A mathematical programming approach for supplier selection using Activity Based Costing.

Abstract

Vendor selection is an important problem in today's competitive environment . Decisions involve the selection of vendors and the determination of order quantities to be placed with the selected vendors. In this research we develop a mathematical programming model for this purpose using an Activity Based Costing approach. The system computes the total cost of ownership, thereby increasing the objectivity in the selection process and giving the opportunity for different kinds of sensitivity analysis. Moreover, it allow the analyst to objectively evaluate alternative purchasing policies due to the underlying analytic and rigorous decision model.Activity based costing; Mathematical programming; Selection;