sources of supply risk and how to best manage them. The risk
                                                                             sources are many and risk avoidance is not a viable strategy. Hence, one needs to carefully design the processes to be
                                                                             risk resilient and take appropriate action when an undesirable beyond the control happens. For example, procurement or
                                                                             selection of suppliers is an important supply chain process. Supplier selection is generally done based on the
                                                                             performance criteria such as unit cost, quality, delivery times, etc. However, in global sourcing several factors including
                                                                             political, economical, infrastructural issues; natural and manmade disasters; resource price fluctuations will cause
                                                                             deviations, disruptions or disasters depending on the magnitude of the event. There is a need to identify all such factors
                                                                             and also list them and create awareness among all concerned of the events that can happen and how they can be dealt
                                                                             with. One of the aims of our paper is precisely this. We present the supply chain ecosystem and list all the possible
                                                                             risks that affect the supply chain. We also develop an understanding of relationships between the countries of the
                                                                             supplier and the manufacturer such as free trade agreements and also the transport infrastructure such as ports, roads
                                                                             and also the resource productivity (labour, finance, power, etc.).
                                                                                 Traditionally, supplier selection was done mainly based on performance criteria. Risk is increasingly gaining impor-
                                                                             tance because of the increased uncertainties in the ecosystem elements. Also, supplier selection process is an inherently
                                                                             multi-objective problem, and many tangible and intangible performance factors (price, quality, delivery performance, ser-
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                                                                             vice, etc.) need to be considered and evaluated in selecting suppliers. Wang and Yang (2009) considered supplier selec-
                                                                             tion in a quantity discount environment using multi-objective linear programming, analytical hierarchy process (AHP)
                                                                             and fuzzy compromise programming. Chan and Kumar (2007) identified and discussed some of the important and criti-
                                                                             cal decision criteria including risk factors for the development of an efficient system for global supplier selection using
                                                                             fuzzy AHP. Lu, Wu, and Kuo (2007) adds environmental principles into supplier selection process by applying fuzzy
                                                                             AHP. Chan et al. (2008) proposed a fuzzy AHP approach for global supplier selection. Chena, Lin, and Huang (2006)
                                                                             used fuzzy technique for order of preference by similarity to ideal solution (TOPSIS) for supplier selection. Kaya and
                                                                             Kahraman (2011) proposed a modified fuzzy TOPSIS for selection of the best energy technology alternative.
                                                                             1.1 Contribution
                                                                             In this paper, we concentrate on the procurement process which is global and is managed as an inter-organisation
                                                                             network. This paper is a significant contribution to the literature on this topic. We present a methodology for choice of
                                                                             suppliers based on performance criteria and also to minimise the risks. Our methodology is based on the ecosystem
                                                                             framework and applies fuzzy AHP and fuzzy TOPSIS in a unique way, by separating out the performance criteria from
                                                                             the risk ones and then solving each part separately before consolidating the scores. The performance criteria such as lead
                                                                             time, cost and quality are evaluated using all the ecosystem parameters. Generally, costs in supply chain include inven-
                                                                             tory, transport and unit costs. In our case, they include trade, resource and infrastructure-related costs and coordination
                                                                             costs as well. Similarly, quality in our case includes quality on delivery rather than at the factory thus including
                                                                             spoilage, theft and damage during transport, loading, unloading, etc. The risk criteria classification used in this study
                                                                             also differentiates it from other previous studies. Most of the supply chain risk studies, which have tried to do this, con-
                                                                             sider only supply failures, partner risks, logistics failures, sharp fall in demand, etc. But, risks for the supply chain can
                                                                             arise from all the four elements of the ecosystem rather than the supply chain alone. The risks come from governments,
                                                                             political and social networks, resources and delivery systems such as logistics and IT (Viswanadham and Kameshwaran
                                                                             2013). Therefore, risk mitigation or avoidance strategies should include all the ecosystem entities and plan the strategies
                                                                             accordingly. The best way of risk avoidance strategy is to take care of risks when selecting the suppliers.
