Application of Grey Relational Analysis Method in Solving Supplier Selection Problems

For any manufacturing or service organization, selecting the right upstream suppliers is a key success factor that will significantly reduce purchasing cost, increase downstream customer satisfaction and improve competitive ability. There are several quantitative as well as qualitative criteria, like quality, on-time delivery, price, performance history, warranty policy, technical and productive capability, financial stability, delivery lead time, problem solving capability, expertise, experience and reputation which primarily affect the supplier selection decision in any organization. Supplier selection is a Multi-Criteria Decision-Making (MCDM) problem because the selection process mainly involves evaluating the performance of a number of suppliers according to a set of common criteria to meet the business needs. Although various mathematical techniques have already been attempted to solve the supplier selection problems, this paper explores the application of Grey Relational Analysis (GRA) method to select the most suitable supplier for a given manufacturing organization. Two real time examples are illustrated to validate the applicability and usefulness of the MCDM method.