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Application of the AHP in evaluation and
selection of suppliers
Dr Anna Prusak
Dr Piotr Stefanów
Dr inż. Magdalena Niewczas
Prof. dr hab. Tadeusz Sikora
Research motives and objectives
• Selection of suppliers is key in food and pharmaceutical sector, in
which failure to meet the requirements may pose risk to the
consumer health.
• The application of the Analytic Hierarchy Process (AHP) in
evaluation and selection of (best) suppliers by food traders will be
demonstrated.
• A model will be derived, for the use by food traders in supplier
selection.
• Results of testing this model in prioritization of factors influcencing
supplier selection by food wholesalers will be presented.
Criteria for supplier evaluation found in various
studies [i.e. 3, 4, 5, 6, 7]
IN GENERAL:
• products compliant with the requirements
• just-in-time
• readiness for changes
• production capacity
• localization
• quality
• additional service
• cooperation
• organization
SPECIFICALLY IN FOOD INDUSTRY:
• risk criterion (i.e. low quality of delivered products)
• law requirements (i.e. obligatory food safety assurance systems,
labeling, certification)
Supplier evaluation methods [i.e. 1, 2, 8, 11]
• Point method: measurable criteria of supplier evaluation are first
set up, then scored and weights are calculated for each criterion.
Sum of the achieved scores or weighted mean is calculated.
• Indicator method: calculation of indexes reflecting quality of
supplies, i.e. order realization, delays of delivery, etc.
• Graphic method: points (from 1 to 5) reflecting level of fulfilment
of particular criterion by the supplier are put into the chart (i.e.
radar chart). In this way, the area of fulfilment of the requirements
by the supplier is delineated.
• AHP is also used to evaluate suppliers – 21 studies were found
regarding such applications, only 7 referred to food industry
(ScienceDirect search).
The Analytic Hierarchy Process (AHP)
• A multi-criteria decision making (MCDM) method that helps the
decision-maker solving a complex problem with multiple
conflicting and subjective criteria.
• One of the most widely used tools in decision analysis worldwide.
• Invented by Thomas L. Saaty in the 1970’ (first AHP, then ANP).
• Applied in theory and practice (i.e. by IBM in designing computers
– Baldridge Quality Award for this).
Stage 1: Problem modelling – construction of
hierarchy
Stage 2: Pairwise comparisons – 9-point
fundamental scale
Elements of each group (criteria,
subcriteria) are compared between each
other with respect to the element located
only one level above.
All combinations of elements have to be
considered (n-number of elements in a
group):
n(n-1) / 2
Stage 3: Calculation of priorities (weights) and
Consistency Ratio (CR)
• Matrices of comparisons are built for each group of elements
compared and weights are calculated.
• Several methods of priority calculation: using software (i.e. Super
Decisions, Expert Choice) or „by hand”: matrix multiplication,
arithmetic mean, geometric mean. Mathematical foundations are
in Saaty’s books.
• For each matrix consistency is measured using CR to see
whether judgments are logical (consistent).
• Judgments are consistent only if CR ≤ 0,10 (10%) – otherwise
pairwise comparisons must be repeated!
• Decision based on inconsistent judgments is not reliable.
The AHP model of supplier evaluation for food
wholesaler
Priorities (weights) calculated for criteria and
subcriteria
Global weights for subcriteria - the key factors
of supplier selection
How to select a supplier? Conclusions
• Pairwise comparisons of suppliers with respect to each
subcriterion (only up to 9 suppliers according to the 7+/-2 rule of
Miller [9]) and aggregation of priorities.
• In case of a large number of suppliers (>9), point method can be
used instead of pairwise comparison judgments to evaluate the
suppliers with respect to subcriteria.
• Suppliers who fulfil the most important factors will be selected: in
our case it is is „promotion” (26,45%) – a difference between the
price for wholesalers and price for retailers, and „reaction on
problems” (14,79%).
References
[1] Araz C, Ozkarahan I.: Supplier evaluation and management system for strategic sourcing based on a new
multicriteria sorting procedure, Int. J. Production Economics, 106, 2007, 585-606.
[2] Benton W.C., Krajeski L.: Vendor performance and alternative manufacturing environments. Decis. Sci.,
1990, 21, 403-415.
[3] Bross M.E., G. Zhao: Supplier selection process in emerging markets – The case study of Volvo Bus
Corporation in China. Master Thesis. School of Economics and Commercial Law. Göteborg University, 2004.
[4] Current C.A., Benton W.C.: (1991). Vendor selection criteria and methods. European Journal of Operational
Research, 1991, 50, 2-18.
[5] Hamrol A., Mantura W.: Zarządzanie jakością. Teoria i praktyka, PWN, Warszawa 2002, p. 319 (in Polish).
[6] Krishnan H.S.: A hybrid approach to supplier selection for the maintenance of a competitive supply chain.
Expert Systems with Applications, 2008, 34 (2), 1303-1311.
[7] Łuczak J.: System zarządzania jakością dostawców w branży motoryzacyjnej – ocena istotności wymagań,
Wyd. AE w Poznaniu, 2008, p. 53 (in Polish).
[8] Magdalena R. (2012): Supplier Selection for Food Industry: A Combination of Taguchi Loss Function and
Fuzzy Analytical Hierarchy Process, The Asian Journal of Technology Management Vol. 5 No. 1, 13-22.
[9] Miller G.A.: The Magical Number Seven, Plus or Minus Two Some Limits on Our Capacity for Processing
Information, Psychological Review, Vol. 101, No. 2, 343-352.
[10] Saaty T.L. (2006) Fundamentals of decision making and priority theory with the AHP.
[11] Tas A. (2012): A Fuzzy AHP approach for selecting a global supplier in pharmaceutical industry, African
Journal of Business Management Vol. 6(14), pp. 5073-5084, 11 April, 2012.
Thank you for your attention