Elsevier

Resources Policy

Volume 57, August 2018, Pages 30-44
Resources Policy

Selecting sustainable supplier countries for Iran's steel industry at three levels by using AHP and TOPSIS methods

https://doi.org/10.1016/j.resourpol.2018.01.002Get rights and content

Highlights

  • Suppliers as the basic components of the supply chain play a significant role in creating a sustainable supply chain.

  • In sustainable supplier selection, the weights of sustainability criteria can be obtained by using AHP.

  • TOPSIS method has been applied for ranking the suppliers’ countries of Iran steel industry at three levels of supply chain.

  • Results show that the Iran mining industry is the best sustainable supplier for the Iran steel industry.

  • Iran is found as the best sustainable supplier country for the most suppliers of Iran steel industry chain at three levels.

Abstract

Supplier selection as a multi-criteria decision-making problem that highly depends on the decision makers’ vision has a major issue among supply chain (SC) managers. SC sustainability, which pays attention to the environmental, economic, and social aspects in SC, has been recently highlighted in the evaluation process undergone by the SC managers. Suppliers, as the basic components of the SC, play a significant role in creating a sustainable SC. Hence, the first aim of this research is to determine the weights of sustainability criteria by using analytical hierarchy process. The second aim of this study is to evaluate suppliers based on four main criteria, CO2 emissions, the number of employees in the suppliers’ country industry, water consumption and distance from supplier's country to the destination at three SC levels and the macroeconomic (international) level. In order to address the second goal of this research, the Technique for Order Preference by Similarity to Ideal Solution (TOPSIS) method as a multi-criteria decision-making method has been applied. In this research, Iran's steel industry has been selected as the case study. Results show that the Iranian mining industry is the best sustainable supplier for Iran's steel industry. In addition, Iran was found as the best sustainable supplier country for most suppliers in Iran's steel industry SC based on the three SC sustainability criteria at three levels. Finally, a sensitivity analysis has been applied according to the different weights of the sustainability criteria. The results of this research can help managers in the steel industry to deal with the supplier selection problem at the macro-level. Furthermore, the presented approach in this research can assist managers of other industries to select and evaluate their suppliers.

Introduction

Currently, Supply Chain (SC) management is attempting to maintain a long-term cooperation with the suppliers and use fewer, but more reliable, suppliers (Ho et al., 2010). Suppliers are important for every company due to their fundamental role in the success of the companies (Wagner and Johnson, 2004). Supplier selection is one of the most important business activities with a significant effect on the product's quality (Junior et al., 2014). Supplier selection provides a basis for predicting and evaluating the suppliers’ potential for creating a joint relationship (Ha et al., 2011). Basically, supplier selection, as a decision-making process aims to reduce the number of potential suppliers until achieving the final selection (Wu and Barnes, 2011, De Boer et al., 2001). Decisions are based on the evaluation of suppliers by using qualitative and quantitative criteria. Selecting the suppliers might require searching for new suppliers or choosing among the available cases (Junior et al., 2014). Therefore, companies should use an appropriate supplier selection model to determine suitable partners, and consequently maintain their competitive advantages in the globalization process (Hsu et al., 2013). In recent years, the SC problem has attracted the attention of many researchers. In addition, the method of selecting the suppliers in the SC is a major challenge for the organizations. Furthermore, the interest of the companies and scientific centers in sustainable SC has been increased in recent years. Therefore, the supplier selection process has become one of the key operational tasks for sustainable SC management (Buyuközkan and Çifci, 2011). Due to the increased global awareness about sustainability and governmental orientations in this regard, companies cannot neglect the issue of sustainability in business (Gaziulusoy, 2015, Govindan et al., 2016a, Govindan et al., 2016b). Sustainable development means a “development that meets the needs of the present without compromising the ability of future generations to meet their own needs” (Keeble, 1988). This definition of sustainability captured the fundamental intertemporal aspect of human impacts on the natural environment (Guest, 2010).

In this context, the Triple Bottom Line (TBL) has been introduced to evaluate the manufacturing performance in three aspects of social, economic and environmental sustainability (Elkington, 2004, Elkington, 1994). TBL expresses that a firm's long-term profitability can be achieved by balancing the economic purposes with the social and environmental aspects (Dao et al., 2011, Elkington, 1994, Elkington, 2004). Due to intendancy of societies to have a sustainable future, sustainability has been considered in manufacturing SCs. To achieve a sustainable SC, all of the members of the chain from suppliers to the top managers must have an affinity with sustainability. Even though many researchers have been focused on supplier selection, the research on sustainable supplier selection has not been studied adequately (Amindoust et al., 2012, Keskin et al., 2010a, Keskin et al., 2010b, Kuo et al., 2010).

The theory behind the decision-making problem for selecting suppliers can be seen in Decision Theory (DT). This theory directly depends on many concepts in Sustainable Supply Chain Management (SSCM) research. To have a successful SSCM, factors such as organizational culture, strategy, risk management and transparency need to be considered in decision making (Carter and Rogerc, 2008). However, there are challenges to having a successful SSCM such as uncertainty, complexity, operationalization, cost, mindset and cultural change (Abbasi and Nilsson, 2012). Collaboration is also known as a key driver for successful SSCM. Therefore, inter-firm decision-making processes are important in SSCM (Gimenez and Tachzawa, 2012). Many studies have focused on modeling successful SSCM criteria by using Operational Research (OR) decision analysis (Bloemhof-Ruwaard et al., 1995, Seuring, 2013). These OR applications lead to the presentation of one particular branch of a wider subject of DT (Alexander et al., 2014).

