Supplier selection of an Indian heavy locomotive manufacturer: An integrated approach using Taguchi loss function, TOPSIS, and AHP

This paper proposes an integrated model by combining the advantages of three methods, namely: Taguchi loss function, analytical hierarchy process (AHP), and technique for order performance by similarity to ideal solution (TOPSIS), to help managers objectively evaluate suppliers by eliminating bias and subjectivity. The loss function is perhaps the most objective method to quantify loss, where it is possible to eliminate subjective discretion. The AHP is a time tested method for pair wise comparison used to find  the weightages of criteria. Finally, combining TOPSIS to find which supplier is closest to best helps making an objective assessment of suppliers and also addresses the rank reversal issue generally incurred in multi criteria decision making (MCDM) problems. This framework will give purchase managers the authority to override an offer which is lowest in price as other criteria will play a significant role in getting the best supplier. Moreover, this framework of evaluating suppliers will include a performance report for managers to make a comparison with other firms in their domain. This will instil positive competition as they will have quantifiable objectives to work upon and further improve. The application of the proposed model to an Indian heavy locomotive manufacturer (HLM) is a new application area.  Two real life cases of an Indian heavy locomotive manufacturer have been explained by applying the proposed model, along with sensitivity analysis to test the credibility of the proposed model.