A Distance-Based Multi-Criteria Decision Making Approach to Problem of Supplier Involvement in New Product Development

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1 Iowa State Unversty From the SelectedWorks of Gül Okudan-Kremer August, 2010 A Dstance-Based Mult-Crtera Decson Makng Approach to Problem of Suppler Involvement n New Product Development Gulsen Akman, Kocael Unversty F. Mne Otkur, Kocael Unversty Gül E. Okudan, The Pennsylvana State Unversty Avalable at:

2 Proceedngs of the ASME 2010 Internatonal Desgn Engneerng Techncal Conferences & Computers and Informaton n Engneerng Conference IDETC/CIE 2010 Proceedngs of the ASME 2010 Internatonal Desgn August Engneerng 15-18, 2010, Techncal Montreal, Conferences Quebec, Canada & Computers and Informaton n Engneerng Conference IDETC/CIE 2010 August 15-18, 2010, Montreal, Quebec, Canada DETC2010- DETC A Dstance-Based Mult-Crtera Decson Makng Approach to Problem of Suppler Involvement n New Product Development Gülşen Akman and F. Mne Ötkür Department of Industral Engneerng Kocael Unversty Kocael, 42380, Turkey ABSTRACT Because of rsng global competton and more rapd technologcal changes, the need for faster development of products wth hgher qualty and relablty has ncreased, also elevatng the mportance of suppler nvolvement. Accordngly, companes gve hgh prorty to development of relatonshps wth ther supplers, ncludng collaboratve product development. Ths paper focuses on evaluatng current supplers, whch are to be nvolved n desgn decsons and product development processes. Frst, an overvew of the suppler nvolvement n product development process s descrbed. Then, a questonnare form s ntroduced, whch was admnstered to 40 automotve supplers to determne the suppler selecton crtera s mportance levels. Survey results were evaluated usng statstcal means for relablty and sutablty. Fnally, n order to select the best suppler, results were evaluated usng a method ntegratng Analytcal Network Process (ANP) and Technque for Order Preference by Smlarty to Ideal Soluton (TOPSIS). The evaluaton crtera were weghted wth ANP, and then suppler companes were ranked usng TOPSIS methodology. 1. THE ROLE OF SUPPLIERS IN PRODUCT DEVELOPMENT Because of global competton and more rapd technologcal changes, the need for short product development cycle tmes, lower development costs, faster development of products wth hgher qualty and relablty ncreases [5]. As outsourcng s a way of shortenng development cycle tmes, the mportance of suppler nvolvement n product development has also ncreased. Suppler nvolvement s also emphaszed as a growth strategy, and thus companes place a hgh mportance Gül E. Okudan Department of Industral and Manufacturng Engneerng School of Engneerng Desgn The Pennsylvana State Unversty Unversty Park, PA, 16802, USA on suppler nvolvement n ther product development processes [8]. Product development s an nterdscplnary actvty, whch requres contrbutons from several functonal boundares of a company; however, three of these are central to most product development projects: Marketng, Desgn, Manufacturng [16]. Several other functons, such as fnance, purchasng, and sales, are also frequently nvolved n the development team on temporary bass. Beyond these broad functonal boundares, the specfc composton of a development team depends on the partcular characterstcs of the product. In most cases, development teams are supported by ndvduals or teams from partner companes, supplers, and/or consultng frms [16]. Product development process even ncludes development of the dstrbuton channels for strategcally marketng and ntroducng the new product [6]. To reman compettve, companes should take advantage of the compettve performance advantages of ther supplers that match or exceed the advantages provded by the supplers of ther compettors. In order to beneft from such advantages, companes need to proactvely approach to suppler ntegraton for new product development purposes, perhaps through formaton of strategc allances wth core technology supplers, open nformaton sharng, co-locaton of suppler desgn personnel, and jont future technology plannng. Such approaches should also nclude strateges and tactcs that drectly promote suppler nputs nto the new product development process [2]. Overall, nvolvng supplers n product development provdes advantages such as reduced cost, and concept-to-customer development tme, mproved qualty, and access to nnovatve 1 Copyrght 2010 by ASME

