A. Noorul Haq · G. Kannan
Fuzzy analytical hierarchy process for evaluating and selecting a vendor in a supply chain model
Received: 23 October 2004 / Accepted: 12 January 2005 / Published online: 16 November 2005 © Springer-Verlag London Limited 2005 Abstract The paper proposes a structured model for evaluating vendor selection using the analytical hierarchy process (AHP) and fuzzy AHP. The model is developed using evidence from an empirical study. The paper aims to demonstrate how the model can help in solving such decisions in practice. A usability evaluation of the AHP-based model with three vendors is discussed. It also examines the structure of the decision hierarchy, whether it can represent vendor selection decisions in reality and whether it covers all key factors affecting vendor selection choices. The effectiveness of the AHP model is illustrated using a company in the southern part of India and the results validated using fuzzy AHP. Keywords Analytical hierarchy process (AHP) · Fuzzy AHP · Pair wise comparison · Supply chain management · Vendor selection which satisﬁes the service policy, maintaining the lowest possible cost level due the incredible competition environment that they are exposed to. A supply chain is a network of departments, which is involved in the manufacturing of a product from the procurement of raw materials to the distribution of the ﬁnal products to the customer. Purchasing commands a signiﬁcant position in most organizations since purchased parts, components, and supplies typically represent 40 to 60of the sales  of its end products. This means that relatively small cost reductions gained in the acquisition of materials can have a greater impact on proﬁts than equal improvements in other cost-sales areas of the organization. There has been an evolution in the role and structure of the purchasing function through the 1990s. The purchasing function has gained great importance in the supply chain management due to factors such as globalization, increased value added in supply, and accelerated technological change. Purchasing involves buying the raw materials, supplies, and components for the organization. The activities associated with it include selecting and qualifying vendor, rating vendor performance, negotiating contracts, comparing price, quality and service, sourcing goods and service, timing purchases, selling terms of sale, evaluating the value received, predicting price, service, and sometimes demand changes, specifying the form in which goods are to be received, etc. A key and perhaps the most important process of the purchasing function is the efﬁcient selection of vendors, because it brings signiﬁcant savings for the organization. The objective of the vendor selection process is to reduce risk and maximize the total value for the buyer, and it involves considering a series of strategic variables. Among these variables is the time frame of the relationship with vendors, the choice between domestic and international vendors, and the number of vendors, that is, choosing between single or multiple sourcing and the type of product. Some authors have identiﬁed several criteria for vendor selection, such as the net price, quality, delivery, historical supplier performance, capacity, communication systems, service and geographic location [2–4]. These criteria are key issues in the supplier assessment process since it measures the performance of the suppliers.
Due to the speedy growth in the implementation of information technology combined with wide spread globalization concepts which have changed the background of business and generated new axiom that companies large and small, have to contend with to remain feasible. At present, industries tend to focus only on their core business and resort more and more to outsourcing several of their production functions than...