                                                                                 This paper is organised as follows: In Section 2, we present the ecosystem model. We show how the performance is
                                                                             affected by the human, financial, infrastructural and natural resources, government actions and also the delivery logistics.
                                                                             We further study the risk contributions of all the ecosystem elements. We then proceed in Section 3, to select the
                                                                             suppliers to minimise the risk and enhance the performance. This section presents the proposed integrated methodology
                                                                             which uses fuzzy AHP and fuzzy TOPSIS. In Section 4, we present a numerical illustration to show the applicability
                                                                             and usability of the approach. Finally, Section 5, concludes the paper with future research directions.
                                                                             2. Ecosystem model
                                                                             A supply chain ecosystem consists of the elements of the supply chain and the entities that influence the goods, infor-
                                                                             mation and financial flows through regulations, technology, management, etc. Accordingly, the supply chain ecosystem
                                                                             comprises of networks of companies directly and indirectly part of the supply chain, countries of operations/presence
                                                                             and their governments, industrial, social and political organisations, logistics and information technology services
                                                                             infrastructure, the third-party service providers that connect the companies and the countries to the external economic
                                                                             and social environment, resources including natural, financial and human resources with talent, connections and
                                                                                                                      International Journal of Production Research                                              3
                                                                             knowledge of the industrial environment, industry clusters, universities, etc. interacting together with the horizontal and
                                                                             vertical supply chain landscape and economic and social climate. The ecosystem is shown in Figure 1. The four distinct
                                                                             risk sources in manufacturing and service chain networks include (Viswanadham and Kameshwaran 2013)
                                                                                 We generally conduct the performance, risk and innovation studies using this framework. For this paper, the perfor-
                                                                             mance and risk are relevant. Specifically, we deal with the supplier selection problem using Fuzzy AHP framework taking
                                                                             into consideration the lead time, cost and quality as well as the risk emanating from all the ecosystem parameters.
Table 1. Ecosystem enablers for supplier’s supply chain (adapted from Viswanadham and Kameshwaran 2013).
                                                                             Enablers Modular products, JIT,        FTAs, customs, IP protection,        Port, Road & IT           Finance, power, water etc.
                                                                                      TQM, SRM, SC visibility,      Good judiciary, trade laws, social   infrastructure, 3PLs,     clusters, high labour
                                                                                      collaboration                 acceptance                           software vendors          productivity
                                                                             Cost     High product design cost,     Low tariffs, high profits             Low transportation and    Low factor costs
                                                                                      low production cost                                                inventory costs
                                                                             Lead     Low                           Low                                  Low                       Low
                                                                               time
                                                                             Quality High quality products          High SC service levels               High SC service levels    High management quality
                                                                                                                                                         & market reach
                                                                             4                                                N. Viswanadham and A. Samvedi
                                                                             standardisation, collaboration with partners and the supply chain visibility using sensor networks, call centres and Inter-
                                                                             net, late customisation and use of supply hubs will certainly reduce the lead time and increase the efficiencies and prod-
                                                                             uct flexibility but may also increase the cost of production. This performance analysis of supply chains is given in
                                                                             Table 1.
                                                                                 The total landed cost has the following components: product cost, transport (shipping) cost, trade-related costs
                                                                             (processing, customs clearance, port operations and the like), pipeline (in-transit) inventory and safety stock inventory
                                                                             costs and finally the coordination cost. If a particular country has highly variable processing times for port operations,
                                                                             supply chain managers need to hold additional safety stock to maintain desired customer service levels in the face of
                                                                             increased supply uncertainty.
                                                                             relationships, changes in governments, uncertainties in trade agreements (anti-dumping and voluntary export restrictions)
                                                                             deregulation, etc. Social unrest and regulatory risks are high in emerging markets. In developed countries, the financial
                                                                             crisis has created a situation of oversight by the government.
                                                                                  The following hierarchy for supplier selection is being proposed here. This hierarchy simultaneously considers both
                                                                             performance and risk factors and the ecosystem model ensures the inclusivity of all important factors. The hierarchy is
                                                                             described in Figure 2.