3 technologes that can yeld a hgher market share [8]. Beyond these, suppler nvolvement n product development may also brng mnor desgn mprovements (e.g., mprovng a component s manufacturablty or outsourcng the total responsblty for the complete development of a specfc part or sub-assembly [17]. Despte these potental advantages, however, selectng the approprate suppler remans to be a complcated problem. Among other ssues, the complexty of ths problem mostly s due to the mult-crtera nature of ths problem, where qualtatve and quanttatve data are relevant n rankng supplers. Further, gettng the suppler rankng done n an approprate way s controversal as varous strengths of dfferent supplers should be valued objectvely. Fnally, relevance of the suppler strengths to dfferent development projects could also be dfferent, elmnatng the potental of usng a standard scale for suppler evaluaton for product development ntegraton purposes. Accordngly, n ths paper, we propose a complete methodology, whch s a synergstc use of ANP and TOPSIS, to approprately select a suppler. 2. METHODOLOGY In ths secton we provde bref summares on the major components of the methodology we propose. 2.1 Analytcal Network Process (ANP) ANP s the general form of Saaty s [9,10] Analytc Herarchy Process (AHP). Whle AHP models a decson makng framework usng a undrectonal herarchcal relatonshp among decson levels, ANP allows for more complex nterrelatonshps among the decson levels and attrbutes [4]. Smlar to the tradtonal AHP approach, a herarchcal relatonshp exsts wthn the network model. A major dfference between AHP and ANP s the exstence of a feedback relatonshp among the levels wthn the herarchy [4]. ANP has a herarchy (or a network) of crtera and sub-crtera that control the feedback networks. It also conssts of the networks of nfluence that contan the factors of the problem, and the logcal groupngs of these factors nto clusters. Each control crteron (or sub-crteron) has a feedback network. A supermatrx of lmtng nfluence, whch gves the prortes of the factors n the network, s computed for each network [13]. The ANP process has four major steps: Step 1: Model constructon and problem formaton, Step 2: Conductng parwse comparsons on the clusters, Step 3: Supermatrx formaton and transformaton, and Step 4: Selecton of the best alternatve Technque for Order Preference by Smlarty to Ideal Soluton (TOPSIS ) Topss s a mult-crtera decson makng approach where an alternatve s selected through evaluatons of m, based on n crtera. In a typcal mult-crtera decson problem, n would represent the number of dmensons, and m would represent the data ponts n the soluton space. TOPSIS selects the best alternatve based on the shortest dstance of soluton alternatves to the postve-deal soluton, and the longest dstance to the negatve-deal soluton [n 17]. Usng ths method, dea soluton can be reached by comparng the maxmum and mnmum values of the alternatves accordng to the crtera. Ths process s depcted n Fgure 1. Frst step of the method s the dentfcaton of the alternatves and the crtera; a sample tabulaton s provded n Table 1. In the table, alternatves are lsted from a 1 to a n (a 1 a n ), and crtera values are lsted from y 1k to y nk. Table 1. TOPSIS Decson Matrx Crtera Alternatves y 1 y 2 y k a 1 y 11 y 12 y 1k a 2 y 21 y 22 y 2k a n y n1 y n2 y nk The other TOPSIS steps are provded below: Step 1: Normalzaton of the matrx values by addng the crtera values or feature squares n the decson matrx, and then takng the square root of the sum. 2nd crteron A -... A 3 (1) Fgure 1. Postve-Ideal And Negatve-Ideal Solutons (Adopted from [17]) Step 2: Normalzed decson matrx s weghted accordng to crtera values, usng the process descrbed by Shh et al. [14]. X j = w j. z j =1 n; j=1...k (where wj s j s crtera weght) (2). A 4 A 1. A 2 A + 1st crteron 2 Copyrght 2010 by ASME

