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Assessment and selection of vendor in a manufacturing organisation - A

graph theoretic approach

Article  in  International Journal of Logistics Systems and Management · January 2013

DOI: 10.1504/IJLSM.2013.052747

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Int. J. Logistics Systems and Management, Vol. 14, No. 4, 2013 447

Assessment and selection of vendor in a

manufacturing organisation – a graph theoretic
approach

Mohit Singh* and I.A. Khan

Department of Mechanical Engineering,
Jamia Millia Islamia, New Delhi, India
E-mail: sinmohit@gmail.com
E-mail: iakhanjmi@yahoo.com
*Corresponding author

Sandeep Grover
Department of Mechanical Engineering,
YMCA University of Science and Technology,
Faridabad, India
E-mail: groversandeep@hotmail.com

Abstract: Graph theoretic approach has been adopted for evaluation and
selection of vendor. The authors identified five factors affecting the vendor’s
quality on the basis of 57 research papers of vendor selection and also
mentioned the factors chosen by different researchers. On the basis of these
factors, a model has been developed for vendor selection. The authors also
considered 37 research papers on graph theoretic methodology and mentioned
the factors used by different researchers. During the application of graph
theoretic approach, a digraph of characteristics which contributes to quality of
vendor has been developed further the interdependency of attributes as well as
their inheritances has been identified and its representation in matrix form has
been used for calculation of numerical index of the vendor’s quality through
variable permanent function. A single numerical index has been developed
graph theoretic approach for assessment and comparison of vendor in
manufacturing organisation.

Keywords: graph theoretic approach; GTA; vendor evaluation; digraph.

Reference to this paper should be made as follows: Singh, M., Khan, I.A. and
Grover, S. (2013) ‘Assessment and selection of vendor in a manufacturing
organisation – a graph theoretic approach’, Int. J. Logistics Systems and
Management, Vol. 14, No. 4, pp.447–472.
Biographical notes: Mohit Singh is pursuing his PhD in Mechanical
Engineering from Jamia Millia Islamia, New Delhi, India. His research interest
is related to quality management practices, TQM, and industrial engineering.
I.A. Khan completed his PhD in Mechanical Engineering from Indian Institute
of Technology, Delhi, India. He is a Professor in the Department of Mechanical
Engineering, Jamia Millia Islamia, New Delhi, India. His research interest is
related to TQM, stress analysis, concurrent engineering, design for
maintainability and mechanical engineering design systems. He has authored a
good number of papers in national and international journals, and guides
research at postgraduate and doctorate levels.

Copyright © 2013 Inderscience Enterprises Ltd.

448 M. Singh et al.

Sandeep Grover is working as Professor and Head of Mechanical Engineering

Department at YMCA University of Science and Technology, Faridabad, India.
He has obtained his PhD in the area of Total Quality Management from Jamia
Millia Islamia, New Delhi, India and he has published a good number of papers
in national and international journals. His research interest is related to TQM,
SCM, and industrial engineering. He is guiding researches at postgraduate and
doctorate levels.

1 Introduction

The selection of a good vendor is a strategic decision as the deliveries has a long lasting
effect on the quality of product. It not only satisfies the customer demands and increases
the Industry’s profit but also satisfies various factors like cost, delivery, quality, quantity,
less rework etc. Vendor selection is one of the major factors which affect the quality of
End product very strongly. In today’s highly competitive environment, an effective
supplier selection process is very important to the success of any manufacturing
organisation (Liu et al., 2005). If a vendor performance is of consistently high quality, its
customer can decrease or eliminate costly incoming inspections that add no value to the
product (Evans and Dean, 2002).
Supplier selection and evaluation have become one of the major topics in production
and operations management literature, especially in advanced manufacturing
technologies and environment (Motwani and Youssef, 1999). The analysis of criteria for
selection and measuring the performance of suppliers has been the focus of attention for
many scientists and purchasing practitioners since 1960’s (Tahriri et al., 2008). Cost of
purchasing of raw materials and component parts from external vendors are also very
important. As an example, in automotive industry, costs of components and parts
purchased from external agencies may total more than 50 costs for high technology firms.
It shows the importance of decisions of the purchasing activity (Weber and Current,
1993). The financial crisis led to a steep increase of corporate insolvencies in 2008 and
2009, with an unprecedented large number of high-profile insolvencies and bankruptcies
(e.g., Lehman Brothers, Washington Mutual, General Motors, CIT, Chrysler, Thornburg
Mortgage, Indymac) (Blome and Schoenherr, 2011). The harmful effect of supplier
defaults has been shown by Hendricks and Singhal (2005), who reported a median shrink
in operating income of 31.28% for firms that had experienced a supply problem caused
by vendors. In general, supply interruption costs today are higher than ever before (Aydin
et al., 2011), necessitating the further investigation to vendor development.
The gravity of ‘vendor selection process’ is evident from umpteen number of research
on the issue. Different authors have identified and analysed various factors and applied
different techniques to discuss the issue and provide a solution to the vendor selection.
The work done by the different researchers was of immense help to the authors for
selection of factors in the present paper. However the authors observed that the individual
and interactive effect of factors has not been taken into account during the course of
application of techniques. To predict or compare the vendor performance for a
manufacturing industry, it is necessary to analyse various factors and their effect.
Therefore, a mathematical model is required to correlate the different factors, sub-factors
 Assessment and selection of vendor in a manufacturing organisation 449

