Supplier selection becomes difficult when procurement teams must balance price, quality, delivery reliability, capacity, and service at the same time. This TOPSIS example shows how a structured ranking can turn competing supplier data into a clear recommendation.
The decision is to select the best supplier for a mid-sized manufacturing company that needs dependable materials for recurring production orders. The choice matters because a low purchase price can create hidden costs when quality or delivery performance is weak.
Criteria used in the decision
- Unit cost: measures purchase price and procurement spend.
- Quality score: reflects defect risk and consistency.
- On-time delivery: indicates reliability against promised dates.
- Production capacity: shows whether demand growth can be supported.
- Service responsiveness: captures communication and issue resolution.
Input data
The analysis uses a five-supplier decision matrix. A compact sample is shown below:
| Supplier | Cost | Quality | On-time % | Capacity | Service |
|---|---|---|---|---|---|
| A | 48 | 86 | 91 | 72 | 80 |
| B | 52 | 92 | 95 | 84 | 88 |
| C | 45 | 79 | 87 | 90 | 76 |
Cost is treated as a cost criterion; quality, delivery, capacity, and service are benefit criteria. The illustrative weights are 0.25, 0.25, 0.20, 0.15, and 0.15.
Running the TOPSIS analysis
The decision matrix was entered and evaluated in the TOPSIS software on OnlineOutput. The software normalizes the criteria, applies the weights, calculates distance from the ideal and negative-ideal solutions, and produces a closeness score.
Result and interpretation
| Rank | Supplier | TOPSIS score | Interpretation |
|---|---|---|---|
| 1 | Supplier B | 0.782 | Best overall balance |
| 2 | Supplier A | 0.541 | Competitive, but lower capacity |
| 3 | Supplier C | 0.418 | Low cost offset by weaker quality and delivery |
Supplier B ranks first because it performs consistently across the most important criteria, even though it is not the cheapest option. TOPSIS identifies the alternative closest to the ideal combination rather than the alternative that wins on only one measure. Validate contract terms, risk exposure, and availability before making a final commitment.
Download the online result · Download the Excel file · Download the Word file
Practical takeaway
For similar supplier, vendor, or logistics decisions, define measurable criteria first and label each as a cost or benefit. Test alternative weights so the ranking reflects business priorities rather than a single attractive number.
FAQ
Why is TOPSIS suitable for supplier selection?
It compares alternatives across multiple cost and benefit criteria and identifies the option closest to the ideal solution.
Can I change the criteria weights?
Yes. Weight changes support sensitivity analysis when priorities differ.
How many suppliers can I compare?
You can compare as many alternatives as your decision matrix supports.
Does the highest score guarantee the final contract?
No. Due diligence, risk checks, and negotiations remain necessary.
Continue with TOPSIS
Try the TOPSIS software or read the complete TOPSIS method guide.
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