Design of multi-criteria decision framework for supplier evaluation and supply chain sustainability risk (SCSR) management

Purpose

This study tries to identify important criteria and sub-criteria for the evaluation of suppliers for effective management of supply chain sustainability risks (SCSR). This study also demonstrates the application of the analytic hierarchy process (AHP) method in a specific case of a company that is managing a short food supply chain and facing difficulty in ranking the suppliers on three dimensions of sustainability.

Design/methodology/approach

Literature reviews and expert opinions are used to identify and assess the sub-criteria for each of the three dimensions of sustainability, followed by pairwise comparison as per the AHP methodology. Finally, the proposed framework is used to evaluate the three suppliers that represent approximately 70% of the total tea sourced by the case company.

Findings

None of the three suppliers is best on all three dimensions of sustainability. The rank order of suppliers together on the three dimensions is different than the rank order with respect to each of the dimensions separately. The results obtained are useful for the case company to understand the risk associated with each of their suppliers. Also, it helps them develop a proactive plan to address those risks. The results also show that the overall country-level indices may not accurately reflect the individual supplier level, and specific information may help to make better judgements.

Research limitations/implications

The study only demonstrates the evaluation of tier-one suppliers. There are various suppliers in the supply chain (tier two and tier three), and there could be missing or inadequate information about these next-level suppliers that augments SCSR substantially. The study focussed on the countries of three specific suppliers, and sustainability parameters are highly contextual and vary from country to country.

Practical implications

This study proposes a multi-criteria decision framework to evaluate and analyse suppliers based on their performance against SCSR. Using the AHP method, a case application is demonstrated for sustainable supply chain risk management. By considering SCSR in the evaluation process, the case company is able to prioritise prevailing risks, analyse suppliers’ positions against these risks and initiate appropriate risk management strategies. The proposed framework provides a powerful tool for making SCSR decisions in similar contexts.

Social implications

The results helped the company to effectively and efficiently prioritize SCSR and rate suppliers using the proposed framework. It is also observed from the results that the social criterion related to human rights (0.161) was highest in the case company’s priority, followed by child labour (0.118). This fact adds value to the proposition that although social sustainability has featured less in academia, it is unclear whether this is apparent in practice.

Originality/value

The study uses experts from a case company based in the UK which is in the business of procurement and supply of tea and is managing a short food supply chain. The framework is the first of its kind using all three dimensions of sustainability: environmental, social and economic.