Abstract
Recently, outsourcing has played an important role in manufacturing strategy while enterprises have paid more attention to their own core competence. Particularly, specialized outsourcing not only lowers manufacturing costs of the overall supply chain but also further reduces production risk, shortens cycle time, and improve quality to ensure the ultimate objective of long-term profitability and sustainable operation. Thus, the vendor selection and order allocation (VSOA) becomes a well-known and critical problem. The vendor selection and order allocation problem simultaneously considers many complicated factors and qualitative and quantitative attributes. It is indeed a highly complex semi-structured problem. Added to this, the outsourcing process in a real environment always exists uncertainty and vagueness which makes the decision-making more difficult. This research incorporates multi-criteria decision analysis with portfolio optimization to construct a decision framework for the vendor selection and order allocation problem with performance and risk evaluation under delivery uncertainty. The objective of the proposed framework is to allocate appropriate orders to proper vendor and make effective tradeoff among the performance, risk and cost objectives. The methodologies of this research framework include decision analysis, feature selection, performance evaluation, risk identification and quantification, portfolio optimization, and simulation output analysis. Finally, a robust solution can be generated to assist in decision-making via step by step analysis. We conduct a numerical study to illustrate and validate the proposed framework. The result shows that suggested order allocation can take higher performance, minimize total cost, and achieve risk diversification.