Analytical hierarchy process - supplier selection, Business Economics

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Analytical Hierarchy Process - Supplier Selection

Supplier selection is a multi-criteria decision-making problem that the selection process mainly involves evaluating a number of suppliers according to a set of common criteria for selecting suppliers to meet business needs. For any manufacturing or service business, selecting the right upstream suppliers is a key success factor that will significantly reduce purchasing cost, increase downstream customer satisfaction, and improve competitive ability. Evaluation criteria may be tangible (measurable) items or intangible (immeasurable) items. Different sets of criteria have been proposed to evaluate suppliers including quality, delivery time, price, quantity history. The case study proposed that price, quality and delivery are the most important criteria for evaluating suppliers in industrial market. This paper develops a supplier selection process, which will be more effective for continual process improvement, and is based on a case study carried out in leading automobile manufacturing company. The Analytical Hierarchy process (AHP) method applied in this case study to develop the effective supplier selection. The Additive Normalization Method and Eigen Vector Method are used as the prioritization methods to determine the priority vector.  The application of AHP can be applied to enhance the decision-making process and reduce the time taken to select a supplier. AHP helps the companies to protect the production line from shortage of raw material.

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