There is a need for a complete and structured methodology
for selecting a supplier in supply chain. > The present
work describes an efficient decision framework for supplier
evaluation and selection in supply chain. The objective
of this paper is to decide the significant categories and
performance indicators for selecting a supplier in the supply
chain and to explain how an AHP-PVA algorithm can be used
to capture and analyze significant categories and performance
indicators to rank the suppliers. The application of the
decision framework for supplier evaluation and selection
has been demonstrated with a case situation. The findings
demonstrate that the decision framework can be useful to
all firms in their supplier selection decision.
In the past, outsourcing was primarily confined to the
procurement of non-core components and services, but today,
the outsourcing trend has expanded to include most of the
activities of an organization. Organizations start to recognize
that individual organizations cannot handle the intense
competition in the global market place and increased customer
expectations independently, but a strong supply chain can
be used to tackle it efficiently by creating a win-win environment.
Therefore supplier selection, which is a strategic decision,
is a critical issue for most of the manufacturing and service
organizations. Various researchers have proposed a number
of systematic approaches to handle this problem.
Supplier
selection has been the subject of extensive conceptual and
empirical work in business management literature and is widely
considered to be one of the most fundamental responsibilities
of the purchasing function of management (Carr and Pearson,
1999; and Vonderembse and Tracey, 1999). Weber et al.
(1991) reviewed and classified the articles related to the
criteria and analytic methods used in the supplier selection
process. Weber and Ellram (1993) developed a multi-objective
programming approach as a method for supplier selection in
a Just-in-Time (JIT) environment. Ghodsypour and O'Brien (1998)
mentioned the three main categories for supplier selection—cost,
quality and service. Ghodsypour and O'Brien (2001) developed
a mixed integer nonlinear programming model to solve multiple
sourcing problem capturing different related costs like total
costs of logistics, net price, storage, transportation and
ordering cost. Tracey and Tan (2001) carried out confirmatory
factor analysis and path analysis to examine empirically the
relationships among supplier selection criteria> (i.e., quality,
delivery reliability, product performance and unit price),
supplier involvement on design teams and in continuous improvement
programs, four dimensions of customer satisfaction (i.e.,
competitive pricing, product quality, product variety, and
delivery service) and overall firm performance. Muralidharan
et al. (2001) proposed a methodology and also implementation
guidelines for vendor/supplier selection which makes use of
estimation of the rating by a group on an individual basis
following the principle of anonymity. Kahraman et al.
(2003) used fuzzy Analytic Hierarchy Process (AHP) to select
the best supplier firm. |