French et al. (2009) presented the historic evolution of DT in management. They reviewed the basic tools of DT and the appropriate use of them for improving decision-making. These tools include individual and group decisions, “decision tables” showing different options and their known consequences, “decision trees” that show how particular options open up others, and “influence diagrams” that show conditional dependency or independence.

Alexander et al. (2014) introduced two branches for the DT theory. First the rational normative branch and second the empirical behavioral branch. One of the basic DT studies in management research belongs to Simon (1960), in which the concept of “bounded rationality” has been presented. Moreover, French et al. (2009) mentioned, this can be seen as the beginning of a new branch in DT. French et al. (2009) explained how the rational normative branch and empirical behavioral branch could be gathered by using what they call “prescriptive decision analysis”. This considers contextual bias by encountering a particular decision-maker alongside rational decision processes to discard the cognitive limitations and biases. However, it should be mentioned that all these techniques are merely "decision support systems" to help the decision maker's judgment. The responsibility for the decision should remain with the person or group holding authority.

Decision making techniques such as Analytic Hierarchy Process (AHP), Analytic Network Process (ANP), Multiple-Criteria Decision Analysis (MCDA) and Multiple Integer Linear Programming (MILP) are suitable for structural problems in which all of its associated factors can be easily coded and have features that are unambiguous, comprehensive, understandable, and practical (Dekker et al., 2012, French et al., 2009, Keenry and Gregory, 2005). Using these tools of decision making provided power for many organizations and plays like a standard part of their operations.

In manufacturing, supplier selection plays a vital role in improving the performance of SC (Krause et al., 2007). Though many scholars explored methods for supplier selection based on essential supplier selection parameters such as cost, reliability, lead time and environment, the usage of social sustainability parameters was explored less and specific research on social aspects was very limited (Mani et al., 2014). Although sustainability studies focus on three aspects of economy, environment, and society; the social aspect is not investigated due to "humanity" and the difficulty in achieving tangible results from it (Carter and Liane Easton, 2011, Ashby et al., 2012). Therefore, this paper attempts to fill this gap by addressing the "Number of employees" of the specific industry in each alternative (country) as a social criterion. On the other hand, regarding the problem of water scarcity in the world, although it is important to pay attention to the amount of water consumed by the industry, it has been largely overlooked in supplier selection research. Therefore, another innovation in this research is considering water consumption in the form of a criterion entitled "water consumption" for supplier selection. In addition, few articles have studied all aspects of sustainability simultaneously for supplier selection. Therefore, one of the strengths of this article is considering the three main aspects of sustainability simultaneously for supplier selection in forms of “carbon dioxide emissions” (environmental criterion), “number of employees working in the supplier industry” (social criterion), “water consumption” (environmental criterion), and “the distances between the countries” (economic criterion). Moreover, Grimm et al. (2016) mentioned firms' sustainable supplier management practices focusing on first-tier suppliers (second level of SC) had been studied extensively, while little is known on how firms reach out to sub-suppliers. Hence, in this article, the selection of sustainable suppliers is investigated at the third level of SC. Therefore, these gaps need to be addressed by exploring three sustainability aspects including social, environmental and economic criteria for the supplier selection problem of sub-suppliers.

According to presented SC in Fig. 1, the main producer is placed at the first level of the chain, then its main suppliers are located at the second-level of the chain, and finally, the sub-suppliers are presented as the third-level of the chain. Concerning the importance of the steel industry as an infrastructural industry in the economy of countries, the main aim of the current research is to select the best sustainable suppliers for the steel industry at three levels, which is carried out by using Multi-Criteria Decision-Making (MCDM) methods. To achieve the goals of this study, two questions arise. First, "What is the priority of the selection criteria for steel supplier countries?" and second, "which country is selected as the supplier for Iran's steel industry SC as the case study?”.

In this paper, first, the issues of SC management, supplier selection, as well as sustainability in the SC are reviewed in Section 2. Then, in Section 3, AHP and Technique for Order Preference by Similarity to Ideal Solution (TOPSIS) methods which are the research methods of this paper are described. In Section 4, the results of methods as mentioned earlier for selecting the supplier countries of the steel industry SC at three levels are demonstrated. Finally, Section 5 presents the conclusion and recommendations.

Section snippets

Supply chain management

SC is a set of processes including supplying the raw material, manufacturing the parts, and assembling the components for delivery of the final product (Wu and Olson, 2008). SC management refers to the management of a network of internal and external relations between companies and dependent commercial units, which embraces the flow of materials, information, and services from the major suppliers to the final customers in order to achieve the customer satisfaction (Stock and Boyer, 2009).

Materials and methods

AHP has attracted the attention of many researchers mainly due to its favorable mathematical properties and because the required input data in this method are obtained easily (Rajesh and Malliga, 2013). This method can be used to measure the quantitative and qualitative factors in decision-making (Saasty, 1977). Besides, this method also facilitates decision-making based on the judgments, feelings, memories, and other forces that might affect decision-making in the multi-level hierarchical

Table of evaluation criteria

The average expert's opinions about the importance of each criteria as well as the availability of the criterion data are presented in Table 3. By considering the data availability of criteria, the most important criteria for supplier selection of Iran's steel industry SC are CO2 emission, the number of employees working in the supplier industry, water consumption rate, and distances between the countries.

Calculating the weight of criteria by AHP

As previously mentioned, the investigated criteria in this research included: CO2

Conclusion

A suitable sustainable supplier selection in a competitive international and regulatory environment can help the environmental, social, economic and the competitiveness of a firm. The present research was conducted to determine the supplier countries of steel industry at three levels. The main contribution of this study is to integrate all three aspects of economic, social and environmental sustainability by considering the criteria including carbon dioxide emissions, number of employees

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