A New Algorithm for Ranking Suppliers in Volume Discount Environments

Abstract

Purchasing is one of the most crucial and vital activities of business, as it has a significant impact on finance, operations and competitiveness of the organization. Many organizations are now allocating more resources for outsourcing activities to increase their competitive position. Selecting an appropriate supplier for outsourcing is now one of the most important decisions of the purchasing department. This decision generally depends on a number of different criteria. On the other hand, to encourage the buyers to order more, suppliers usually offer volume discounts. To rank suppliers in volume discount environments in the presence of both cardinal and ordinal data, this paper proposes an innovative algorithm, which is based on Minimax Regret-based Approach (MRA). A numerical example demonstrates the application of the proposed method.