Multi-tier sustainable global supplier selection using a fuzzy AHP-VIKOR based approach

Abstract

Politico-economic deregulation, new communication technologies, and cheap transport have pushed companies to increasingly outsource business activities to geographically distant countries. Such outsourcing has often resulted in complex supply chain configurations. Because social and environmental regulations in those countries are often weak or poorly enforced, stakeholders impose responsibility on focal companies to ensure socially and environmentally sustainable production standards throughout their supply chains. In this paper, we present an integrated fuzzy AHP-VIKOR approach-based framework for sustainable global supplier selection that takes sustainability risks from sub-suppliers (i.e., (1+n)th-tier suppliers) into account. Sustainability criteria (including risk concerns) were identified from the existing literature and were further narrowed with the assistance of field experts and case decision makers to remove any literature bias. Then, based on the finalized sustainability criteria, suppliers and sub-suppliers were evaluated altogether. In previous studies, this approach was limited. The problem is addressed in two stages as follows. In the first stage, fuzzy AHP is used to generate criteria weights for sustainable global supplier selection, and in the second stage, fuzzy VIKOR is used to rate supplier performances against the evaluation criteria. Among five sustainability criteria (economic, quality, environment, social, and global risk), economic criteria demonstrated the greatest weight and global risk displayed the least weight. This result clearly shows that global risks are still not considered a major criterion for supplier selection. Further, the proposed framework may serve as a starting point for developing managerial decision-making tools to help companies more effectively address sustainability risks occurring further upstream in their supply chains. These vital tools are particularly important if focal companies are under intense scrutiny by their stakeholders.