Supplier selection considering product structure and product life cycle cost

Purpose – Supplier selection is a complex decision that involves not only the consideration of unit purchasing cost but also product life cycle cost (LCC), which affects the company’s after-sale costs over the life cycles of their products. Product structure and its impact on the supplier selection evaluation process are rarely investigated in the literature. Therefore, product structure for a multi-criteria multi-product supplier selection problem with uncertainty is considered. In the model, the authors address product structure, the competitive supply environment, diverse criteria, and standard requirements. The purpose of this paper is to choose suppliers that minimize LCC and maximize the reliability of the finished products. Design/methodology/approach – The model provides straightforward representation of interrelationships among multi-objectives and analysis of tradeoffs among conflicting objectives affected by product structure. The authors illustrate the model by using real life data from lubrication systems in the offshore reliability data (OREDA) handbook. Sensitivity analysis is provided for the case study in which various scenarios that describe product structure, the uncertainties in purchasing prices, reliabilities of purchased components, machine downtime due to poor quality components, suppliers’ capacity and delivery times. Different priority ranking among objectives is also tested to examine the impact of each objective on the overall objective. Findings – The computational results are based on real data and would provide useful guidelines for the management in OEM to choose right suppliers. Originality/value – Product structure and its impact on the supplier selection evaluation process are rarely investigated in the literature. Therefore, product structure for a multi-criteria multi-product supplier selection problem with uncertainty is considered.