Supplier selection and evaluation using multicriteria decision analysis

Transcription

1 Suppler selecton and evaluaton usng multcrtera decson analyss Stratos Kartsonaks 1, Evangelos Grgorouds 2, Mchals Neofytou 3 1 School of Producton Engneerng and Management, Techncal Unversty of Crete, Chana, Greece, e-mal: ekartsonaks30@gmal.com 2 School of Producton Engneerng and Management, Techncal Unversty of Crete, Chana, Greece, e-mal: vangels@ergasya.tuc.gr 1 School of Producton Engneerng and Management, Techncal Unversty of Crete, Chana, Greece, e-mal: mcneophytou@gmal.com Abstract. The suppler selecton and evaluaton s a very senstve and crucal process for all companes and organzatons. The suppler nowadays functons as an assocate partner and the relatonshp between hm and the company must be based on a mutual trust. Despte ths fact the man method of selectng a suppler s dependng on the cost neglectng other mportant factors. Ths paper presents a new method based on the multcrtera decson analyss and gves a new dynamc perspectve to the problem wth emphass to on a contnuous evaluaton process to the problem. The proposed model was mplemented n a food ndustry and the results are beng dscussed. Keywords: Suppler Selecton, Suppler Evaluaton, Multcrtera Decson Analyss, UTA II method. 1 Introducton One of the most common and at the same tme, most crucal ssue that modern companes face s the suppler s selecton and evaluaton. Ths partcular process can affect the overall performance of any ndustry, not only from the aspect of cost, but also for the fnal product and the reputaton of the company. So when t comes to the fnal decson, the purchase manager has to consder many factors that shape the profle of a proper suppler. Some of the crtera that are beng wdely examned are the prce, the qualty and the delvery tme. As the selecton progress can become very complex, a sold method to mprove the suppler performance s by developng a robust buyer-suppler relatonshp. Ths relatonshp must be bult wth mutual trust and cooperaton and demands from the buyer to work wth a small number of supplers. In order for ths relatonshp to be successful, a regular examnaton of a suppler s performance must be held. There s no pont n organzng a process for the selecton of a suppler wthout ncludng a well-based evaluaton system. Ths not only helps the buyer to keep track of the suppler s performance, but also functons as a tool for the suppler hmself, to mprove and evolve hs products and servces. 255

2 Many approaches have been appled to ths problem but most of them focus on the selecton process (Ho et al., 2014). Ths research escapes from tradtonal approaches and launches a dfferent aspect to ths problem that focuses on a constant evaluaton model. Specfcally the proposed model was based on a UTA-II method (Sskos, 1980) that t has never been mplemented to these knds of problems. The methodology dscussed at ths artcle proposes 2 evaluaton systems and 1 selecton system for new supplers. As many ndustres have establshed ther supplyng sources, t would be more effcent to create evaluaton systems that could flter the performances of the supplers (Mummalanen et al., 1996). The proposed model was successfully tested n a food ndustry and n ths artcle, the results are beng dscussed. 2 Proposed Approach The frst step to create the purposed model was by categorzng all the products and servces that the company s beng suppled. In ths way t becomes easer for the buyer to decde the evaluaton crtera from a few categores rather than by examnng the numerous products. Afterwards 3 systems were created. For each system, dfferent crtera were selected. The frst system, concerns the evaluaton of a sngle supply. For every product that the company buys, the suppler manager should grade the product n the selected crtera. By mplementng the UTA-II method, the weghts of each crteron are estmated (Sskos et al., 2005). So the total score of a supply s estmated usng an addtve value functon of the followng form: U n = p u. j j j = 1 where U s the score of the -th supply, p s the weght of the j-th crteron, and u j j s the score of the -th supply on the j-th crteron. Let s suppose that a supply s beng evaluated on four crtera. Table 1 shows the performance scores u for ths partcular supply. Assumng that the estmated j crtera weghts are p = 0.25, p = 0.25, p = 0.30, and p = 0.20, the score (value) of ths supply s U = = A Table 1. Example of a supply evaluaton (0-10 scale). Supply Crteron 1 Crteron 2 Crteron 3 Crteron 4 A The second system refers to the annual suppler evaluaton. The evaluaton procedure s smlar to the supply s evaluaton process. In ths system the buyer (1) 256

3 evaluates the performance of a suppler n an one year perod. The crtera that should be used must be able to descrbe the suppler s actons. The second system though s not enough to gve a clear vew of the suppler s effcency. The proposed model suggests that the total score of a suppler wll be calculatng by addng the average score of the supples that a vendor made wth the score of the vendor s annual evaluaton: global year U = au + (1 a) U. (2) global where U s the overall score of the -th suppler, U s the average scores of the year yearly supples by the -th suppler, U s the annual evaluaton score of the th suppler, and a s a weghtng factor that aggregates the suppler annual evaluaton and the average scores of supples. Dependng on the overall score each suppler, wll be enlsted n a dfferent category. Three categores were created: authorzed supplers under superntendence supplers unauthorzed supplers As the score wll dynamcally change, t s possble for a suppler to enter to a dfferent category through tme. But f t becomes an unauthorzed one, t wll not be selected agan. The fnal system refers to the selecton of new supplers and adopts a thresholdtype procedure. Agan the supply s manager gves a score n each of the selected crtera, but ths tme each crteron has a score lmt (threshold). If the score exceeds the chosen lmt then the examned suppler s approved. Otherwse t wll not selected and becomes nadequate. 3 Evaluaton Crtera Α set of evaluaton crtera were selected for each one of the aforementoned evaluaton systems. After examnng the crtera that were used n other approaches and n cooperaton wth the Qualty Manager of the food ndustry, the crtera that were selected are the followng: Supply evaluaton crtera: 1. Prce 2. Qualty of product/servce 3. Cooperaton 4. Responsveness to customer needs 5. Delvery tme Annual suppler evaluaton crtera: 1. Cost 2. Cost reducton performance 3. Qualty 257