to evaluate and compare the vendors for different applications. The present works
undertakes the application of GTA in the vendor selection in manufacturing industry.
Graph theory (Deo, 2000) is one of the methodologies which can provide a solution
to the above problem. Graph theoretic approach (GTA) is a systematic and logical
approach that has been applied in various fields of science and technology (Gandhi and
Agrawal, 1992, 1994; Grover et al., 2004; Venkata Rao and Gandhi, 2002). The matrix
approach is useful in analysing the graph models expeditiously to derive the system
function and index to meet the objectives. Moreover, representation of graph by a matrix
offers ease in computer processing. In view of these, graph theory and matrix methods
are proposed in this paper for the analysis and quantification of various factors,
sub-factors affecting the performance of vendors. This would lead to determination of
single numerical index, which would be useful in assessing and comparing the quality of
vendors.

2 Literature review

2.1 Vendor selection-based literature survey

Vendor selection decisions are complicated by the fact that various criteria must be
considered in the decision making process. In recent years, most of the firms concentrate
on improving their process to present better services to end-customers. So, they have
little interest to enhance the performance of their vendors (Azadeh et al., 2011). The
analysis of criteria for selection and measuring the performance of vendors has been the
focus of many academicians and purchasing practitioners since the 1960’s (Weber et al.,
1991). Different researchers suggested various attributes/factors for the selection of
vendor. In this paper to identify the factors which affecting the vendor selection
significantly the author investigated the factors evaluated by different researchers for
vendor selection are mentioned in Table 1:
Table 1 Factors evaluated by different researchers for vendor selection

S. No. Researchers Attributes/Factors

1 Dickson (1966)
2 Evans (1980)
3 Shipley (1985)
Supplier’s suggested net price, supplier’s qualitative
capabilities, after sales services, supplier’s delivery capabilities,
supplier’s geographical situation, supplier’s financial status,
supplier’s capacity and production facilities, supplier’s
partnership antecedents, supplier’s technical capacity, supplier’s
organisation and management, future potential purchases from
supplier, supplier’s information system, supplier’s operational
control, supplier’s status in related industry, supplier’s
individuals antecedents, supplier’s organisational behaviour,
supplier’s eagerness to cooperate, supplier’s policy of guarantee
and legal claims, supplier’s capability to meet the product
requirements, effects of supplier’s contract on other contracts,
suppliers educational aids corresponding products, supplier’s
adaptation with the purchaser’s procedures and instruments,
supplier’s performance antecedents
Price, quality, delivery rate
Quality, price, delivery lead time
450 M. Singh et al.

Table 1 Factors evaluated by different researchers for vendor selection (continued)

S. No. Researchers Attributes/Factors

4 Ellram (1990) Product quality, offering price, delivery time, service quality
5 Weber et al. (1991) Price, delivery, quality, productive capability
6 Cusumano and Takeishi Finance, price, quality, delivery, technology capability, history
(1991) of business relationship
7 Weber and Current Price, delivery, product quality
(1993)
8 Chaudhry et al.(1993) Quality, capability of delivery, feedback of price
9 Swift (1995) Product, usability, degree of trust, experience, price
10 Choi et al. (1996) Finance, consistency, relationship, flexibility, technological
capability, service, reliability, price
11 Ghodsypour and Brien Cost, quality, service
(1998)
12 Jayaraman et al.(1999) Quality level, production capacity, lead time, storage capacity
13 Lee et al. (2001) Cost, quality, delivery, service
14 Tam and Rao Tummala Proposed quality, cost, problem solving capability, expertise,
(2001) delivery lead time, experience, and reputation
15 Muralidharan et al. Quality, technical facilities, delivery
(2001)
16 Muralidharan et al. Quality, delivery, price, technical capability, financial position,
(2002) past performance attribute, facility, flexibility, service
17 Chan, F.T.S. (2003) Cost, quality, design, performance, technology
18 Prahinski and Benton Quality, delivery performance, price, reaction to demand
(2004) change, service of support
19 Pi and Low (2005) Quality, on-time delivery, price, service
20 Kreng and Wang Cost, quality, reliability of delivery, lead time, delivery on time
(2005)
21 Shyur and Shih (2006) On-time delivery, product quality, price/cost, facility and
technology, responsiveness to customer needs, professionalism
of salesperson, quality of relationship with vendor
22 Chang (2007) R&D, cost, quality, service, response
23 Gencer and Gurpinar Business structure of the supplier, manufacturing capability of
(2007) the supplier, quality system of the supplier
24 Samuel and Keskar Reliability, responsiveness, flexibility, cost and financial, assets
(2007) and infrastructure, safety, environment
25 Chou and Chang (2008) Cost, quality, delivery, organisational culture and strategy,
technical capacity
26 Ha and Krishnan Quality, delivery, management and organisation
(2008)
27 Montazer et al. (2009) Quality, delivery time, price, after sales service, vendor
flexibility, political factors
28 Önüt et al. (2009) Cost, references, quality of the product, delivery time,
institutionality, execution time (years)
29 Zhang et al. (2009) Product quality, service quality, delivery time, price
 Assessment and selection of vendor in a manufacturing organisation 451

