System dynamics model: developing model for supplier selection with a focus on CSR criteria

Abstract

The complexity and significance of decision-making in selecting suppliers highlight the need for a systematic and transparent approach. The more organizations rely on suppliers, the more harmful the direct and indirect consequences of poor decision-making are. This study attempted to identify factors affecting supplier selection and develop a system dynamics model for supplier selection by taking into account social corporate responsibility (CSR) practices. This model aims to increase CSR practices when selecting suppliers and thus help supply chain members gain competitive power and satisfy customer demands optimally. The system dynamics model for supplier selection was developed by considering profitability, productivity, social transparency, and customer satisfaction. To this end, first, the indicators affecting supplier selection were identified. Then, a cause–effect model was extracted by surveying subject-matter experts. Finally, the system dynamics model was developed. The final output of the third stage was a dynamic model of a supplier selection system that considers CSR practices. The results showed that profitability increases only by implementing the policy of reducing the average distance between suppliers and increasing the number of suppliers. This issue causes lower costs, reduced delivery time due to reduced average distance between suppliers, and increased suppliers, resulting in increased customer satisfaction and increased demand.