Abstract
Purpose The purpose of this paper is to propose a decision support model for supplier selection based on analytic hierarchy process (AHP) using a case of automotive industry in a developing country of Pakistan and further performs sensitivity analysis to check the robustness of the supplier selection decision.
Methodology The model starts by identifying the main criteria (price, quality, delivery and service) using literature review and ranking the main criteria based on experts’ opinions using AHP. The second stage in the adopted methodology is the identification of sub criteria and ranking them on the basis of main criteria. Lastly perform sensitivity analysis to check the robustness of the decision using Expert Choiceۛ software.
Findings The suppliers are selected and ranked based on sub criteria. Sensitivity analysis suggests the effects of changes in the main criteria on the suppliers ranking. The use of AHP in the supplier selection gives the decision maker the confidence of the consistency and the robustness throughout the process.
Practical implications The AHP methodology adopted in this study provides managers in automotive industry in Pakistan with the insights of the various factors that need to be considered while selecting suppliers for their organizations. The selected approach also aids them in prioritizing the criterion. Managers can utilize the hierarchical structure of adopted supplier selection methodology suggested in this study to rank the suppliers on the basis of various factors/criteria.
Originality/value This study makes three novel contributions in supplier selection area. First, AHP is applied to automotive industry and use of AHP in the supplier selection gives decision maker the confidence of the consistency. Second, sensitivity analysis enables in understanding the effects of changes in the main criteria on the suppliers ranking and help decision maker to check the robustness throughout the process. Last, we find it important to come with a simple methodology for managers of automotive industry so that they can select the best suppliers. Moreover, this approach will also help managers in dividing the complex decision making problem into simpler hierarchy.
4. Conclusion and Future
Research Directions Selecting an appropriate supplier plays a vital role in the supply chain performance of the organization in order to meet customer demand in a timely and cost effective manner in order to achieve their satisfaction. This paper proposed a model for ranking the suppliers for the automotive industry in Pakistan used as an example. Due to the complexity of the problem, we used the multi criteria decision making tool (AHP). The problem is divided into two hierarchies (main criteria and sub criteria). The main criteria (Price, Quality, Delivery and Service) are identified based on literature review. These criterions are ranked based on the experts‟ opinions using AHP pair wise comparison approach. The results of the ranking of the main criteria are Price (47%), Quality (28%), Delivery (16%) and Service (10%) with inconsistency of 0.01. Sets of sub criterion are identified and ranked with respect to their associated main criteria using the same process. Three suppliers are selected and ranked in this process. Finally, sensitivity analysis is performed to study the effect of changing the weights of the main criteria on the ranking of suppliers. The benefits of this approach are that it divides the complex problem into simpler hierarchy as well as low inconsistency of the decision makers‟ judgments. The use of sensitivity analysis identified the range of change of the main criterion weights while the ranking of supplier stay robust.