Table 1 Factors evaluated by different researchers for vendor selection (continued)

S. No. Researchers Attributes/Factors

30 Boran et al. (2009) Product quality, relationship closeness, delivery performance,
price
31 Lee (2009) Benefits, opportunities, cost, risk
32 Lee et al. (2009) Quality, technology capability, total product life cycle cost,
green image, pollution control, environment management, green
product, green competencies
33 van der Rhee et al. Cost, delivery performance, value-added service/ support,
(2009) flexibility
34 Wu et al. (2009) Management, technical, operational, fixed cost, variable cost
35 Razmi et al. (2009) Price, quality, finish time, company’s rank, company’s
antecedents, company’s economic status
36 Wang and Yang (2009) Net price, delivery lateness, defective rate, quantity discount
rates
37 Chang and Hung Quality, price, delivery performance, service, flexibility
(2010)
38 Bhattacharya et al. Delivery, quality, responsiveness, management, discipline,
(2010) financial position, facility, technical capabilities
39 Sanayei et al. (2010) Product quality, on-time delivery, price/cost, supplier’s
technological level, flexibility
40 Chamodrakas et al. Cost, quality, delivery
(2010)
41 Lin et al. (2010) Delivery management capability, quality management
capability, integrated service capability, price
42 Liao and Kao (2010) Product quality, price, delivery time, service satisfaction,
warrant degree
43 Vinodh et al. (2011) Business improvement, extent of fitness, quality, service, risks
44 Aksoy et al. (2011) Quality, JIT delivery performance, location, price
45 Liao et al. (2011) Relationship closeness, quality of product, delivery capabilities,
warranty level, experience time
46 Khan et al. (2011) Appropriate infrastructure, company size, cost saving, data
protection laws, efficient contract management, efficient
outsourcing relationships management, efficient project
management, financial stability, industry-university linkage,
knowledge exchange, knowledge of the client’s language and
culture, knowledge of the client’s language and culture,
overseas offices, pilot project performance, political stability,
quality of products and services, risk sharing, skilled human
resource, soft deliverable, SPI certification, timely delivery of
the product, vendor’s responsiveness
47 Punniyamoorthy et al. Management and organisation, quality, technical capability,
(2011) production facilities and capacities, financial position, delivery,
services, relationships, safety and environment concern, cost
48 Chen (2011) Quality, cost, delivery time, service, technical and production
capability, relation combination, organisational management
452 M. Singh et al.

Table 1 Factors evaluated by different researchers for vendor selection (continued)

S. No. Researchers Attributes/Factors

49 Buyukozkan and Cifci Organisation, financial performance, service quality,
(2011) technology, social responsibility and environmental
competencies
50 Ozcan Kilincci et al. Financial status, management approach, technical ability,
(2011) quality system and process, geographical location, product
facility and capacity, working with Kanabn approach
51 Zeydan et al. (2011) New project management, supplier management, quality and
environmental management, production process management,
test and inspection management, corrective and preventive
actions management
52 Chang et al. (2011) Product quality, product price, technology ability, service,
delivery performance, stable delivery of goods, lead-time,
reaction to demand, change in time, production capability,
financial situation
53 Amin et al. (2011) Unit cost, quality, percent of on-time delivery, management
stability, mutual trust, strength of geographical location,
international communication
54 Yücel and Güneri Net price, quality, delivery, capacity
(2011)
55 Chen and Chao (2012) Suppliers general conditions, price and delivery, quality,
professional techniques
56 Omurca (2012) Quality management practices and systems, self audit,
process/manufacturing capability, management of the firm,
design and development capabilities, cost reduction capability,
quality performance, delivery performance, cost reduction
performance, other
57 Izadikhah (2012) Price, quality, delivery time, performance history, economic
status, relation with industry

2.2 Graph theory-based literature survey

Graph theoretic approach – history of it’s’ use: It is a systematic methodology consisting
of ‘Digraph representation’, ‘Matrix representation’ and ‘Permanent function’. Permanent
function’ leads to Single Numerical Index. Graph theoretic approach is tool for multiple
utility for application in various fields. The conventional methods of representation are
not suitable for mathematical modelling and analysis. Graph theoretic approach is
suitable for visual analysis and can be computer processed as a mathematical entity.
Several researchers have applied Graph theoretic approach in various fields as shown in
the Table 2. This approach has been used in the determination of performance index of an
organisation, or human or system reliability or determination of Intellectual capital value
index etc.
 Assessment and selection of vendor in a manufacturing organisation 453

