Application of the AHP in evaluation and

selection of suppliers

Dr Anna Prusak

Dr Piotr Stefanów

Dr inż. Magdalena Niewczas

Prof. dr hab. Tadeusz Sikora

Research motives and objectives

• Selection of suppliers is key in food and pharmaceutical sector, in

which failure to meet the requirements may pose risk to the

consumer health.

• The application of the Analytic Hierarchy Process (AHP) in

evaluation and selection of (best) suppliers by food traders will be

demonstrated.

• A model will be derived, for the use by food traders in supplier

selection.

• Results of testing this model in prioritization of factors influcencing

supplier selection by food wholesalers will be presented.

Criteria for supplier evaluation found in various

studies [i.e. 3, 4, 5, 6, 7]

IN GENERAL:

• products compliant with the requirements

• just-in-time

• readiness for changes

• production capacity

• localization

• quality

• additional service

• cooperation

• organization

SPECIFICALLY IN FOOD INDUSTRY:

• risk criterion (i.e. low quality of delivered products)

• law requirements (i.e. obligatory food safety assurance systems,

labeling, certification)

Supplier evaluation methods [i.e. 1, 2, 8, 11]

• Point method: measurable criteria of supplier evaluation are first

set up, then scored and weights are calculated for each criterion.

Sum of the achieved scores or weighted mean is calculated.

• Indicator method: calculation of indexes reflecting quality of

supplies, i.e. order realization, delays of delivery, etc.

• Graphic method: points (from 1 to 5) reflecting level of fulfilment

of particular criterion by the supplier are put into the chart (i.e.

radar chart). In this way, the area of fulfilment of the requirements

by the supplier is delineated.

• AHP is also used to evaluate suppliers – 21 studies were found

regarding such applications, only 7 referred to food industry

(ScienceDirect search).

The Analytic Hierarchy Process (AHP)

• A multi-criteria decision making (MCDM) method that helps the

decision-maker solving a complex problem with multiple

conflicting and subjective criteria.

• One of the most widely used tools in decision analysis worldwide.

• Invented by Thomas L. Saaty in the 1970’ (first AHP, then ANP).

• Applied in theory and practice (i.e. by IBM in designing computers

– Baldridge Quality Award for this).

Stage 1: Problem modelling – construction of

hierarchy

Stage 2: Pairwise comparisons – 9-point

fundamental scale

Elements of each group (criteria,

subcriteria) are compared between each

other with respect to the element located

only one level above.

All combinations of elements have to be

considered (n-number of elements in a

group):

n(n-1) / 2

Stage 3: Calculation of priorities (weights) and

Consistency Ratio (CR)

• Matrices of comparisons are built for each group of elements

compared and weights are calculated.

• Several methods of priority calculation: using software (i.e. Super

Decisions, Expert Choice) or „by hand”: matrix multiplication,

arithmetic mean, geometric mean. Mathematical foundations are

in Saaty’s books.

• For each matrix consistency is measured using CR to see

whether judgments are logical (consistent).

• Judgments are consistent only if CR ≤ 0,10 (10%) – otherwise

pairwise comparisons must be repeated!

• Decision based on inconsistent judgments is not reliable.

The AHP model of supplier evaluation for food

wholesaler

Priorities (weights) calculated for criteria and

subcriteria

Global weights for subcriteria - the key factors

of supplier selection

How to select a supplier? Conclusions

• Pairwise comparisons of suppliers with respect to each

subcriterion (only up to 9 suppliers according to the 7+/-2 rule of

Miller [9]) and aggregation of priorities.

• In case of a large number of suppliers (>9), point method can be

used instead of pairwise comparison judgments to evaluate the

suppliers with respect to subcriteria.

• Suppliers who fulfil the most important factors will be selected: in

our case it is is „promotion” (26,45%) – a difference between the

price for wholesalers and price for retailers, and „reaction on

problems” (14,79%).

References

[1] Araz C, Ozkarahan I.: Supplier evaluation and management system for strategic sourcing based on a new

multicriteria sorting procedure, Int. J. Production Economics, 106, 2007, 585-606.

[2] Benton W.C., Krajeski L.: Vendor performance and alternative manufacturing environments. Decis. Sci.,

1990, 21, 403-415.

[3] Bross M.E., G. Zhao: Supplier selection process in emerging markets – The case study of Volvo Bus

Corporation in China. Master Thesis. School of Economics and Commercial Law. Göteborg University, 2004.

[4] Current C.A., Benton W.C.: (1991). Vendor selection criteria and methods. European Journal of Operational

Research, 1991, 50, 2-18.

[5] Hamrol A., Mantura W.: Zarządzanie jakością. Teoria i praktyka, PWN, Warszawa 2002, p. 319 (in Polish).

[6] Krishnan H.S.: A hybrid approach to supplier selection for the maintenance of a competitive supply chain.

Expert Systems with Applications, 2008, 34 (2), 1303-1311.

[7] Łuczak J.: System zarządzania jakością dostawców w branży motoryzacyjnej – ocena istotności wymagań,

Wyd. AE w Poznaniu, 2008, p. 53 (in Polish).

[8] Magdalena R. (2012): Supplier Selection for Food Industry: A Combination of Taguchi Loss Function and

Fuzzy Analytical Hierarchy Process, The Asian Journal of Technology Management Vol. 5 No. 1, 13-22.

[9] Miller G.A.: The Magical Number Seven, Plus or Minus Two Some Limits on Our Capacity for Processing

Information, Psychological Review, Vol. 101, No. 2, 343-352.

[10] Saaty T.L. (2006) Fundamentals of decision making and priority theory with the AHP.

[11] Tas A. (2012): A Fuzzy AHP approach for selecting a global supplier in pharmaceutical industry, African

Journal of Business Management Vol. 6(14), pp. 5073-5084, 11 April, 2012.

Thank you for your attention