E-procurement Service Provider Selection—An Analytic Network Process-Based Group Decision-Making Approach

Abstract

E-procurement is used by companies as a tool to reduce procurement costs, bring transparency into the purchasing process, and reduce the procurement cycle time. The specialized expertise involved in building such systems and its associated costs have compelled some companies to hire third-party e-procurement service providers. Selecting the right service provider is a tricky task for two reasons: First, the company must be aware of the factors that need to be considered when comparing alternative providers. Second, the executives of the company must have a tool in place to compare the alternative providers in the most unbiased manner possible. In this paper we identify a set of selection criteria and subcriteria based on an extensive literature survey and discussions with procurement executives in an organization. From these criteria, we then propose a two-stage selection process that consists of an initial screening of the providers and a final analytic network process-based selection with group decision making. Finally, the proposed framework is applied to a real-life case to study the individual bias involved in the selection process and to study the sensitivity of the final selection process.