Choosing a supplier is a multi-criteria decision: the lowest price is not always the best business choice. This TOPSIS example shows how a supply-chain team can rank suppliers using a balanced set of operational criteria.
Decision context
The decision is to select the most suitable supplier for a manufacturing company that needs reliable materials at a competitive total cost. The choice matters because supplier performance directly affects production continuity, working capital, and customer service.
Criteria and alternatives
- Cost: lower purchasing and logistics cost improves total value.
- Quality: fewer defects reduce rework, returns, and production interruptions.
- Delivery reliability: dependable lead times protect the production schedule.
- Capacity: available volume supports demand growth and peak periods.
- Service: responsive communication and after-sales support reduce coordination risk.
Alternatives: Supplier A, Supplier B, Supplier C, and Supplier D.
Input data
The decision matrix below shows a compact sample of the inputs used in the analysis. Cost is a cost criterion; the other measures are benefit criteria.
| Supplier | Cost | Quality | Delivery | Capacity |
|---|---|---|---|---|
| A | 78 | 82 | 80 | 75 |
| B | 85 | 88 | 86 | 82 |
| C | 72 | 76 | 74 | 80 |
| D | 80 | 84 | 82 | 78 |
TOPSIS execution
The analysis was executed in the TOPSIS software on OnlineOutput.com. The method normalizes the matrix, applies criterion weights, measures each supplier’s distance from the ideal and anti-ideal solutions, and calculates a closeness coefficient.
Result and interpretation
The final software output is summarized below:
| Rank | Supplier | Closeness coefficient | Interpretation |
|---|---|---|---|
| 1 | Supplier B | 0.781 | Best overall balance |
| 2 | Supplier D | 0.612 | Strong alternative |
| 3 | Supplier A | 0.488 | Moderate performance |
| 4 | Supplier C | 0.301 | Weakest overall fit |
Supplier B ranks first because it is closest to the ideal solution across the weighted criteria. Although it is not the cheapest option, its stronger quality, delivery reliability, capacity, and service profile create the best overall trade-off. Supplier D is a credible backup, while Supplier C would need targeted improvement before selection.
Downloads: Online result · Excel download · Word download
Practical takeaway
This example shows how TOPSIS turns a vague supplier discussion into a transparent ranking supported by explicit criteria and weights. For similar problems, define benefit and cost criteria carefully, validate the weights with decision-makers, and test whether small weight changes alter the ranking.
FAQ
Why is the cheapest supplier not automatically ranked first?
TOPSIS evaluates each supplier against all weighted criteria, so a slightly higher cost can be justified by better quality, delivery, capacity, or service.
Which criteria can be used for supplier selection?
Common criteria include cost, quality, delivery reliability, capacity, flexibility, sustainability, and service. The final set should reflect the organization’s priorities.
Can TOPSIS handle both cost and benefit criteria?
Yes. TOPSIS can normalize cost criteria so lower values are preferred and benefit criteria so higher values are preferred.
Where can I run this supplier-selection analysis?
You can run it in the TOPSIS software and learn the underlying approach on the TOPSIS method page.
Run your own analysis
Start with the TOPSIS software, then review the TOPSIS method guide to build and interpret your own decision model.