4 Step 3: A and A - deal dstances are defned. Usng the normalzed matrx values, mnmum and maxmum values for each column are defned. A A = (maxv j j J ),(mn v j j J ' (3) A = { v v,..., v } 1, 2 n ' = (mn vj j J ),(maxvj j J (4) A v v,..., v { } = 1, 2 n Step 4: Maxmum deal dstance s calculated usng the formula below (Equaton 5). S = n j= 1 2 ( v v ) (5) j Step 5: Mnmum deal dstance s calculated accordng to the formula below (Equaton 6). S = n j= 1 j 2 ( v v ) (6) j Step 6: Relatve rankng and scores for each alternatve are calculated usng Equaton 7. j S C = S + S 0 C 1, =1,,n (7) 3. CASE STUDY The case study s conducted n an automoble manufacturng company n Turkey. In ths paper, we wll refer to ths company as the focal company. It nvolved three phases. In the frst phase, a questonnare was prepared and admnstered to the 40 local supplers of ths focal company. Collected survey results were evaluated by SPSS 16.0 statstcal software n order to determne valdty and relablty of the evaluaton crtera. In the second phase, crtera weghts are determned usng the Analytc Network Process (ANP). ANP mplementaton s completed usng Super Decsons software [12]. In the thrd and fnal phase, TOPSIS method s used n order to rank supplers accordng to ther preparedness for ther potental nvolvement n the product development process wth the focal company. 3.1 Phase I Seven evaluaton crtera, whch are provded n Table 2, are dentfed as a result of a lterature revew. These crtera are: (1) Innovaton, (2) Product Development Intenton, (3) Knowledge Sharng, (4) Partcpaton n product development processes, (5) Response Capablty, (6) Specal nvestment capablty, and (7) Technologcal capacty. A questonnare form was developed to valdate the proposed crtera (from the lterature revew) and ther mportance levels. The questonnare forms were flled by managers of 40 supplers of the focal company. Overall, ths survey was performed to determne valdty and relablty of crtera for the current set of suppler companes and the local condtons. Factor analyss and relablty analyss were conducted on the collected data for whch the results are shown n Table Phase II In order to determne factor weghts whch should be used n the TOPSIS method, ANP method s appled. Ths step s to construct the decson structure of the suppler nvolvement problem. The overall objectve of ths ANP model s to determne the relatve mportance of factors or crtera that nfluence the suppler nvolvement n the product development process of a focal company. The ANP model conssts of seven man crtera clusters or dmensons: (1) Innovaton (IN), (2) Product Development Intenton (INTENT), (3) Knowledge Sharng (KNOW), (4) Partcpaton n product development processes (PART), (5) Response Capablty (RESPO), (6) Specal nvestment capablty (SINVEST), and (7) Technologcal capacty (TECH). A graphcal summary of the overall ANP model s presented n Fgure 2. Note that shorter crtera names are ncluded n the fgure (e.g., KNOW for knowledge sharng). Parwse crtera comparsons were performed by fve dstnct decson makers, who are assocated wth purchasng, qualty management and manufacturng departments of the focal company. For the parwse comparsons Saaty s [9] standard scale s used. Inconsstency rato of all comparson matrces were below 0.1 Table 3 llustrates the unweghted matrx ncludng the parwse factor comparsons. The weghted supermatrx (shown n Table 4) s obtaned by weghtng the blocks n the unweghted supermatrx by the correspondng prortes from the cluster matrx. The entres of the weghted supermatrx gve the drect nfluence of any one factor on any other factor. The weghted supermatrx has zeros ndcatng no nteracton. For example, whle IN s nfluenced by INTENT (1.000), t s not nfluenced by PART. In order to determne the fnal local prortes, the factor prortes for each cluster n the columns of the lmt matrx are normalzed to 1. Overall weghts of crtera are shown n Fgure 3 and Table 6. In the fgure, nnovaton (IN) crtera s the most mportant crtera for suppler nvolvement. 3 Copyrght 2010 by ASME

5 Man Crtera Innovaton Intenton Knowledge Sharng Partcpaton Response Capablty Specal Investment Technologca l capablty Table 2. Factor and Relablty Analyss Results Sub-Crtera Factor Explaned Cronbach loadng varance Alpha Means R&D cooperaton wth suppler Openness to nnovatons 0.83 Product development 0.73 suggestons Intenton to nvolvng n customer s PD process Spendng tme to support 0.81 customer s PDP Engneerng support to customer 0.90 to engage new products Plannng to nvolvng n 0.71 customer s PDP Marketng knowledge Process cost knowledge 0.84 Process capacty knowledge 0.66 Techncal suggestons 0.73 Desre to partcpaton of 0.66 customer s PDP Partcpaton level of PDP 0.79 nvolvement Communcaton level of suppler 0.40 and customers nteractvely Level of rapd response to urgent 0.80 stuatons. problems ands specals wants of customer Response flexblty to unexpected demand changes Meetng desre to product development changes of customer Usage hgh featured tools and equpment to meet customer s product requrements Extraordnary technologcal standards to manufacture customer s current product Usage hgh level resources n order to manufacture products approprate to customer capacty Level of technologcal complexty used for new product/process development Innovaton level of technology used for new product/process development Foresee ablty level of product/process technology for suppler nvolvement Resources (Authors) Chung and Km [1] Kannan and Tan [3] McIvor and Humpreys [5] Walter [18] Song and Benedetto [15] Kannan and Tan [3] Song and Benedetto [15] Petersen et al. [7] Specal to ths study. 4 Copyrght 2010 by ASME