Table 2 Applications of GTA

S. no. Field of application Researchers Attributes/Factors

1 Identification and Agrawal and Rao Links and joints.
isomorphism of (1989)
kinematic chains
2 Reliability engineering Gandhi et al. (1991) Reservoir, pump, pressure relief valve,
and system safety metering out unit, control valve, and
actuator.
3 Failure mode effect Gandhi and Agrawal Reservoir, pump, pressure relief valve,
analysis (1992) metering out unit, control valve, and
actuator.
4 System wear evaluation Gandhi and Agrawal Macro and micro geometry, loads,
and analysis (1994) motions, environmental aspects,
interface media, stress state , lubrication
condition, formation of oxide, surface
temperature, and friction
5 System and structural Venkatasamy and Power plant, transmission system,
analysis of the Agrawal (1995) braking system, steering system,
automobile vehicle suspension system, frame and body, and
wheels and tyres.
6 Selection of automobile Venkatasamy and Type of fuel used, fuel consumption,
vehicle for a particular Agrawal (1996) maximum speed, cost, and no. of
application passengers.
7 Evaluation of metal Singh and Sekhon Economical material utilisation, die cost,
stamping layouts (1996) stamping operational cost, required
production rate, job accuracy.
8 Analysis of Gandhi and Agrawal Stress, type of joint, material, problems
failure-causes of a (1996) of welders, external loading including
system environment, and welding condition
9 Quality evaluation of an Venkataswamy and Performance, features, reliability,
automotive vehicle Agrawal (1997) durability, conformance, serviceability,
aesthetics, perceived quality,
maintainability, safety, environmental
impact, life cycle cost.
10 Maintainability index Wani and Gandhi Accessibility, simplicity, disassembly,
for mechanical systems (1999) standardisation, identification,
diagnosability, system environment,
Tribo-concepts, ergonomics, tools and
test equipment, and documentation.
11 Selection of teachers in Venkata Rao and Teaching exp., no. of publications, cost
technical institutions Gandhi (2000) of major projects handled, industrial
exp., foreign assignments
454 M. Singh et al.

Table 2 Applications of GTA (continued)

S. No. Field of application Researchers Attributes/Factors

12 Conceptual design with Al-Hakim et al. Input shaft, input gears, output gears,
functional perspectives (2000) output shaft
13 Machinability Venkata Rao and Grinding ratio, normal force, tangential
evaluation of work Gandhi (2002) force, surface finish, dimensional
materials accuracy, cost per unit volume of ground
14 Failure causes analysis Venkata Rao and Machine tool levelling, type of cutting
of machine tools Gandhi (2002) and the cutting condition,
inhomogenities in the work material,
disturbance in machine tool drives,
cutting process, tool setting and job
holding
15 Coal-based steam Mohan et al. (2003) Fuel system, air system, water system,
power plant main combustion system, flue gas
system, superheated steam system
16 Failure analysis of Seghal et al. (2003) Insufficient lubrication, overload,
Tribo mechanical contaminated lubricant, misaligned bent
systems shaft, pump pr. insufficient, gear seizure,
bearing failure, etc.
17 Quantifying TQM Grover et al. (2004) Behavioural factors, non-behavioural
environment factors, use of tools and
technique/methodologies, human factors,
and functional areas
18 Performance evaluation Kulkarni (2005) Infrastructure, top management support,
of TQM in Indian strategic planning, employee
industries empowerment, and customer satisfaction
19 Human resource Grover et al. (2005) Employee, employer, customer, and
performance index in supplier
TQM environment
20 Human factors in TQM Grover et al. (2006) Top management involvement, work
culture, motivation, innovation, attitude
change, coordination
21 Selection of material Venkata Rao (2006) Ultimate tensile strength, cost of
for an engineering material, density, hardness, thermal
application conductivity and corrosion resistance
22 Selection of industrial Venkata Rao and Purchase cost, load capacity, velocity,
robots Padmanabhan repeatability, number of degrees of
(2006) freedom and man-machine interface
23 Selection, Venkata Rao and Tool life, main cutting force, surface
identification, and Gandhi (2001) finish, cost per unit volume of metal
comparison of metal removed, and cooling capacity
cutting fluids
24 Selection of power Garg, et al. (2006) Capital cost, electricity generation cost,
plants plant load factor
25 Evaluation of flexible Venkata Rao (2006) Total cost involved, floor space required,
manufacturing system number of employees, throughput time,
product mix flexibility, and routing
flexibility
 Assessment and selection of vendor in a manufacturing organisation 455

Table 2 Applications of GTA (continued)

S. No. Field of application Researchers Attributes/Factors

26 Modelling and analysis Durai Prabhakaran Resin system, reinforcement system,
of polymer composite et al. (2006a) processing equipments, tooling system,
products and product design
27 Design of composite Durai Prabhakaran Design for minimal weight, DFE, DFM,
products through et al. (2006b) DFR, design for material inserts, and
concurrent design design for quality
approach
28 Structural modelling Durai Prabhakaran Resin system, reinforcement system,
and analysis of et al. (2006c) processing equipments, tooling system,
composite product and product design
system
29 Selection of rapid Venkata Rao and Dimensional accuracy of the product or
prototype process Padmanabhan part, surface finish of the product or part,
(2007) type of material, material properties,
product or part cost, build envelope,
build time, range of layer thickness, part
size, feature type, feature size, ease of
use, environmental affinity, etc.
30 Mitigation of risk in Faisal et al. (2007) Information sharing, supply chain
supply chain agility, aligning incentives, strategic risk
environment planning, risk sharing supply chain, etc.
31 Selection of Chakladar et al. Tolerance and surface finish, material
non-traditional (2008) removal rate, power requirement, shape
machining processes feature, and work material type
32 Environmental impact Venkata Rao (2008) Solid waste, liquid waste, energy
assessment index consumption, waste water, noise
produced, gaseous emissions
33 Decision making in Bhosle and Basu Simulation cost, maintenance cost,
assessing the cycle cost (2008) operating cost, cost of modularity of
and reliability growth design, acquisition cost, and reliability
of a productive asset effort function
34 Selection of robot based Choudhury et al. General physical, performance, structure,
on an integrated model (2009) application, sophistication, control
encompassing the system, availability, task
manipulator attributes
and manipulator
requirements
35 Selection of advanced Goyal and Grover Initial cost, maintenance cost, annual
manufacturing system (2010) operating cost, reduction in floor area,
product flexibility, product quality
36 Performance evaluation Jangra et al. (2011) Die material, machine tool, tool
of carbide compacting electrode, geometry of die, machining
die manufactured by operation
wire EDM
37 Development and Singh et al. (2012) Leadership, human resource
comparison of quality development, organisational policies and
award planning, organisational output
456 M. Singh et al.

