Application of AHP and ANP in supplier selection process-a case in an automotive company

Abstract

Most organizations prefer to outsource the activities which are not cost-efficient. With regard to the huge amount ofexpenditure in this area, proper selection of the desirable suppliers becomes significant. Previous studies indicated that the criteriaof supplier selection might not be always independent, and this fact implies the existence of interdependencies among them that mayaffect the supplier selection. This study presents and compares two multi-attribute decision making (MADM) techniques to dealwith the supplier selection problem with and without interdependency. An Analytic Hierarchy Process (AHP), and its extension,Analytic Network Process (ANP) are applied to find the final priorities of the suppliers respectively for the cases of independencyand interdependency in an automotive manufacturing company. The two techniques lead to different rankings for the potentialsuppliers. Thus, a Preemptive Goal Programming (PGP) with two goals, maximizing the Total Value of Purchasing and minimizingthe Total Cost of Purchasing, to decide which method is the best was conducted. The whole process is illustrated in a case study.The results from the company of the case study showed that the ANP had the optimal TCP of 1,290 US dollars, while the valuefor AHP was 1,710 USD. However, comparing the TVP value for the two methods shows a negligible difference.