It depends on the situation; the characters are really fairly well-balanced. Against enemies that use physical attacks, Dunban is the best tank, but 7 can do a good job of tanking and also does a lot of damage. Reyn is probably a better tank against ether-using enemies, though.

Shulk and 7 are both physical damage machines, but Riki and Melia are more effective against physical-resistant enemies. Melia is probably overall the best damage dealer, but her AI is fairly ineffective; if you're going to put Melia in your party, you need to manually control her.

Sharla is never necessary against normal enemies, and really only useful if you're fighting a boss whom you're significantly underleveled against.

Personally, I used Melia/Shulk/Dunban for most of the game. After I got 7, I occasionally swapped either Melia or Dunban out for her, depending on the situation. Honestly, I almost never used Reyn again after Dunban joined.

I feel that shulk, reyn, and sharla can get pretty much anything done. reyn tanks almost everything the game throws at him and sharla heals everyone pretty good (you need to upgrade her arts). shulk is a huge damage dealer when you upgrade slit edge and backslash, and sharla can one hit kill enemies suffering daze with her headshot ability. honestly im not a big fan of using dunban, riki, or melia. they just dont cut it.

After Dunban joins the party, Reyn becomes redundant. Dunban is by far the best tank in the game with his high agility. 7th is an okay tank, but don't expect her to be evading as much as Dunban.

You're probably familiar with the topple-lock combo, and the best parties (in my opinion) revolve around it.
Dunban is a must for this party; it will not work without him. Shulk is... not completely necessary but extremely useful. These are the two AI-controlled characters.

Your main should either be 7th or Melia. Their AI sucks in general, and don't usually use Arts efficiently. Melia has a force topple which works at most levels. 7th also has a force topple, but depends on tension and chain attacks. In my opinion, 7th is a better choice.

7th can take damage, but Melia can't without properly-timed Reflections.

Against higher-leveled story bosses, an ether-based party of Melia (main), Sharla, and Riki will work wonders. This party is especially useful against a certain boss with acid pools.

Personally, after discovering topple-lock, Reyn and Sharla became novelty characters. Melia became less useful after getting 7th's Final Cross, though.