3 Identification of factors

To apply the GTA effectively, it is very important to select the factor properly and for
this an intense literature survey is done as mentioned in Table 2. On the basis of these
factors the GTA can be applied to assess the best vendor. According to the literature
survey the most important factor which affects the vendor selection process in a
manufacturing organisation are as following with their co-factors:
• quality – low defect rate (LDR), commitment to quality (CQ), improved process
capability (IPC)
• cost – unit cost (UC), operating cost (OC), maintenance cost (MC)
• service – on time delivery, quick responsiveness (QR), warranty (WR)
• financial capability – economic performance (EP), financial stability (FS)
• technical and production capability – manufacturing capability (MC), design
capability (DC), capacity utilisation (CU).
Representation of factors in the form of model tree.

Figure 1 Model tree for vendor selection

The factors are general and important in nature and are briefly discussed as under:

3.1 Quality
The term quality has many definitions represented by different researchers time to time.
Here, in context of vendor selection, quality means the good quality material at low cost
supplied by the vendor within the specified time period. The quality of any product is
solely depends on the raw material supplied by the vendor because if the raw material is
 Assessment and selection of vendor in a manufacturing organisation 457

not of meeting the required level expectations then there is no guarantee of good quality
product. So for this reason it is necessary to ensure the quality of raw material supplied
by the vendor that whether they are meeting the required expectations or not? For
ensuring the quality, it is necessary to measure the co-factors of quality like defect rate,
commitment of quality and process capability of the vendor. The material supplied by the
vendor must have minimum defects and the vendor must be committed to quality; CQ
meant for “The vendor must be committed to continuously evaluate their systems,
processes, resources and organisational structure to ensure that they are aligned to
achieve quality result”. And with these it is also necessary to measure the process
capability of the vendor to ensure that the vendor is capable to fulfil your requirements
within the specified period of time properly.

3.2 Cost
Cost is one of the major factor which influencing the vendor selection significantly. In
this competitive environment it becomes awkward for the manufacturing Industries to
remain their stake in the market and earn profits. New companies are introducing in the
market with competitive price. So in this scenario cost of raw material supplied by the
vendor plays an important role in deciding the cost of the product manufactured by the
industry because it is not possible to produce goods at low cost when the raw material
supplied by the vendor is expensive, hence the raw material supplied by the raw material
should also be of low cost. The OC and MC of the material supplied by the vendor also
increases the cost of the product extensively. Operating cost meant for “the cost incurred
in processing/operating the material” and MC meant for “the cost incurred in
maintenance of any facility, equipment or asset”.

3.3 Service
To choose a vendor, it is important to consider the services provided by the vendor before
selection. The services includes on-time delivery, QR and WR of the product. On-time
delivery (OTD) stands for delivering the product or services to the industry within the
specified time. Quick responsiveness stands for response of vendor towards any queries
and complaints raised by the purchaser. The vendor must take care of material/service
during the WR period, and should provide an optimum WR period.

3.4 Financial capability

It is one of the important factor while choosing a vendor. The vendor financial position
must be sound enough so that the vendor fulfils the order properly, without any delay and
at optimum cost. The co-factors of financial capability are: EP, FS. Economic
performance stands for direct economic value generated and distributed, including
revenues, OCs, employee compensation, donations and other community investments,
retained earnings, and payments to capital providers and governments. Financial stability
stands for ability to facilitate and enhance economic processes, manage risks, and absorb
shocks.
458 M. Singh et al.

3.5 Technical and production capability

Before selecting any vendor it is very important to judge the technical and production
capability of the vendor. After evaluation of technical and production capability, the
industry can identify that whether the selected vendor is good enough to complete your
demands or not. The co-factors of technical and production capability are: MC, DC, CU.
Manufacturing capability stands for capability of vendor to manufacture the product
within the specified period of time with the available resources. Design capability stands
for capability of the vendor to design the product according to the demand and to
incorporate latest changes and amendments with time. Capacity utilisation can be defined
as utilisation of all resources, machinery and facilities of vendor in full swing to
manufacture the product.

4 Application of GTA

The value of the vendor quality index is determined using graph – theoretic approach.
The GTA consists of three steps:
1 digraph representation
2 matrix representation
3 permanent function representation.

