=Paper=
{{Paper
|id=Vol-2030/HAICTA_2017_paper30
|storemode=property
|title=Supplier Selection and Evaluation Using Multicriteria Decision Analysis
|pdfUrl=https://ceur-ws.org/Vol-2030/HAICTA_2017_paper30.pdf
|volume=Vol-2030
|authors=Efstratios Kartsonakis,Evangelos Grigoroudis,Michalis Neofytou
|dblpUrl=https://dblp.org/rec/conf/haicta/KartsonakisGN17
}}
==Supplier Selection and Evaluation Using Multicriteria Decision Analysis==
https://ceur-ws.org/Vol-2030/HAICTA_2017_paper30.pdf
Supplier selection and evaluation using multicriteria
decision analysis
Stratos Kartsonakis1, Evangelos Grigoroudis2, Michalis Neofytou3
1
School of Production Engineering and Management, Technical University of Crete, Chania,
Greece, e-mail: ekartsonakis30@gmail.com
2
School of Production Engineering and Management, Technical University of Crete, Chania,
Greece, e-mail: vangelis@ergasya.tuc.gr
1
School of Production Engineering and Management, Technical University of Crete, Chania,
Greece, e-mail: micneophytou@gmail.com
Abstract. The supplier selection and evaluation is a very sensitive and crucial
process for all companies and organizations. The supplier nowadays functions
as an associate partner and the relationship between him and the company must
be based on a mutual trust. Despite this fact the main method of selecting a
supplier is depending on the cost neglecting other important factors. This paper
presents a new method based on the multicriteria decision analysis and gives a
new dynamic perspective to the problem with emphasis to on a continuous
evaluation process to the problem. The proposed model was implemented in a
food industry and the results are being discussed.
Keywords: Supplier Selection, Supplier Evaluation, Multicriteria Decision
Analysis, UTA II method.
1 Introduction
One of the most common and at the same time, most crucial issue that modern
companies face is the supplier’s selection and evaluation. This particular process can
affect the overall performance of any industry, not only from the aspect of cost, but
also for the final product and the reputation of the company. So when it comes to the
final decision, the purchase manager has to consider many factors that shape the
profile of a proper supplier. Some of the criteria that are being widely examined are
the price, the quality and the delivery time. As the selection progress can become
very complex, a solid method to improve the supplier performance is by developing a
robust buyer-supplier relationship. This relationship must be built with mutual trust
and cooperation and demands from the buyer to work with a small number of
suppliers. In order for this relationship to be successful, a regular examination of a
supplier’s performance must be held. There is no point in organizing a process for the
selection of a supplier without including a well-based evaluation system. This not
only helps the buyer to keep track of the supplier’s performance, but also functions as
a tool for the supplier himself, to improve and evolve his products and services.
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Many approaches have been applied to this problem but most of them focus on the
selection process (Ho et al., 2014).
This research escapes from traditional approaches and launches a different aspect
to this problem that focuses on a constant evaluation model. Specifically the
proposed model was based on a UTA-II method (Siskos, 1980) that it has never been
implemented to these kinds of problems. The methodology discussed at this article
proposes 2 evaluation systems and 1 selection system for new suppliers. As many
industries have established their supplying sources, it would be more efficient to
create evaluation systems that could filter the performances of the suppliers
(Mummalaneni et al., 1996). The proposed model was successfully tested in a food
industry and in this article, the results are being discussed.
2 Proposed Approach
The first step to create the purposed model was by categorizing all the products and
services that the company is being supplied. In this way it becomes easier for the
buyer to decide the evaluation criteria from a few categories rather than by
examining the numerous products. Afterwards 3 systems were created. For each
system, different criteria were selected.
The first system, concerns the evaluation of a single supply. For every product that
the company buys, the supplier manager should grade the product in the selected
criteria. By implementing the UTA-II method, the weights of each criterion are
estimated (Siskos et al., 2005). So the total score of a supply is estimated using an
additive value function of the following form:
n (1)
U i = ∑ p j uij .
j =1
where U i is the score of the i-th supply, p j is the weight of the j-th criterion, and uij
is the score of the i-th supply on the j-th criterion.
Let’s suppose that a supply is being evaluated on four criteria. Table 1 shows the
performance scores uij for this particular supply. Assuming that the estimated
criteria weights are p1 = 0.25 , p2 = 0.25 , p3 = 0.30 , and p4 = 0.20 , the score
(value) of this supply is U A = 0.25 × 8 + 0.25 × 7 + 0.30 × 9 + 0.20 × 10 = 8.45 .
Table 1. Example of a supply evaluation (0-10 scale).
Supply Criterion 1 Criterion 2 Criterion 3 Criterion 4
A 8 7 9 10
The second system refers to the annual supplier evaluation. The evaluation
procedure is similar to the supply’s evaluation process. In this system the buyer
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evaluates the performance of a supplier in an one year period. The criteria that should
be used must be able to describe the supplier’s actions.