6 INTENT IN PART KNOW RESPO TECH SINVES Fgure 2. ANP Framework for Suppler Involvement Crtera Table 3. Unweghted Super Matrx Clusters IN INTENT KNOW PART RESPO SINVEST TECH IN INTENT KNOW PART RESPO SINVEST TECH The decson matrx s constructed by evaluatng every alternatve based on all crtera and sub-crtera. Among the sub-crtera are the exstence of an R&D department, the number of products developed wthn last three years, and the product development tme. 17 supplers of the focal company were selected as alternatves for ntegraton to the new product development process. These supplers were evaluated by the focal company accordng to the crtera. The decson matrx for the suppler nvolvement problem s shown n Table 7. The equaton (2) and the decson matrx varables from Table 4 are used to make necessary calculatons. The standard decson matrx for the sample problem s shown n Table 8. The weghted standard decson matrx s reached by multplyng standard decson matrx wth ts weghts. The weghts n Table 7 and the standard decson matrx n Table 8 were multpled and the weghted standard decson matrx (shown n Table 9) was reached. 3.3 Phase III The constructon of the deal postve (A) and deal negatve (A - ) solutons are completed based on the calculatons dentfed n equatons 4 and 5. The postve and negatve deal numbers are shown n Table 10. Calculaton of the allocaton measures s completed usng equatons 6 and 7. The calculated postve allocaton measures S ) and the negatve allocaton measures ( S ) are lsted n ( Table 11. Fnally, the deal and negatve deal allocaton measures are used n the calculaton of closeness of every sngle decson pont. For ths, the proporton of the negatve allocaton measure to the total allocaton measure s used as the crteron (equaton 8). A sample of calculated values s provded n Table 11. In order to select the most deal soluton, C values are ordered. Suppler 1 s the most deal soluton wth a score of Suppler 16 s the second deal suppler for nvolvng n the product development process. 4. DISCUSSION In ths study, an ntegrated mult-crtera decson makng approach nvolvng ANP and TOPSIS model s proposed for applcatons of suppler selecton for product development. The scale we have developed s supported by relevant works n the lterature, and ncludes quanttatve and qualtatve measures. We should note, however, t s mportant to translate the qualtatve data nto the quanttatve data as much as possble. As per the applcaton presented, a rankng of the potental supplers for potental nvolvement to the new product desgn process s provded. As part of the case study, the valdty of the results reached through the proposed method s also studed through examnaton of the selected supplers by a management team. The examnaton revealed that the rankng by the management 5 Copyrght 2010 by ASME

7 team s very smlar to the rankng provded by the proposed method. process Whle smlar results are also acheved wthout the presented method, for cases when the decsons of the management team should be verfed, or when the experence (tenure) of the team members s lmted, havng the method wll ad decson makers n makng sound decsons. Overall, ths paper provdes a dfferent approach to evaluatng and selectng s set of supplers for nvolvng n the product development efforts of a focal company. Table 4. Weghted Super Matrx Clusters IN INTENT KNOW PART RESPO SINVEST TECH IN INTENT KNOW PART RESPO SINVEST TECH Table 5. Lmt Matrx Supplers IN INTENT KNOW PART RESPO SINVEST TECH IN INTENT KNOW PART RESPO SINVEST TECH Fgure 3. Overall Weghts of Crtera Table 6. Crtera Weghts Crtera IN INTENT KNOW PART RESPO SINVEST TECH Weghts Copyrght 2010 by ASME