4.1 Digraph representation

The vendor’s quality digraph represents the significance of factors and interdependence
between them. The nodes (Pi’s) of the digraph represent the vendor’s quality measures of
characteristics and the edges (Pij’s) represent the quality dependence of the
characteristics. The four characteristic quality digraph is shown in Figure 2.

Figure 2 Four characteristic quality digraph

1 1

22
4

3
 Assessment and selection of vendor in a manufacturing organisation 459

4.2 Matrix representation

The digraph representation provides a visual representation which is helpful up to a
limited extent. After digraph representation of factors, now a matrix representing factors
for vendor evaluation is formed. Matrix representation for vendor evaluation gives one to
one representation. This matrix is known as variable permanent matrix.
⎛ P1 P12 P13 P14 ⎞
⎜ ⎟
P21 P2 P23 P24 ⎟
VPM = ⎜
⎜ P31 P32 P3 P34 ⎟
⎜ ⎟
⎝ P41 P42 P43 P4 ⎠

In the given matrix the value of P1, P2, P3 and P4 can be determined by making a digraph
of each factor with their co-factors and the value of interdependcies like P12, P13, P14 etc.,
can be determined with the help of Table 3.
Table 3 Value of interdependency of factors (Pij)

S. No. Qualitative measure of interdependency Assigned value of factor

1 Very strong 5
2 Strong 4
3 Medium 3
4 Weak 2
5 Very weak 1

The value of diagonal elements can also be determined by the Table 4:

Table 4 Value of inheritance of factors (Hi)

S. No. Qualitative measure of factor Assigned value of factor

1 Extremely low 1
2 Low 2
3 Below average 3
4 Average 4
5 Above average 5
6 High 6
7 Extremely high 7

4.3 Permanent function representation

To determine the numerical index, the permanent of the matrix, called as variable
permanent quality function of the industry is used here. The permanent function is
obtained in a similar manner as its determinant but with all signs positive. This
expression is representative of the vendor quality and contains all possible quality terms
of the vendor. The VPF expression corresponds to the four – characteristic digraph/VPM
is given as.
460 M. Singh et al.

VPF = P1 P2 P3 P4
+ p12 p21 P3 P4 + p13 p31 P2 P4 + p14 p41 P2 P3
+ p23 p32 P1 P4 + p24 p42 P1 P3 + p34 p43 P1 P2
+ p12 p23 p31 P4 + p13 p32 p21 P4 + p12 p24 p41 P3
+ p14 p42 p21 P3 + p13 p34 p41 P2 + p14 p43 p31 P2 (1)
+ p23 p34 p42 P1 + p24 p43 p32 P1
+ p12 p21 p34 p43 + p13 p31 p24 p42 + p14 p41 p23 p32
+ p12 p23 p34 p41 + p14 p43 p32 p21 + p13 p34 p42 p21
+ p12 p24 p43 p31 + p14 p42 p23 p31 + p13 p32 p24 p41

The variable permanent function i.e., expression (1) is a complete expression in itself as it
considers all factors and all possible relative interdependencies. Each term in the
expression is useful and all combinations of inheritance/interdependencies of factors and
subfactors are covered. It contains N! terms, where N is number of factors (here N = 4).
Moreover, the terms in permanent function are arranged in a systematic way in N + 1
grouping.
The first group contains only one term and represents the presence of factors for
Vendor assessment i.e., P1 P2 P3 P4.
The second grouping is absent since these are no self-loops i.e., this grouping will
occur in expression only if a factor is connected to itself.
The third grouping contains set of two vendor assessment factor interdependence and
remaining N-2 (i.e., 2 here) factors.
Each term of fourth grouping represents a set of three vendor assessment factor
interdependence and the remaining N-3 (i.e., 1 here) factors.
The fifth grouping contains terms arranged in a two-subgrouping. The first
subgrouping contains a set of two vendor assessment factor interdependence and measure
of remaining N-4 factors. The second subgrouping is a set four vendor assessment factor
interdependence or its pair and measure of remaining N-4 vendor assessment factors.
Thus the permanent function of vendor assessment matrix (i.e., expression one) is a
true representation of measure of vendor assessment factors in an organisations.

4.4 Vendor’s quality digraph

In particular, the five quality characteristics of the vendor form the vendor quality
digraph. As already mentioned, these quality characteristics are: (1) quality, (2) cost, (3)
service, (4) financial capability, (5) technical and production capability. Each node of the
digraph represents the quality measure of the corresponding quality characteristic and the
edge between the two nodes represents the dependence between them. The vendor’s
quality digraph gives the visual representation of the interdependence between the quality
characteristic and shows the complexity of the interdependencies of the characteristics of
the vendor.
 Assessment and selection of vendor in a manufacturing organisation 461

Figure 3 Vendor quality digraph

1
5
3

4.5 Vendor’s quality matrix

The vendor quality matrix according to the vendor quality digraph (also known as
variable permanent matrix; VPM) is as follows:

⎛ P1 P12 P13 P14 P15 ⎞

⎜ ⎟
⎜ P21 P2 P23 P24 P23 ⎟
VPM = ⎜ P31 P32 P3 P34 P35 ⎟
⎜ ⎟
⎜ P41 P42 P43 P4 P45 ⎟
⎜P P52 P53 P54 P5 ⎟⎠
⎝ 51
As explained earlier the diagonal elements represent the quality measure of
characteristics and off diagonal elements represent the quality dependence among the
characteristics. The value of off diagonal elements can be determined by the Table 3,
whereas to determine the value of diagonal elements, the digraph of each quality
characteristics with their co-factors is presented and afterwards by making the variable
permanent matrix the value of quality characteristic can be determined.

