Analytical hierarchy process based supplier selection methodology: a framework and application

Abstract

Supplier selection is an important operation in every company. A few important criteria in the selection of a supplier are product factor, company factor and service factor. A huge accent is given on the quality of inputs, as it is a pre-requisite for every company to produce high-quality products. Each company uses its own procedure for evaluation and selection of suppliers. In this paper, supplier selection is based on the following criteria as product factor with the sub-factors like undersize, oversize and price, and company factor with sub-factors like annual sales, net profit, capacity, location, transport facility and technical facility. Analytic Hierarchy Process (AHP) is a decision-making method for ranking alternative courses of action when multiple criteria are considered. The paper illustrates use of AHP to structure the supplier selection process. Finally, a framework is presented that any buying organisation can adopt to fit its specific set of needs.