                                                                                                                                            Supplier
                                                                                                                                                                          Resources
                                                                                                         Cost            Performance        Selection        Risk
                                                                                                                                             Criteria
                                                                                                                                                                         Institutional
                                                                                                       Quality
                                                                                                                                                                           Delivery
                                                                                                                                                                        Infrastructure
                                                                             Equal                                                                               1                                                                         (1, 1, 3)
                                                                             Little importance                                                                   3                                                                         (1, 3, 5)
                                                                             Strong importance                                                                   5                                                                         (3, 5, 7)
                                                                             Very strong importance                                                              7                                                                         (5, 7, 9)
                                                                             Extreme importance                                                                  9                                                                        (7, 9, 11)
                                                                                 Let X ¼ fx1 ; x2 ; . . . ; xn g be an object set and U ¼ fu1 ; u2 ; . . . ; um g be a goal set. According to the method of
                                                                             Chang’s extent analysis model, each object is taken and extent analysis for each goal gi is performed. Therefore, m
                                                                             extent analysis values for each object can be obtained as Mg1i , Mg2i ; . . . ; Mgmi , I ¼ 1; 2; . . . ; n. All the Mgj i , j ¼ 1; 2; . . . ; m
                                                                             are triangular fuzzy numbers. The algorithm of the Chang’s extent analysis model is as follows,
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Step 1 The value of fuzzy synthetic extent with respect to the ith object is defined as
                                                                                                                                                                       "                               #1
                                                                                                                                                       X
                                                                                                                                                       m                   X
                                                                                                                                                                           n X
                                                                                                                                                                             m
                                                                                                                                             Si ¼            Mgj i                             Mgj i
                                                                                                                                                       j¼1                 i¼1           j¼1
                                                                                         Pm
                                                                             To obtain      j¼1   Mgj i perform the fuzzy addition operation of m extent analysis for a particular matrix such that
                                                                                                                                                                                                             !
                                                                                                                                        X
                                                                                                                                        m                        X
                                                                                                                                                                 m                X
                                                                                                                                                                                  m               X
                                                                                                                                                                                                  m
                                                                                                                                               Mgj i    ¼                  lj ;            mj ;         uj
                                                                                                                                        j¼1                          j¼1           j¼1            j¼1
                                                                                             hP P                  i1
                                                                                               n  m
                                                                             and to obtain         i¼1
                                                                                                              j
                                                                                                         j¼1 Mgi         , perform the fuzzy addition operation of Mgj i ; j ¼ 1; 2; . . . ; m values such that
                                                                                                                                                                                                                  !
                                                                                                                                      n X
                                                                                                                                      X m                             X
                                                                                                                                                                      n                  X
                                                                                                                                                                                         n             X
                                                                                                                                                                                                       n
                                                                                                                                                     Mgj i   ¼                    li ;         mi ;          ui
                                                                                                                                      i¼1    j¼1                       i¼1               i¼1           i¼1
                                                                                                                            "                        #1                                                                  
                                                                                                                                X
                                                                                                                                n X
                                                                                                                                  m
                                                                                                                                                                    1                        1                 1
                                                                                                                                             Mgj i           ¼    Pn                     ; Pn               ; Pn
                                                                                                                                i¼1    j¼1                                 i¼1     ui           i¼1    mi         i¼1 li
                                                                             The principles for the comparison of fuzzy numbers were introduced to derive the weight vectors of all elements for
                                                                             each level of hierarchy with the use of fuzzy synthetic values. To compare the fuzzy numbers, following principles are
                                                                             used.
                                                                                                                                                       8
                                                                                                                                                       >  1;                       if m2  m1
                                                                                                                                                   <
                                                                                                                                                          0;                        l 1  u2
                                                                                   V (M2  M1 ) ¼ sup min lM1 (x); lM2 (y) ¼ hgt(M1 \ M2 ) ¼ lM2 (d) ¼         (l1  u2 )
                                                                                                  yx                                                  >
                                                                                                                                                       :                         ; otherwise
                                                                                                                                                         (m2  u2 )  (m1  l1 )
                                                                                                                          International Journal of Production Research                                  7
                                                                                                                ~ 1 and M
                                                                             Figure 3. The intersection between M       ~ 2.