4.6 Vendor permanent function representation

To determine the numerical index for vendor assessment, it is necessary to determine the
permanent of vendor quality matrix. The permanent of vendor quality matrix is a
multinomial and a standard matrix function, which has been used and defined in a
combinatorial mathematics (Jurkat and Ryser, 1966). The methodology used for deriving
the permanent function is as similar to determinant calculation but by keeping the all
signs positive. The permanent of a matrix can be determined as under:
462 M. Singh et al.

VPF = PER – P
5
= ∏ P + ∑∑∑∑∑ ( p
1
i
i j k l m
ij p ji )Pk Pl Pm

+ ∑∑∑∑∑ ( p
i j k l m
ij p jk pkl + pik pkj p ji )Pl Pm

⎛
⎜ i∑∑∑∑∑ ( p j k l m
ij p jk ) ( pkl plk )Pm ⎞
⎟
+⎜ ⎟
⎜+
⎜ ∑∑∑∑∑ ⎡⎣( pij p jk pkl pli ) + ( pil plk pkj p ji ) ⎤⎦ Pm ⎟
⎟
⎝ i j k l m ⎠
⎛
⎜ i∑∑∑∑∑ ( p j k l m
ij p ji ) ( pkl plm pmk + pkm pml plk ) ⎞
⎟
+⎜ ⎟
⎜+
⎜ ∑∑∑∑∑ ( pij p jk pkl plm pmi + pim pml plk pkj p ji ) ⎟⎟
⎝ i j k l m ⎠ (2)
Equation (2) contains 5! Terms and these terms are arranged in n + 1 grouping, where n is
the number of elements (factors). Here, n = 5, therefore, six grouping are there.
• The first grouping contains only one term and is a set of effects of five factors i.e.,
P1, P2…P5.
• In general second grouping is absent in absence of self loops.
• The third grouping contains set of two factors interdependence, i.e., pij pji and
measure remaining n-2 (i.e., 3 here) factors.
• Each term of fourth grouping represents a set of three interdependence pij pjk pki or its
pair pik pki pji and measure of remaining n-3 (i.e., 2 here) factors.
• The terms of fifth grouping are arranged in two subgroups. The first sub-grouping is
a set of two, 2-factors interdependence, i.e., pijpji and pklplk and measure of remaining
n-4 factors. The second sub-grouping is a set of four factor interdependence, i.e.,
pijpjkpklpli or its pair pilplkpkjpji and measure of n-4 factors.
• The terms of sixth grouping are also arranged in two subgroups. The first sub
grouping is a set of two factors interdependence, i.e., pijpji, a set of three factor
independence, i.e., pklplmpmk or its pair pkmpmlplk. The second sub-grouping is a set of
five factor interdependence, i.e., pijpjkpklplmpmi or its pair pimpmlplkpkjpji.

4.6.1 Quality-based digraph

In the vendor quality matrix the diagonal element P1 represent the Quality characteristic
namely ‘Quality’. The characteristic quality is having three co-factors namely: LDR, CQ,
IPC. The digraph of the characteristic ‘Quality’ is shown below:
 Assessment and selection of vendor in a manufacturing organisation 463

Figure 4 Quality-based digraph

LDR
(H3)

Quality 
CQ (H1) IPC

On the basis of quality-based digraph the variable permanent matrix is developed to

determine the value of quality characteristic.
⎛ H1 H12 H13 H14 ⎞
⎜ ⎟
H 21 H2 H 23 H 24 ⎟
VPM − P1 = ⎜
⎜ H 31 H 32 H3 H 34 ⎟
⎜ ⎟
⎝ H 41 H 42 0 H4 ⎠

Now,
⎛7 4 5 2⎞
⎜ ⎟
3 5 4 2⎟
VPM − P1 = ⎜
⎜4 2 4 1⎟
⎜ ⎟
⎝3 3 0 2⎠
VPM − P1 − 1908

Similarly make the digraph for other quality characteristic like P2, P3, P4 and P5 and also
represent their variable permanent matrices to determine the value of quality
characteristic.

