The SIJ Transactions on Industrial, Financial & Business Management (IFBM), Vol. 1, No. 1, March-April 2013 ISSN: 2321 – 242X © 2013 | Published by The Standard International Journals (The SIJ) 18 Abstract—Supplier selection is a important issue in supply chain management. The manufacturer‟s spends more than 60% of its total sales in on purchased items. In today‟s highly competitive global operating environment, it is impossible to produce low-cost, high quality products successfully without satisfactory suppliers. Therefore selecting a supplier is a tremendous importance. Decision maker always consider many criteria in supplier selection problem to find their best supplier. Hence supplier selection problem belong to Multi Criteria Decision Making (MCDM).There are many tools to select a supplier in a manufacturing industry. This paper presents integration the taguchi loss function and topsis method to select an optimal supplier in supply chain management. Keywords—NIS, PIS, SCM, Topsis, Taguchi Loss Function Abbreviations—Analytic Hierarchy Process (AHP), Analytic Network Process (ANP), Negative Ideal Solution (NIS), Supply Chain Management (SCM), Technique for Order of Preference by Similarity to Ideal Solution (TOPSIS) I. INTRODUCTION N effective supply chain management, correct vendor evaluation plays the most important role in formulating sub-contracting strategies. Correct vendor evaluation helps an organization, directly and indirectly, to improve product quality, and reduce production costs and lead times for new product introduction [Pal & Kumar, 2010]. Supplier selection is the first step of the activities in the product realization process starting from the purchasing of material till to the end of delivering the products [Elanchezhian et al., 2010]. Supplier selection is evaluated as a critical factor for the companies desiring to be successful in nowadays competition conditions [Sanjay Sharma & Srinivasan Balan, 2012]. Supplier selection is a Multi-criterion problem which includes both qualitative and quantitative factors (criteria). A trade-off between these tangible and intangible factors is essential in selecting the best supplier [Farzad Tahriri et al., 2008]. Supplier selection is a fundamental issue in SCM because most of the companies spend more cost on raw materials. Therefore supplier selection places a major role in SCM [Chen et al., 2006]. II. LITERATURE SURVEY Supply chain management is one of the most important concepts in recent decades. The globalization and the competitiveness have motivated higher attention to SCM process. SCM, which integrates suppliers, manufactures, distributors and customers is diffused in the firm in order to improve flexibility, cost, quality and delivery performance [Wacker, 1996]. Supplier selection may be single most important phase of the purchasing process [Edward J. Hay, 1990]. The objective of this stage is to find the optimal supplier [Robert L Nydic, 1992]. So, the firm must considered multi criteria in their attempts to distinguish between items offered by potential suppliers [Ed Timmerman, 1986]. It is the important job for decision makers to select proper suppliers in their supplier chain management. They need to use some criteria to evaluate their alternative and find which one is the best for them. Hence the I *Student, Department of Mechanical Engineering, Kumaraguru College of Technology, Coimbatore, Tamilnadu, INDIA. E-Mail: lavanapriya@gmail.com **Assistant Professor, Department of Mechanical Engineering, Kumaraguru College of Technology, Coimbatore, Tamilnadu, INDIA. E-Mail: manivel_murali03@yahoo.co.in ***Student, Department of Mechanical Engineering, Kumaraguru College of Technology, Coimbatore, Tamilnadu, INDIA. E-Mail: laxamanapriya@gmail.com C. Lavanpriya*, V. Manivel Muralidaran** & C. Lakshmanpriya*** A Case Study of Integrating the Taguchi Loss Function and Topsis Method to Select an Optimal Supplier in a Manufacturing Industry