4 4. Cooperaton 5. Relablty 6. Delvery tme 7. Guarantee Selecton of new suppler crtera: 1. Relablty 2. Cooperaton 3. Free products for tral 4. Qualty accredtaton & audt 5. Payment 6. Guarantees The crtera were selected n a way that could express the strengths and weaknesses of each suppler. As a result the company would have a whole better vew of ther performance. So t was really mportant the crtera to fulfll the company s requrements. Some of the selected crtera have been appled to many researches such as cost, qualty, and delvery tme and other have been used n a smaller scale lke cooperaton (Chan et al., 2007) and qualty accredtaton and audt (Karpak et al., 2001). Furthermore, some other crtera that are beng ntroduced n ths research were not mplemented n the examned researches but they were crucal for the food ndustry. Those were the guarantee that expresses the prerequstes that a suppler would have f a problem wth the order come up. The other one was the crteron of relablty that expresses the fame that a suppler has. 4 Applcaton to a Food Industry The proposed model was mplemented n a food ndustry, whch needed an mproved suppler evaluaton system. Havng chosen the evaluaton crtera we tested the proposed model to all the supplers that the company has cooperated wth one-year perod. The proposed model was bult n Mcrosoft Offce Excel. The specfc program was chosen because t s wdely known wth a frendly user nterface. Tables 2-3 present some ndcatve results of the evaluaton of a supply, where the company cooperated wth three dfferent supplers. The evaluaton of a supply takes place n ths way: The assessor (the person that made the order) opens the Excel, where the database of all the supplers and the products that the company s beng provded, s held. As soon as she/he chooses the product and the suppler that she/he wants to evaluate she/he gets mmedately nformaton of the suppler s overall score, ts annual evaluaton score and the average score of ts past supples. Then what must she/he does s to smply evaluate the product that she/he receved n the 5 determned crtera. When she/he does that she/he receves the score of the supply and also the state of the supply. As the example of Table 2 concerns, t s obvous that the food ndustry s not satsfed wth the prce of the laptops from all the 3 supplers. It also s clearly dssatsfed by Suppler C who got a really poor evaluaton. At ths pont t should be mentoned that f a supply receves a score 5 or lower the company may not accept t 258

5 and ask for a refund. Suppler B dd not receve a good score at the crtera of cooperaton and delvery tme. Table 2. Example of the evaluaton of 3 dfferent supples. Suppler Product Prce Qualty Cooperaton Responsveness Delvery tme A Laptop B Laptop C Laptop Table 3. Example of the evaluaton of 3 dfferent supplers. Suppler Annual evaluaton Average score of supples Overall score State of suppler A Authorzed B Under superntendence C Unauthorzed Smlarly to the aforementoned example, the evaluaton of other products or supplers may be appled. The food ndustry n ths way can have all the necessary and contnuously updated nformaton that t wants from the supplers and keep track of ther performances n detal. The evaluaton takes no tme and the feedback that the company gets s really valuable. The annual evaluaton of a suppler and the selecton of new suppler work lkewse. 5 Conclusons The proposed model dffers from other researches due to the fact that functons as a tool for the company because t gves the ablty to contnuously update the provded nformaton. The process of the constant evaluaton of a supply offers the ablty to the Suppler Manager to keep track of a vendor s performance through the year. But the proposed model functons not only as a performance measurement tool for the suppler, but t helps the Supply Manager to fnd the best suppler for the next order. As the scores change automatcally, she/he can check who has the best overall score at ths tme and pck the better one. Moreover the selecton of the rght crtera gves the opportunty to the buyer to track the weaknesses of a suppler. For nstance a vendor may have a good score n delvery tme and a low one n the qualty. So the company wll have the ablty to take the rght measures the next tme t wll trust the same suppler. 259

6 References 1. Chan, F.T.S., Chan, H.K., Ip, R.W.L and Lau, H.C.W. (2007) A decson support system for suppler selecton n the arlne ndustry. Proceedngs of the Insttuton of Mechancal Engneers, Part B: Journal of Engneerng Manufacture, 221 (4), p Ho, W., Xu, X. and Dey, P.K. (2010) Mult-crtera decson makng approaches for suppler evaluaton and selecton: A lterature revew. European Journal of Operatonal Research, 202, p Karpak B., Rammohan, E.K. and Kasugant, R. (2001) Purchasng materals n the supply chan: Managng a mult-objectve task. European Journal of Purchasng & Supply Management, 7, p Mummalanen, V., Dubas, K.M. and Chao, C. (1996). Chnese purchasng managers preferences and trade-off n suppler selecton and performance evaluaton. Industral Marketng Management, 25, p Sskos, J. (1980) Comment modélser les préfénces au moyen de fonctons d utlté addtves. Thése de 3e cycle. Pars: Unversté Perre et Mare Cure. 6. Sskos, Y., Grgorouds, E. and Matsatsns, N. (2005). UTA methods. In Multple Crtera Decson Analyss: State of the Art Surveys, Internatonal Seres n Operatons Research and Management Scence, eds. J. Fguera, S. Greco, and M. Ehrgott, p New York: Sprnger. 260