Promethee II for Selection of Carrier in Supply Chain

Abstract

The challenge for supply chain in the prevailing scenario is to attain competitive superiority in the long run. It can be achieved through manufacturing excellence, supply chain coordination and logistical competency. Therefore, logistics plays a significant role in every supply chain. The two major transportation decisions in the supply chain are: choice of the mode of transportation and carrier selection. While selecting the carrier in the supply chain for any logistics function both the qualitative and the quantitative factors has to be taken into consideration. Hence, there is need for a complete and structured methodology for selecting a carrier. This paper describes an efficient methodology ‘Promethee II’ for carrier selection in supply chain.

In order to survive in the global competition and to sustain the long-term advantages, more and more enterprises have introduced Supply Chain Management (SCM) (Felix et al., 2003). From the beginning of this decade, this subject has been studied, practiced and reported in the literature. According to Mentzer et al. (2001), eventhough in its infancy still it is a very popular development area among companies. Literature on supply chain management recommends that firms should concentrate on their core competencies and outsource other activities (Handfield and Nichols, 1999). For most of the firms, logistics is not considered to be a core competency. Prahalad and Hamel (1990) define core competence as “the collective learning in the organization, especially how to coordinate diverse production skills and integrate multiple streams of technologies”. A manager responsible for making ‘logistics outsourcing’ decision must develop a true sense of what the core competence of the organization is and whether the product/activity/ service under consideration is an integral part of that core competence. A key service that is closely interrelated with the firms competence would more likely be reflected in a favorable ‘insourcing’ decision, rather than an ‘outsourcing’ decision. If a firm by mistake outsourcers a core competence, it may loose its competitive advantage. Therefore, a core competency is not just something a company does well but it is a combination of capabilities that is unique (a strong differentiator for your business), is durable (hard for your competitors to imitate), and is extensive (delivering significant value to your company). Most companies justify their choice to logistics outsourcing for more than one of the following primary reasons, i.e., focus on core business, improved capital utilization, supply chain cost reduction and improved customer service. Thus, transportation activities are often subject to outsourcing. It moves the raw materials, semi-finished products and finished products between the different members of the supply chain.