Optimizing Supplier diversity and risk management through a multi-criteria decision-making framework in strategic procurement

Project Abstract

In the face of globalized supply chains and increasing environmental, social, and governance expectations, organizations confront heightened supplier-related risks that can disrupt operations, inflate costs, and erode competitiveness. This study develops a comprehensive decision-support framework that optimizes supplier diversity and risk management through a rigorous multi-criteria decision-making (MCDM) approach integrated with strategic procurement processes. The research identifies key diversity dimensions—geographic spread, minority and women-owned enterprises, supplier capabilities, and innovation potential—and aligns them with risk indicators such as supply disruption probability, financial stability, compliance, ESG performance, and cybersecurity posture. A mixed-methods design combines qualitative insights from procurement practitioners with quantitative data from supplier performance records, market analyses, and risk registers to construct a hierarchically structured decision model. The core methodological contribution is the synthesis of Analytic Network Process (ANP) and Technique for Order of Preference by Similarity to Ideal Solution (TOPSIS) within a dynamic procurement framework, enabling explicit trade-offs between diversity goals and risk mitigation outcomes. The model supports supplier selection, segmentation, and development strategies by generating robust rankings, sensitivity analyses, and scenario planning under varying market conditions and policy requirements. The research introduces a practitioner-oriented scoring schema for diversity readiness and risk exposure, incorporating probabilistic risk assessment with deterministic MCDM outcomes to produce implementable procurement roadmaps. An empirical validation is conducted through a multi-case study across manufacturing and logistics sectors, accompanied by a simulation engine that tests resilience under supplier bankruptcy, geopolitical shocks, and demand volatility. Findings demonstrate that a diversified supplier base, when guided by an MCDM framework that foregrounds risk-adjusted diversity metrics, significantly lowers total cost of ownership, shortens lead times, enhances supply chain resilience, and improves ESG compliance. The framework also reveals nuanced insights, such as the diminishing marginal risk-reduction benefits of diversification beyond a critical threshold and the importance of early supplier development programs to maximize the value of diverse sourcing. Practical contributions include a step-by-step implementation guide, data collection templates, and an adaptable scoring card suitable for periodic updates. The study discusses governance implications, including alignment with corporate strategy, procurement policies, supplier code of conduct, and cross-functional collaboration with risk, sustainability, and supplier relationship management teams. Limitations are acknowledged regarding data availability, sectoral specificity, and potential model complexity for smaller organizations, with recommendations for simplification and modular deployment. The abstract concludes by outlining future research directions, such as integrating real-time supplier risk streams, incorporating circular economy metrics, and extending the framework to encompass global trade compliance and dynamic supplier collaboration models. Overall, the research advances a robust, transparent, and scalable approach to optimizing supplier diversity while maintaining rigorous risk controls within strategic procurement.

Project Overview

What This Project Is About

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A plain-language overview of how organizations choose and manage suppliers, balancing who they buy from with how risky those choices are. The project explores how multiple factors like cost, quality, delivery reliability, supplier diversity, and risk indicators can be considered together to make smarter procurement decisions.

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The Problem It Addresses

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In many organizations, supplier decisions rely on single factors or gut feeling, which can lead to reliance on a few vendors, hidden risks, and missed opportunities for diverse sourcing. This project studies how to combine several evaluation factors to reduce risk and improve resilience while supporting inclusive supplier practices.

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Objectives of the Project

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1. Explain key concepts of supplier diversity and risk management in procurement.
2. Identify a set of criteria that influence supplier selection.
3. Demonstrate how a multi-criteria decision-making approach can balance competing goals.
4. Develop a simple framework or model that practitioners can apply to real cases.
5. Assess potential benefits and limitations of the framework in a real organization.

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What You Will Do Step by Step

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1) Review basic procurement concepts and relevant literature in plain terms.

2) List and define the evaluation criteria (cost, quality, lead time, diversity, risk exposure).

3) Choose a basic multi-criteria method and adapt it to procurement settings.

4) Create a small dataset from a hypothetical or real procurement scenario.

5) Apply the method to rank supplier options and interpret results.

6) Discuss how results would inform supplier selection and policy decisions.

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Expected Outcome

A clear, easy-to-use decision framework that helps managers choose suppliers more reliably while promoting diversity and mitigating risk. The project should produce practical guidelines and a simple example that can be applied in organizations with limited data and resources.