Title: A simulated annealing algorithm for optimal supplier selection using the reliability-based total cost of ownership model
Authors: G. Kanagaraj, N. Jawahar
Addresses: Department of Mechanical Engineering, Thiagarajar College of Engineering, Madurai – 625 015, India. ' Department of Mechanical Engineering, Thiagarajar College of Engineering, Madurai – 625 015, India
Abstract: Traditional supplier evaluation and selection methods are often based on the quoted price, which ignores the significant direct and indirect costs associated with quality, delivery, use and service costs of purchased parts and materials. Total Cost of Ownership (TCO), which is the integration of quality, service and maintenance-related costs along with the initial price of the product, has evolved as a supplier selection criterion. This paper introduces a Reliability-Based Total Cost of Ownership (RBTCO) model, which incorporates procurement, maintenance and downtime costs along with the practical constraints on product reliability and weight limitation for supplier selection decisions. The mathematical formulation of the RBTCO model belongs to Nonlinear Integer Programming (NLIP). A Simulated Annealing Algorithm (SAA), a powerful tool for such problems, is developed to arrive at the optimal or near-optimal solutions.
Keywords: total cost of ownership; TCO; supplier selection; simulated annealing; product reliability; supplier evaluation; procurement costs; maintenance costs; downtime costs.
International Journal of Procurement Management, 2009 Vol.2 No.3, pp.244 - 266
Published online: 01 May 2009 *Full-text access for editors Access for subscribers Purchase this article Comment on this article