8 Table 7. Decson Matrx Suppler IN INTENT KNOW PART RESPO SINVEST TECH Table 8. Standard Decson Matrx Supplers IN INTENT KNOW PART RESPO SINVEST TECH Copyrght 2010 by ASME

9 Table 9. Weghted Standard Decson Matrx IN INTENT KNOW PART RESPO SINVEST TECH Weghts Supplers Table 10. Max-Mn Vales IN SINVEST RESPO INTENT KNOW TECH PART A A Table 11. Relatve Closeness to Ideal soluton (C) Suppler S + S - C Rank Order Copyrght 2010 by ASME

10 5. REFERENCES [1]. Chung, S. and Km. G. 2003, Performance Effects of Partnershp between Manufacturers and Supplers for New Product Development: The Suppler s Standpont, Research Polcy, 32, [2]. Handfeld, R.B. Jr. and Nchols. E.L. 2002, Supply Chan Redesgn: Transformng Supply Chans nto Integrated Value Systems, Chapter 6. Customer/Suppler Integraton nto New Product Development, Pearson Educaton. ISBN: [3]. Kannan, V. and Tan, K. 2003, Atttudes of US and European Managers to Suppler Selecton and Assessment and Implcatons for Busness Performance, Benchmarkng: An Internatonal Journal. 10, [4]. Meade, L. and Sarks, J. 1998, Strategc Analyss of Logstcs and Supply Chan Management Systems Usng the Analytcal Network Process, Transport Res.-E (Logstcs and Transportaton Revew), 34( 3), [5]. McIvor, R. and Humphreys, P. 2004, Early Suppler Involvement n the Desgn Process: Lessons from the Electronc Industry, Omega, 32, [6]. Otto, K.N. and Wood, K.L. 2001, Product Desgn Technques n Reverse Engneerng and New Product Development, Prentce Hall. ISBN [7]. Petersen, K., Handfeld, R. and Ragatz, G. 2003, A Model of Suppler Integraton nto New Product Development, The Journal of Product Innovaton Management, 20, [8]. Prmo, M.A.M. and Amundsen, S.D. 2002, An Exploratory Study of the Effects of Suppler Relatonshps on the New Product Development Outcomes, Journal of Operatons Management, 20, [9]. Saaty, T.L. 1980, The Analytc Herarchy Method: Plannng, Prorty, Settng Resource Allocaton, New York: McGraw-Hll Internatonal Book Co. [10] Saaty, T.L. 1986, Axomatc Foundaton of the Analytc Herarchy Process, Management Scence, 32(7) [11]. Saaty, T. L. 1996, Decson Makng wth Dependence and Feedback: The Analytc Network Process. RWS Publcatons. Pttsburgh. PA. [12]. Saaty, T.L. 2001a, Decson Makng n Complex Envronments The Analytc Network Process for Decson Makng wth Dependence and Feedback. RWS Publcatons. USA. [13]. Saaty, T.L. 2001b, Decson makng wth the ANP and the natonal mssle defense example, Proceedngs of the Sxth Internatonal Symposum on the AHP, ISAHP Bern. Swtzerland [14]. Shh, H., Shyur, H. and Lee, E. 2007, An Extenson of TOPSIS for Group Decson Makng, Mathematcal and Computer Modelng, 45, [15]. Song, M. and Benedetto, C. 2007, Suppler s Involvement and Success of Radcal New Product Development n New Ventures, Journal of Operatons Management, 10, [16]. Ulrch, K.T. and Eppnger, S.D. 2000, Product Desgn and Development, McGraw-Hll. 2nd ed. ISBN X. [17]. Yurdakul, M. and İç, Y. 2003, Türk Otomotv Frmalarının Performans Ölçümü ve Analzne Yönelk Topss Yöntemn Kullanan Br Örnek Çalışma, Gaz Ünv. Mühendslk Mmarlık Fakültes Dergs, 18, [18]. Walter, A. 2003, Relatonshp-specfc Factors Influencng Suppler Involvement n Customer New Product Development, Journal of Busness Research, 56, [19]. Wynstra, F. and Perck, E. 2000, Managng Suppler Involvement n New Product Development: A Portfolo Approach, European Journal of Purchasng and Supply Management, 6, Copyrght 2010 by ASME