A Combined Grey System Theory and Uncertainty Theory-Based Approach for Supplier Selection in Supply Chain Management

The requirement of large sample size and the strong subject knowledge to build suitable membership function restrict the applicability of probability and fuzzy theories in supplier selection problem. Due to this fact, the combination of grey system theory and uncertainty theory-based approach is applied for supplier selection problem, which requires neither any exact probability distribution nor membership function. The proposed approach is able to consider stochastic and recognitive uncertainties associated with supplier selection decision in supply chain management. This chapter develops framework for reducing the risks associated with suppliers. The novelty of this research is to consider proper uncertainty approaches in different stages of proposed framework instead of solving the whole selection problem using the same uncertainty theory or grey system theory. The proposed framework is based on three stages: identification of supplier selection criteria, defining weights to goals and ratings to supplier attributes as grey linguistic variables, and supplier selection and order allocation using uncertain-goal programming considering uncertain demand and lead time. The proposed model will help the practitioners to effectively evaluate and select suitable set of suppliers and optimal order allocation.