                                                                             where M1 ¼ (l1 ; m1 ; u1 ) and M2 ¼ (l2 ; m2 ; u2 ) and d is the ordinate of the highest intersection point D between lM1 and
                                                                             lM2 (see Figure 3). To compare M1 and M2 , both V (M2  M1 ) and V (M1  M2 ) are needed. The comparison is shown
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graphically in Figure 3.
                                                                             Step 3 The degree of possibility for a fuzzy number to be greater than k fuzzy numbers Mi , (i ¼ 1; 2; : . . . ; k) can be
                                                                             defined by
                                                                                                         V (M  M1 ; M2 ; . . . ; Mk ) ¼ min V (M  Mi ); i ¼ 1; 2; . . . ; k
                                                                             Assume that,
                                                                                                                       d 0 (Ai ) ¼ min V (Si  Sk ); k ¼ 1; 2; . . . ; n; k – i
                                                                                                                                    1 h~1                                    i
                                                                                                                            X~ ij ¼    X ij ( þ )X~ ij ( þ ) . . . ( þ )X~ ij ;
                                                                                                                                                    2                      K
                                                                                                                                    K
                                                                             8                                               N. Viswanadham and A. Samvedi
                                                                             where X~ ij is the rating of the kth decision-maker for ith alternative with respect to jth criterion (Chen 2000).
                                                                                     K
                                                                                Obtaining weights of the criteria and fuzzy ratings of alternatives with respect to each criterion, the fuzzy
                                                                             multi-criteria decision-making problem can be expressed in matrix format as
                                                                                                                                      2                                  3
                                                                                                                                   X~ ij          X~ ij   ...      X~ ij
                                                                                                                                  6 .               ..               .. 7
                                                                                                                              D ¼ 4 ..               .    ...         . 5;
                                                                                                                                   X~ ij          X~ ij         X~ ij
W ¼ ½w1 ; w2 ; . . . ; wn ; j ¼ 1; 2; . . . ; n;
                                                                             where X~ ij is the rating of the alternative Ai with respect to criterion j (i.e. Cj ) and wj denotes the importance weight of
                                                                             Cj . These linguistic variables can be described by triangular fuzzy numbers: X~ ij ¼ (aij ; bij ; cij ). To avoid the
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                                                                             complicated normalisation formula used in classical TOPSIS, the linear scale transformation is used here to transform
                                                                             the various criteria scales into a comparable scale. Therefore, we can obtain the normalised fuzzy decision matrix
                                                                             denoted by R  ~
                                                                                                                                            ~ ¼ ½~rij 
                                                                                                                                            R          mxn
                                                                             where B and C are the set of benefit criteria and cost criteria, respectively, and
                                                                                                                                                         !
                                                                                                                                          ~aij ~bij ~cij
                                                                                                                               ~r ¼           ; ;         ;      j 2 B;
                                                                                                                                           cj cj cj
                                                                                                                                       
                                                                                                                                     aj bj c j
                                                                                                                               ~r ¼     ; ;      ;                j 2 C;
                                                                                                                                     cij bij aij
                                                                                                                                  a
                                                                                                                                   j ¼ min aij            if j 2 C:
                                                                                                                                              i
                                                                                The normalisation method mentioned above is to preserve the property that the ranges of normalised triangular fuzzy
                                                                             numbers belong to [0, 1].
