Supplier selection is a critical decision in supply chain management. Although organizations devote significant resources to establish detailed operating plans with suppliers, a few have developed mature risk management programs to deal with supplier failures. Past performances and survey data indicate that supplier failures are common. Supplier selection should include considerations for supplier risks. Different suppliers provide different levels of risk for an organization. Failure Mode and Effects Analysis (FMEA) is a well-established technique for evaluating and prioritizing risks. This paper seeks to provide a tool to help supply chain decision makers evaluate various supplier options by quantifying the risks associated with each supplier.

In today's global environment, many organizations utilize outsourcing as a strategic part of their business operations. Outsourcing allows an organization to concentrate their internal resources on their core competency, while leveraging the skills of their suppliers to improve their support functions. Once the decision to outsource is made, suppliers must be selected to accomplish the outsourcing function. Supplier selection is one of the primary keys to successful supply chain management. Many organizations have pursued a reduced supplier base or even sole sourcing. Using multiple suppliers for a given product or service compromises an organization's ability to capitalize on economy of scale through volume purchases. A single supplier reduces variation in the product or service being delivered, since there is only one source for delivery. There is a great deal of literature devoted to the subject and many techniques have been developed to support the supplier selection process. When selecting a supplier, many factors must be considered. Certainly, purchase price is a major consideration, because it has such a significant impact on final product cost. However, other factors are also considered. Quality, Lead time and Service are often identified as decision factors along with cost (Liao and Kao, 2010). Selecting the `right' supplier is a strategic supply chain decision that has a major impact on the overall success or failure of the supply chain. Several methods have been developed to aide in supplier selection. A brief summary of common models is detailed below.

Each supplier's performance is evaluated in categorical terms such as `good', `fair', or `poor' as related to various attributes. The supplier receiving the most `good' ratings is selected. This procedure is very easy to implement, but has shortcomings. Each attribute is weighted equally. In reality, some attributes are more important than others. The evaluation process is subjective, not quantitative and is based entirely on the opinion of the evaluator.

Supply Chain Management Journal, Supply Chain Management, Weighted Point Model, Monte Carlo Simulation, Business Plans, Supply Chain Risk Program, Vendor Relationship Management, Business Goal Attainment, Analytical Techniques, Decision Makers, Risk Reduction Efforts.