Bootstrap approach for supplier selection based on production yield

Abstract

Current manufacturing industries have increased their level of out-sourcing and relied more heavily on their supply chain as a source of competitive advantage. Supplier selection decisions have become an important component of production management. Those decisions have a significant impact on a firm's marketing competition, and suppliers may account for a large portion of the production cost. Production quality is one of the key factors in supplier evaluation. The manual of supplier certification includes a discussion of process capability analysis, which recommends a procedure for evaluating the most prevalent process capability index Cpk. However, the recommended procedure is applicable only when evaluating an individual supplier's performance. In this paper, we apply the bootstrap method to the supplier selection problem. We construct lower confidence intervals for the capability difference and ratio between two given suppliers. Performance comparisons are made among various bootstrap methods in terms of error probability and selection power. For convenience of applications, the sample sizes required for various designated selection power are also tabulated.