Decision support system for sustainable supplier selection : a case study of the trading industry in Hong Kong

Abstract

The issue of business sustainability has drawn many concerns throughout the last few decades. Several international conventions and agreements related to sustainable development have been signed. Many countries including the European Union, the USA, and Japan, have enacted laws and regulations to ensure eco-friendly products and production. Issues in sustainable supply chain management (SSCM) have drawn attention from industries and academic communities worldwide. Much research and effort has been focused on the implementation of and conformance to environmental and corporate social responsibility requirements throughout the supply chain. The practice is still in its early stage in today's real-life business environments in many countries and regions of the world. In Hong Kong, many companies are still unaware of this global trend and requirements. This thesis presents a complete sustainable supplier selection approach for the trading industry in Hong Kong. It is designed to assist the industry practitioners in carrying out strategic sourcing while promoting the sustainable procurement to the industry. The decision support system comprises three main elements, namely, (1) formulation of sustainable supplier selection criteria, (2) pre-qualification of potential suppliers by distance from target measuring approach, and (3) final choice of qualified suppliers by fuzzy AHP. Market analysis by theoretic approach and sample interviews were done in this study to understand the gap between academic and industry sides. In accordance with the Triple Bottom Line principle of sustainability, a general rule of criteria establishment and a set of sustainable supplier selection criteria specifically for the trading industry have been derived in the first phase of the proposed decision support system. The criteria defined are in four categories, that is, profitability, suppliers’ service commitment, relationship/ co-operation, and management and organization. The criteria set has incorporated all classic and important criteria from literature, unique features of the industry, suppliers’ overall characteristics and sustainability considerations.

For the methodology of the selection model, decision-making is based on a two-stage hybrid approach (phases two and three in the system). The pre-qualifications stage involves the distance from target measuring approach for filtering those supplier offers that fail to meet customers’ requirements. In the final selection stage, the fuzzy AHP model is implemented for the final evaluation and selection of suppliers on both qualitative and quantitative criteria. Case examples have been performed to validate the functionality of the proposed model with different scenario studies, for example, trading firms with different product categories, and changing business focus like different levels of sustainability considerations.