Environmentally Friendly Supplier Selection Using Prospect Theory

An Integrated Multi-Criteria Decision-Making Model Based on Prospect Theory for Green Supplier Selection under Uncertain Environment: A Case Study of the Thailand Palm Oil Products Industry

Environmental concerns have globally driven the encouragement of green supply chain management. Accordingly, business and industrial organizations try to seek green supply chain strategies to respond to market pressure regarding corporate social responsibility. Green supplier selection is one of the practical strategies for modern enterprises. With the large-scale development of the palm oil products industry, green supplier selection technique is the key for decision making when dealing with mass information and possible risks of biased data. For instance, the preference of decision makers possibly causes a misleading decision, thus leading to unnecessary waste of resources. Therefore, the contribution of this paper is to apply the integrated multi-criteria decision method using the ‘fuzzy decision-making trial and evaluation laboratory’ (fuzzy DEMATEL) method to consider the cause and effect relationship and then using fuzzy analytic network process (fuzzy ANP) to assign the weight of each relevant criteria. The initial results are useful for strategic procurement planning. In the final step, we adopt the prospect theory to synthesize procurement’s psychological and behavioral factors when selecting green suppliers. The final result refers to the comprehensive prospect value to rank the eligible suppliers into orders. Moreover, the results of both sensitivity analysis and comparison method confirm that the proposed model is adequately realistic and robust.