ABSTRACT
For most manufacturing rms, the purchasing of raw material and component parts constitutes a major expense. A study carried out by the Aberdeen group found that more than 83% of the organizations engaged in outsourcing achieved signicant reduction in purchasing cost, more than 73% achieved reduction in transaction cost, and more than 60% were able to shrink sourcing and procurement cycles (Aberdeen Group 2004). Once a decision is made to outsource, the next critical activity is selecting the suppliers. Supplier selection is a key decision in outsourcing, which is prone to errors. The right supplier is one who will meet and complement the organization’s needs from its corporate culture to its long-term future needs. The selection of a good supplier is difcult because some suppliers that meet some selection criteria may fail in others. In order to select the right supplier, two basic and interrelated decisions must be made by a rm. The rm must decide which suppliers to do business with and how much to order from each supplier. Weber et al. (1991) refer to this pair of decisions as the supplier selection problem.
