A Mathematical Model for Supplier Selection in Quantity Discount Environments

Abstract

Supplier selection has received extensive attention in supply chain management (SCM). In this field, owing to the difficulty of treating non-linear functions, many SCM models assume that the prices of materials, production, transportation and inventory are constant. This is far beyond the real situations and, however, is not practical. In fact, vendors usually offer quantity discounts to encourage the buyers to order more, and the producer intends to discount the unit production cost if the amount of production is large. For dealing with this difficulty, this paper examines the application of data envelopment analysis, which has demonstrated potential as a management tool to overcome the shortcomings of other techniques and to help purchasing executives improve the efficiency of their operations.