                                                                                Considering the different importance of each criterion, we can construct the weighted normalised fuzzy decision
                                                                             matrix as
V~ ¼ ½~vij mxn i ¼ 1; 2; . . . ; m; j ¼ 1; 2; . . . ; n
where
                                                                                According to the weighted normalised fuzzy decision matrix, we know that the elements ~vij 8i; j are normalised
                                                                             positive triangular fuzzy numbers and their ranges belong to the closed interval [0, 1]. Then, we can define the fuzzy
                                                                             positive-ideal solution (FPIS, A ) and fuzzy negative-ideal solution (FPIS, A ) as
                                                                                                                           International Journal of Production Research                                       9
                                                                                                                                           A ¼ (~v  v
                                                                                                                                                   1 ;~       v
                                                                                                                                                       2 ;...;~n );
where
                                                                                                                                         X
                                                                                                                                         n
                                                                                                                               di ¼            d(~vij ; ~vj );    i ¼ 1; 2; . . . ; m
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j¼1
                                                                                                                                         X
                                                                                                                                         n
                                                                                                                              di ¼             d(~vij ; ~v
                                                                                                                                                           j );     i ¼ 1; 2; . . . ; m
                                                                                                                                          j¼1
                                                                             where d(:; :) is the distance measurement between two fuzzy numbers calculating with the following formula:
                                                                                                                             rffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffiffi
                                                                                                                              1                                                                        
                                                                                                                    q; s~) ¼
                                                                                                                  d(~              (q1  s1 )2 þ (q2  s2 )2 þ (q3  s3 )2
                                                                                                                              3
                                                                             where q~ ¼ (q1 ; q2 ; q3 ) and s~ ¼ (s1 ; s2 ; s3 ) are two triangular fuzzy numbers. A closeness coefficient is defined to
                                                                                                                                                    
                                                                             determine the ranking order of all alternatives once the d~j and d~j of each alternative Ai (i ¼ 1; 2; . . . ; m) are calculated.
                                                                             The closeness coefficient of each alternative is calculated as
                                                                                                                                                    
                                                                                                                                                  d~j
                                                                                                                                 CCi ¼                    ;      i ¼ 1; 2; . . . ; m
                                                                                                                                             d~j þ d~j
                                                                             Obviously, an alternative Ai is closer to the (FPIS, A ) and farther from (FPIS, A ) as CCi approaches to one.
                                                                             Therefore, according to the closeness coefficient, we can determine the ranking order of all alternatives and select the
                                                                             best one from among a set of feasible alternatives.
                                                                             the criteria according to their importance. Fuzzy AHP is used for this purpose and expert views are taken as input. For
                                                                             the path one that is the performance evaluation, this step also provides with the performance scores for the alternatives.
                                                                             But for the path two, there are two extra steps involved. The first of them requires expert inputs for the risk assessment
                                                                             done for four criteria namely their probability of occurrence, their impact on the performance of supply chain, the effort
                                                                             and time required in recovering from the impact and at what level does the risk affect. This is because, as can be seen
                                                                             from the literature, the risk affecting the strategic level is much more dangerous than one affecting the operational level.
                                                                             The last step in path two does the aggregation of these inputs using fuzzy TOPSIS.
                                                                                 The results from the two paths are then aggregated to come up with a decision table which contains supplier
                                                                             alternative ranks and also the individual risk scores for these alternatives under different risk types. Also, the aggregated
                                                                             risk score for every alternative is displayed in this table. This helps the managers to make an informed decisionon which
                                                                             supplier to choose. The breakup score for each risk type is provided because sometimes the managers want to pay
                                                                             particular attention to a type of risk. This can be because of several reasons such as that the said risk type is already
                                                                             present in the supply chain in large and managers do not want it to be increased any further. Also, the computational
                                                                             complexity of proposed methodology is quite low. This is because solutions like AHP are based on subjective
                                                                             judgement of experts and the value of solution increases with sensitivity analysis of some of these opinions. The
                                                                             complexity thus may not be computational, but the procedure may involve multiple iterations and thus complex. Thus,
                                                                             after gathering the expert opinion analysing it is not computationally complex and hence the resources needed for it is
                                                                             not significant.