The second system though is not enough to give a clear view of the supplier’s
efficiency. The proposed model suggests that the total score of a supplier will be
calculating by adding the average score of the supplies that a vendor made with the
score of the vendor’s annual evaluation:
Uiglobal = aUi + (1 − a)Uiyear . (2)
where U iglobal is the overall score of the i-th supplier, U i is the average scores of the
yearly supplies by the i-th supplier, U iyear is the annual evaluation score of the ith
supplier, and a is a weighting factor that aggregates the supplier annual evaluation
and the average scores of supplies.
Depending on the overall score each supplier, will be enlisted in a different
category. Three categories were created:
• authorized suppliers
• under superintendence suppliers
• unauthorized suppliers
As the score will dynamically change, it is possible for a supplier to enter to a
different category through time. But if it becomes an unauthorized one, it will not be
selected again.
The final system refers to the selection of new suppliers and adopts a threshold-
type procedure. Again the supply’s manager gives a score in each of the selected
criteria, but this time each criterion has a score limit (threshold). If the score exceeds
the chosen limit then the examined supplier is approved. Otherwise it will not
selected and becomes inadequate.
3 Evaluation Criteria
Α set of evaluation criteria were selected for each one of the aforementioned
evaluation systems. After examining the criteria that were used in other approaches
and in cooperation with the Quality Manager of the food industry, the criteria that
were selected are the following:
Supply evaluation criteria:
1. Price
2. Quality of product/service
3. Cooperation
4. Responsiveness to customer needs
5. Delivery time
Annual supplier evaluation criteria:
1. Cost
2. Cost reduction performance
3. Quality
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4. Cooperation
5. Reliability
6. Delivery time
7. Guarantee
Selection of new supplier criteria:
1. Reliability
2. Cooperation
3. Free products for trial
4. Quality accreditation & audit
5. Payment
6. Guarantees
The criteria were selected in a way that could express the strengths and
weaknesses of each supplier. As a result the company would have a whole better
view of their performance. So it was really important the criteria to fulfill the
company’s requirements. Some of the selected criteria have been applied to many
researches such as cost, quality, and delivery time and other have been used in a
smaller scale like cooperation (Chan et al., 2007) and quality accreditation and audit
(Karpak et al., 2001). Furthermore, some other criteria that are being introduced in
this research were not implemented in the examined researches but they were crucial
for the food industry. Those were the guarantee that expresses the prerequisites that a
supplier would have if a problem with the order come up. The other one was the
criterion of reliability that expresses the fame that a supplier has.
4 Application to a Food Industry
The proposed model was implemented in a food industry, which needed an improved
supplier evaluation system. Having chosen the evaluation criteria we tested the
proposed model to all the suppliers that the company has cooperated with one-year
period. The proposed model was built in Microsoft Office Excel. The specific
program was chosen because it is widely known with a friendly user interface. Tables
2-3 present some indicative results of the evaluation of a supply, where the company
cooperated with three different suppliers.
The evaluation of a supply takes place in this way: The assessor (the person that
made the order) opens the Excel, where the database of all the suppliers and the
products that the company is being provided, is held. As soon as she/he chooses the
product and the supplier that she/he wants to evaluate she/he gets immediately
information of the supplier’s overall score, its annual evaluation score and the
average score of its past supplies. Then what must she/he does is to simply evaluate
the product that she/he received in the 5 determined criteria. When she/he does that
she/he receives the score of the supply and also the state of the supply.
As the example of Table 2 concerns, it is obvious that the food industry is not
satisfied with the price of the laptops from all the 3 suppliers. It also is clearly
dissatisfied by Supplier C who got a really poor evaluation. At this point it should be
mentioned that if a supply receives a score 5 or lower the company may not accept it
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and ask for a refund. Supplier B did not receive a good score at the criteria of
cooperation and delivery time.
Table 2. Example of the evaluation of 3 different supplies.
Supplier Product Price Quality Cooperation Responsiveness Delivery
time
A Laptop 6 9 9 9 9
B Laptop 4 9 6 9 5
C Laptop 5 5 5 5 5
Table 3. Example of the evaluation of 3 different suppliers.
Supplier Annual evaluation Average score of supplies Overall score State of supplier
A 8.12 8.02 8.07 Authorized
B 8.08 6.26 7.17 Under
superintendence
C 5.04 5.00 5.02 Unauthorized
Similarly to the aforementioned example, the evaluation of other products or
suppliers may be applied. The food industry in this way can have all the necessary
and continuously updated information that it wants from the suppliers and keep track
of their performances in detail. The evaluation takes no time and the feedback that
the company gets is really valuable. The annual evaluation of a supplier and the
selection of new supplier work likewise.
5 Conclusions
The proposed model differs from other researches due to the fact that functions as a
tool for the company because it gives the ability to continuously update the provided
information. The process of the constant evaluation of a supply offers the ability to
the Supplier Manager to keep track of a vendor’s performance through the year. But
the proposed model functions not only as a performance measurement tool for the
supplier, but it helps the Supply Manager to find the best supplier for the next order.
As the scores change automatically, she/he can check who has the best overall score
at this time and pick the better one. Moreover the selection of the right criteria gives
the opportunity to the buyer to track the weaknesses of a supplier. For instance a
vendor may have a good score in delivery time and a low one in the quality. So the
company will have the ability to take the right measures the next time it will trust the
same supplier.
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References
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