Literature review on MCDM methods application in SC 

Over the last decade, a large number of research papers, certified courses, professional development programs and scientific conferences have addressed SCM, thereby attesting to its significance and importance. SCM is a multi-criteria decision making (MCDM) problem because, throughout its process, different criteria related to each SC activity and their associated sub-criteria must be considered. Often, these criteria are conflicting in nature. For their part, MCDM methods have also attracted significant attention among researchers and practitioners in the field of SCM. The aim of this chapter is to conduct a systematic literature review of published journal articles in the application of MCDM methods in SCM decisions at the strategic, tactical and operational levels. This review considers major SC activities, such as supplier selection, manufacturing, warehousing, logistics, and integrated SC. A total of 111 published articles (from 2005 to 2015) were studied and categorized, and gaps in the literature were identified. This review is useful for academic researchers, decision makers, and experts to whom it will provide a better understanding of the application of MCDM methods in SCM, at various levels of the decision-making process, and establish guidelines for selecting an appropriate MCDM method for managing SC activities at different levels of decision-making and under uncertainty.

SCM is crucial in today’s competitive environment and is steadily gaining serious research attention. Companies are facing challenges in discovering ways to fulfill everrising customer expectations and remain competitive in the market while keeping costs manageable. To that end, they must carry out investigations to isolate inefficiencies in their SC processes.

From a practitioner perspective, an Accenture report (Accenture, 2010), realized in collaboration with Stanford and INSEAD, and covering a survey of executives, indicated that 89% of them found SCM to be critically important or very important. Moreover, SCM is gaining steadily in importance, with 51% of the executives stating that their investments in the area had increased significantly over the past three years. Over the last two decades, SCM has received a substantial amount of attention from academics and practitioners (Tyagi et al., 2015). To cope with new elements of the business environment, SC managers must develop new perspectives with respect to the management of SC functions (Ralston, Blackhurst, Cantor, & Crum, 2015) .

SCM: definitions and evolution

The SC structure and SCM have attracted a great deal of attention from many researchers over the last few years, and impact corporate efficiency. According to James (2011), a literature review plays an important role in SC theory and practice research. The literature indicates that the term SCM was initially coined in the late 1980s, and gained currency in the 1990s. Previous to that, organizations used terms such as logistics and operations management to convey the phenomenon. An alternative more general approach includes the raw materials producer and closes the chain with feedback from customers. (Min & Mentzer, 2004) considered information systems management, make-or-buy decisions, inventory management, order processing, production scheduling, warehousing, and customer service level in their definition. Bechtel & Jayaram (1997) mentioned that the concept of SC includes the flow of information and materials, which starts with suppliers and ends with customers. Based on the preceding, it is clear that supplies chains are complex, and as a result, managing them effectively therefore necessarily requires having a full handle on that complexity.

Another approach defines SCM in terms of different DM levels, namely, strategic, tactical and operational, and indicates that this DM of all scales optimizes SC performance. On the other hand, traditional SC can be defined as a network which consists of suppliers, manufacturing facilities, distribution centers from which we procure raw materials, converted into finished good and deliver it to end user (Fox et al., 2000). Certain differences exist between SCM and traditional logistics. Traditional logistics consists of actions that usually occur inside single organization boundaries, while SCM essentially defines a network of different companies working in coordination, with their main goal being to deliver finished products to customers. In addition, traditional logistics emphasizes SC functions, including purchasing, distribution and inventory management.

SCM includes all the components of traditional logistics, but also tags on actions such as new product development, finance, marketing, and customer service (Glykas, 2011).

In the early 1970s, the major concerns for decision makers and managers were increasing the work in process inventory, challenges associated with new product development, maintaining a high quality of products, and pressure to meet delivery deadlines. Several authors have highlighted many factors as being at the root of these concerns, but the literature shows that the main reason was the introduction of Manufacturing Resource Planning (MRP II). According to Daugherty (2011), in the 1980s, organizations dealt with increased demand for “better, faster, cheaper logistical service.” As a result, many manufacturers outsourced their logistics activities in order to be able to focus more on their core business and activities. This increased the level of uncertainty as compared to what obtained in the previous years. SCM got a boost after the introduction of Enterprise Resource Planning (ERP) in the 1990s, due mainly to the buyer-supplier relationship. However, the literature contains many entries (e.g., https://www.ukessays.com/contact/press.php) indicating that the Information Technology (IT) planning systems that had previously been used had only focused on internal organizations, while ERP systems focused mainly on intra-organizational integration. Due to advances in IT, the development of more refined systems (Internet-based solution systems) ideal for inter-organizational and intra-organizational integration minimized communication gaps and improved visibility. Today, the relationship between buyers and suppliers has moved one step ahead, and the focus of organizations has now evolved from regular partnerships to long-term relationships and strategic alliances: they now share both technology and risk in product development, which minimizes fluctuations in demand and promotes the partnership.

The latest trend in SC evolution is globalization with highly connected international SC networks. These phenomena lead to the creation of Global SCs subject to different disruptions events. Disruptions are defined as unplanned events that hamper the SC system (Yang et al., 2017). Today, the supplier-buyer and supplier-distributor relations are not limited by national boundaries, and the global SCM concept has now been introduced into the SC literature. Being competitive in the market now requires an integrated SC. In many developed economies, competition has switched from “firm to firm” to “chain to chain” (Koh, Demirbag, Bayraktar, Tatoglu, & Zaim, 2007), and that, in a nutshell, attests to how the SCM has evolved over the past decades.

MCDM in SCM

An organization’s strategic, tactical and operational decision-making plays a vital role in ensuring that its SC is operating efficiently, allowing it to achieve the highest levels of customer satisfaction at an optimum cost. Decision-making at each level should focus on gaining a competitive edge and increasing market share. At each level, the nature of decision-making as well as and the related activities are different, as explained below.

Strategic SC decisions are taken by the company’s upper management and apply to the whole organization. SC decisions at this level should reflect the overall corporate strategy set by upper management, and form the long-term foundation for the organization’s whole SC. In order to develop an efficient process, strategic-level decision-making respecting the SC is the first step in the right direction. At this level, decisions relating to the following are usually addressed (www.procurementbulletin.com).

At the tactical level, organizations make short-term decisions related to the SC. Generally, standard planning begins at the strategic level, but actual processes are defined at the tactical level. Decisions made at the tactical level are vital for controlling costs and minimizing overall risk. The main focus at this decision-making level is on fulfilling customer demand in a cost-effective manner.