                                                                             4. Example
                                                                             This section gives an illustrative example, to explain the workings of the methodology proposed, and also real time
                                                                             scenarios where such a method can be useful. The Figure 2 depicts the supplier selection hierarchy, which has been
                                                                             proposed in this study. As can be seen from the Figure 4, there are two major paths. One path evaluates the suppliers
                                                                             on their performance criteria and the other evaluates them on their risk assessment. Most of the studies, which also
                                                                             consider risk, do so by adding risk as a performance criterion. But with added emphasis given these days on risk
                                                                             management, due to high vulnerability of businesses these days, it is better to treat risks separately. This helps in risks
                                                                             getting the importance which they deserve.
                                                                                 When doing the performance evaluation any multi-criteria method can be used. Whereas, for selection through risk
                                                                             assessment, this study uses the approach as explained in the previous section and illustrated through an example here.
                                                                                                                          International Journal of Production Research                                     11
                                                                             The approach involves two major steps, namely assigning weights to all the criteria and determining the scores of all
                                                                             the risks at the lowest level in the hierarchy. These two values are then consolidated into one single-risk index value.
                                                                             Here, we detail out the functioning of methodology proposed to handle risk assessment part of the process. The
                                                                             performance evaluation part is dealt by using Fuzzy AHP, similar to the way first half of described method is solved.
                                                                             The calculation for this part has not been provided here because of the shortage of space. This is also why only those
                                                                             calculations which are necessary for the understanding of the method have been provided here.
                                                                                 The inputs come in the form of linguistic values. The expert inputs for the fuzzy AHP part are linguistic variables
                                                                             as given in the Table 3. Normally, whenever such subjectivity is involved in judgements it is advised to have more than
                                                                             one source of inputs. These inputs can be later aggregated for a better analysis of the system. In this study, inputs from
                                                                             three experts are considered. In total, there will be five fuzzy pairwise comparison tables per expert. These are one for
                                                                             criteria comparison and one each for comparison of sub-criteria under a given criterion. The calculations for sub-criteria
                                                                             comparison under the criteria delivery infrastructure failure is shown in Table 4. The calculation is provided for the
                                                                             pairwise comparison matrix of one expert. The remaining pairwise comparisons are solved in the similar way.
                                                                                 As seen from Table 4, the two risks are compared only once and the reverse comparison is supposed to take the
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                                                                             reverse value automatically. When these linguistic inputs are converted to the fuzzy triangular numbers, we get Table 5.
                                                                                 The synthetic values are then calculated as shown in step 1 of Section 5.2. These synthetic values are then used to
                                                                             reach the final weights. The calculations are done using the step 2, 3 and 4 of the same section. The results are shown
                                                                             in Table 6. Similarly, the weights for all the criteria and sub-criteria are determined. The weights from different experts
                                                                             are then averaged to get the mean weights. Now, the process moves on the second part namely risk assessment inputs.
                                                                             Each risk is measured against four parameters, namely low importance, low probability of occurrence, low impact of
                                                                             the risk on the supply chain if it occurred and less difficulty to mitigate that risk. The criteria are chosen in such a way
                                                                             so that higher value is desired. This helps us in directly adding up the scores to the performance ones. Also, this
                                                                             approach goes with the popular one wherein higher values for better alternatives are desired.
                                                                                 The inputs for the values of these parameters are taken from experts again in the form of linguistic expressions
                                                                             which have earlier been defined as fuzzy intervals, as shown in the Figure 5. The linguistic expressions are randomly
Table 4. Pair wise comparison matrix for sub criteria under critical delivery infrastructure.
                                                                             generated and the values from three experts are averaged as done in the previous step. The resulting values are shown
                                                                             in Table 7. Each risk input parameter is divided into five linguistic expressions with membership values as shown in
                                                                             Figure 5.
                                                                                 The Table 7 shows the risk input matrix with the expert inputs entered. These inputs are then converted to risk
                                                                             scores using fuzzy TOPSIS method as given in Section 5.3.