4.6.2 Cost-based digraph

The co-factor of quality characteristic cost are: OC, UC, MC

Figure 5 Cost-based digraph

OC (C3)

 UC (C2)  COST (C1)  MC(C4)

Variable permanent matrix for cost

464 M. Singh et al.

⎛ C1 0 0 0 ⎞
⎜ ⎟
C21 C2 0 0 ⎟
VPM − P2 = ⎜
⎜ C31 0 C3 0 ⎟
⎜ ⎟
⎝ C41 0 0 C4 ⎠

⎛ 5 0 0 0⎞
⎜ ⎟
⎜ 4 6 0 0⎟
VPM − P2 =
⎜ 3 0 4 0⎟
⎜ ⎟
⎝ 2 0 0 3⎠
VPM − P2 = 360

4.6.3 Service-based digraph

The co-factor of quality characteristic service are: OTD, QR, WR

Figure 6 Service-based digraph

 QR (S3)

SERVICE 
 OTD(S2)  (S1)  WR (S4)

Variable permanent matrix for service

⎛ S1 S12 S13 S14 ⎞
⎜ ⎟
S21 S2 S23 0 ⎟
VPM − P3 = ⎜
⎜ S31 S32 S3 S34 ⎟
⎜ ⎟
⎝ S41 0 S43 S4 ⎠

⎛6 4 3 5⎞
⎜ ⎟
4 5 4 0⎟
VPM − P3 = ⎜
⎜ 3 5 5 2⎟
⎜ ⎟
⎝3 0 1 3⎠
VPM − P3 = 2637

4.6.4 Financial capability-based digraph

The co-factor of quality characteristic financial capability are: EP, FS.
 Assessment and selection of vendor in a manufacturing organisation 465

Figure 7 Financial capability-based digraph

EP (F2) FS (F3)

Financial 
Capability (F1) 

Variable permanent matrix for financial capability

⎛ F1 F12 F13 ⎞
⎜ ⎟
VPM − P4 = ⎜ F21 F2 F23 ⎟
⎜F F32 FS3 ⎟⎠
⎝ 31

⎛ 7 5 6⎞
⎜ ⎟
VPM − P4 = ⎜ 4 4 3 ⎟
⎜5 2 5⎟
⎝ ⎠
VPM − P4 = 525

4.6.5 Technical and production capability-based digraph

The co-factor of quality characteristic technical and production capability are: MMC,
DC, CU)

Figure 8 Technical and production capability-based digraph

DC (T3)

Technical & Production 
MMC (T2)  CU (T4)
Capability  (T1) 

Variable permanent matrix for technical & production capability

⎛ T1 T12 0 T14 ⎞
⎜ ⎟
T21 T2 0 T24 ⎟
VPM − P5 = ⎜
⎜ T31 T32 T3 T34 ⎟
⎜ ⎟
⎝ T41 T42 T43 T4 ⎠
466 M. Singh et al.

⎛4 5 0 1⎞
⎜ ⎟
3 6 0 3⎟
VPM − P5 = ⎜
⎜3 2 6 4⎟
⎜ ⎟
⎝4 2 2 4⎠
VPM − P5 = 2118

After deriving the value of P1, P2, P3, P4 and P5, substitute these values in the vendor’s
quality matrix to determine the quality index of vendor’s quality.

⎛ P1 P12 0 P14 0 ⎞
⎜ ⎟
⎜ P21 P2 0 0 0 ⎟
VPM = ⎜ P31 P32 P3 0 P35 ⎟
⎜ ⎟
⎜ P41 P42 P43 P4 P45 ⎟
⎜P P52 0 P54 P5 ⎟⎠
⎝ 51

⎛1908 3 0 5 ⎞ 0
⎜ ⎟
⎜3 360 0 0 ⎟ 0
VPM = ⎜ 5 3 2637 0 ⎟ 1
⎜ ⎟
⎜3 2 2 525⎟ 3
⎜3 1 0 2 2118 ⎟⎠
⎝
VPM = 2.01415e + 15

5 Conclusions, limitations and future work

In this paper, a methodology for evaluation of vendor’s quality is proposed using a

digraph and matrix method. It is a very useful tool for rating the vendor performance in
terms of a numerical index. The highlights of the paper are as follows:
• It identifies five quality characteristics to parameterise vendor’s performance in a
manufacturing industry namely: quality, cost, service, financial capability, technical
& production capability.
• A model tree is developed showing factors and co-factors affecting selection of a
vendor.
• The graph theoretical methodology consists of the digraph representation, matrix
representation and permanent function representation. The digraph is the visual
representation of the quality characteristics and their interdependence. The matrix is
the mathematical conversion of the digraph to reduce the complexity and permanent
function is the mathematical model, which helps in determining the numerical index.
Hence, this approach representing the rating of vendor’s quality in quantitative
terms. Thus the methodology is helpful in comparing different vendor on the basis of
their performance.
• The decision made on the basis of this approach is more precise and chances for
wrong selection of vendor is reduced.
 Assessment and selection of vendor in a manufacturing organisation 467

• It represented 37 papers of various researchers using GTA and factors considered by

them for the application GTA.
• It also represented 57 papers of various researchers to identify the important factors
and co-factors for vendor selection.
• The paper covered a good number of research papers during literature survey, so it is
beneficial for others to understand the contributions of numerous researchers.
• 37% of companies surveyed indicated that they had failed to achieve any increase in
revenue after focusing on vendor quality. However, 34% reported an increase of
1–5%, 17% reported 5–10% increase, 9% reported 11–20% increase and 3%
reported more than 20% increase in revenue (Shahabuddin, 2011).
• The GTA can also be applied in combination with other approaches like analytic
hierarchy process to make the selection process more and more precise.

Acknowledgements

I would like to thank the reviewers of IJLSM for their helpful suggestions and to make
this paper valuable.

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