A decision framework for sustainable supplier selection and order allocation with lost sales

Abstract

In recent years, companies have started to focus on their supply chains to enhance their sustainability performance in order to meet the customer demands and comply with environmental legislations. Therefore, the sustainability awareness has become an important issue in supply chain management and companies prefer to work with other companies focusing on this subject. This study presents a decision framework for sustainable supplier selection and order allocation problem. The framework consists of three integrated components. First, fuzzy Decision Making Trial and Evaluation Laboratory (DEMATEL) approach is used to calculate the weights of sustainable criteria considered in decision making process. Second, these weights are used as inputs in Taguchi Loss Functions for ranking and calculating the rating value of each supplier. The ranking values are then taken as inputs to determine the optimal order quantities that should be allocated to each supplier using bi-objective optimization. The first contribution of this study is that it presents a novel hybrid approach by integrating fuzzy DEMATEL and Taguchi loss functions for evaluating and ranking sustainable suppliers. The second contribution is that a new bi-objective model considering the issue of lost sales has been proposed for order allocation phase for the first time in literature. The illustration of the proposed framework is shown on a case study which helps decision makers to select the sustainable suppliers and determine order sizes considering lost sales. © 2018 Elsevier Ltd