                                                                                 These scores are then consolidated using the weights assigned to all the risks. These scores are multiplied by the
                                                                             weights assigned to the relative risks. The values obtained are then added up for the first-level risks. For example, the
                                                                             values for first-five risks are added to give a score for the planning and product related risks. The scores obtained for
                                                                             the first-level risks are then again multiplied by the weights assigned to these first-level risks and the resulting values
                                                                             summed up to get the final-risk index value. The two scores are then consolidated into one. These values are shown in
                                                                             Table 8. Thus, it can be seen that supplier 3 is the best in consolidated score and overall risk category. But, it ranks sec-
                                                                             ond in performance. Also when individual risk categories are broken down, we see that supplier three is best for MR1
                                                                             and MR3 category, whereas it ranks third for MR2 and last for MR4. Such a detailed examination is most of the times
                                                                             very useful. Importance of detailing out the values in such a way is that the managers have the data in front of them
                                                                             and are in a position to make a better informed decision. Sometimes giving only the final value can be a little mislead-
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                                                                             ing. This can be explained by considering supplier three. As we can see that the total value of risk assessment is highest
                                                                             for this supplier. That means this supplier is least risky overall. But suppose that the existing supply chain has a lot of
                                                                             risk from MR4 category and the managers do not want that risk to increase anymore, then giving only the total value
                                                                             can be misleading. Supplier three is actually the most risky in MR4 category.
                                                                                                                     µm
                                                                                                                              Low           Mild    High       V High Extreme
                                                                             R1             (0.13,   0.33,   0.53)         (0.47,   0.67,   0.80)         (0.13,   0.33,   0.53)         (0.13,   0.33,   0.53)   0.2955
                                                                             R2             (0.40,   0.60,   0.73)         (0.40,   0.60,   0.80)         (0.20,   0.40,   0.60)         (0.13,   0.33,   0.53)   0.3864
                                                                             R3             (0.33,   0.53,   0.73)         (0.20,   0.40,   0.60)         (0.40,   0.60,   0.80)         (0.40,   0.60,   0.73)   0.4545
                                                                             R4             (0.33,   0.53,   0.73)         (0.33,   0.53,   0.73)         (0.20,   0.40,   0.60)         (0.20,   0.40,   0.60)   0.3636
                                                                             R5             (0.67,   0.87,   1.00)         (0.00,   0.20,   0.40)         (0.73,   0.93,   1.00)         (0.27,   0.47,   0.67)   0.5682
                                                                             R6             (0.33,   0.53,   0.73)         (0.27,   0.47,   0.67)         (0.33,   0.53,   0.73)         (0.47,   0.67,   0.87)   0.4773
                                                                             R7             (0.20,   0.40,   0.60)         (0.47,   0.67,   0.87)         (0.27,   0.47,   0.67)         (0.27,   0.47,   0.60)   0.4091
                                                                             R8             (0.13,   0.33,   0.53)         (0.27,   0.47,   0.67)         (0.00,   0.20,   0.40)         (0.13,   0.33,   0.53)   0.1818
                                                                             R9             (0.20,   0.40,   0.60)         (0.40,   0.60,   0.80)         (0.33,   0.53,   0.73)         (0.60,   0.80,   1.00)   0.5227
                                                                             R10            (0.27,   0.47,   0.67)         (0.47,   0.67,   0.80)         (0.07,   0.27,   0.47)         (0.27,   0.47,   0.67)   0.3636
                                                                             R11            (0.53,   0.73,   0.87)         (0.33,   0.53,   0.73)         (0.47,   0.67,   0.80)         (0.40,   0.60,   0.80)   0.5909
                                                                             R12            (0.33,   0.53,   0.73)         (0.27,   0.47,   0.67)         (0.53,   0.73,   0.93)         (0.47,   0.67,   0.80)   0.5455
                                                                             R13            (0.40,   0.60,   0.80)         (0.07,   0.27,   0.47)         (0.40,   0.60,   0.80)         (0.53,   0.73,   0.93)   0.4773
                                                                             R14            (0.47,   0.67,   0.80)         (0.33,   0.53,   0.73)         (0.27,   0.47,   0.67)         (0.67,   0.87,   1.00)   0.5909
                                                                             R15            (0.20,   0.40,   0.60)         (0.27,   0.47,   0.60)         (0.13,   0.33,   0.53)         (0.33,   0.53,   0.73)   0.3182
                                                                             R16            (0.20,   0.40,   0.60)         (0.53,   0.73,   0.80)         (0.40,   0.60,   0.80)         (0.53,   0.73,   0.93)   0.5682
                                                                             R17            (0.67,   0.87,   1.00)         (0.00,   0.20,   0.40)         (0.73,   0.93,   1.00)         (0.40,   0.60,   0.80)   0.6136
                                                                                                                          International Journal of Production Research                                 13
                                                                                                                                                    Risk scores
                                                                             Suppliers        Performance Scores          MR1            MR2             MR3      MR4      Total       Consolidated Scores
                                                                             the entire ecosystem of the sub-chain is now the part of the overall supply chain and the risks can also emanate from
                                                                             here. For example, Mattel recalled millions of toys in 2007 because high quantity of lead was found in the paint which
                                                                             was used. The problem occurred from one of the sub-suppliers of a Chinese supplier to which the work was outsourced.
