Machine learning techniques and multi-objective programming to select the best suppliers and determine the orders

Abstract

Selection of appropriate suppliers and allocation the orders among them have become the two key strategic decisions regarding purchasing. In this study, a two-phase integrated approach is proposed for solving supplier selection and order allocation problems. Phase 1 contains four techniques from statistics and Machine Learning (ML), including Auto-Regressive Integrated Moving Average, Random Forest, Gradient Boosting Regression, and Long Short-term Memory for forecasting the demands, using large amounts of real historical data. In Phase 2, suppliers’ qualitative weights are determined by a fuzzy logic model. Then, a new multi-objective programming model is designed, considering multiple periods and products. In this phase, the results of Phase 1 and the results of the fuzzy model are utilized as inputs for the multi-objective model. The weighted-sum method is applied for solving the multi-objective model. The results show Random Forest model leads to more accurate predictions than the other examined models in this study. In addition, based on the results, the selection of the forecasting techniques and different weights of suppliers affect both supplier selection and the related orders.