                                                                             This shows the importance of keeping watch on the sub-chains of the selected suppliers and if possible better selects
                                                                             the entire sub-chain.
                                                                                 The method given above can be easily extended to multi-tier supplier selection. The entire process is rerun for the
                                                                             possible supplier alternatives at every tier in the chain. The numerical example here has three tiers overall with four
                                                                             supplier alternatives in the front tier, five in the next upstream tier and three for the last tier. The calculations were
                                                                             demonstrated for the front tier suppliers and these are now extended to the other two tiers. The details of calculations
                                                                             are similar to the ones above but the hierarchy of criteria can be changed if needed. It is sometimes possible that the
                                                                             importance of criteria is different for different tiers and also in some cases the list of criteria can change even. Tables 9
                                                                             and 10 tabulate the values obtained for these tiers. Table 9 shows the values for the second tier in the upstream direction
                                                                             and Table 10 shows the last tier in the upstream direction.
                                                                                 In total, then, there can be 4  5  3 = 60 possible chains involving these alternatives. But almost always there are
                                                                             other constraints like compatibility issues between different firms, logistical connectivity issues, cultural differences,
                                                                             regional problems, etc. Due to these, the number of possible alternative chains is always much lower than the total
                                                                             possible chains. In this case, this number comes out to be nine feasible chains and they are:
Table 9. Consolidated table with all the scores for second tier upstream.
                                                                                                                                                    Risk scores
                                                                             Suppliers        Performance Scores          MR1            MR2             MR3       MR4      Total      Consolidated scores
Table 10. Consolidated table with all the scores for the last tier upstream.
                                                                                                                                                    Risk scores
                                                                             Suppliers        Performance scores          MR1            MR2             MR3       MR4      Total      Consolidated scores
                                                                                                                                               Risk scores
                                                                             Chains         Performance scores         MR1            MR2         MR3           MR4      Total       Consolidated scores
                                                                                 These scores are just the additions of the values from the previous three tables. It can be seen from this table that
                                                                             C5 is the best chain followed by C2 and C9. Also, the table shows that although C5 is the best overall, C9 scores the
                                                                             highest in risk and thus is a better chain with respect to handling risks. C5 also scores the best in performance category.
                                                                             The scores for all the chains are provided to the managers, who can then take an informed decision by taking all the
                                                                             tradeoffs into consideration and also the current scenario.
                                                                             Acknowledgement
                                                                             The first author would like to thank INAE for all its support. Second author thanks Prof. Y. Narahari (Chairman CSA Dept., IISc)
                                                                             and DST for their support and funds, which helped in successful completion of this study.
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                                                                             Chan, F. T. S., and N. Kumar. 2007. “Global Supplier Development Considering Risk Factors Using Fuzzy Extended AHP-based
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                                                                             Chan, F. T. S., N. Kumar, M. K. Tiwari, H. C. W. Lau, and K. L. Choy. 2008. “Global Supplier Selection: A Fuzzy-AHP Approach.”
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