Sourcing analytics for evaluating and selecting suppliers using DEA and AHP: a case of the aerospace company

Abstract

Sourcing represents one of the most upstream supply chain activities, which often dictates the rest of downstream supply chain activities. As such, a poor sourcing decision has a significant trickle-down effect on the effectiveness of a buying firm's manufacturing and logistics decisions. Considering such significance, it is imperative for the firm to make a wise, systematic decision in evaluating and selecting suppliers. To support a critical sourcing decision, we propose a supplier evaluation decision-aid tool within the framework of business analytics, which takes in to account the multiple facets of supplier performance evaluation criteria. As a core of such a tool, we develop a relatively new model that is capable of considering both objective and subjective performance criteria simultaneously using a combination of data envelopment analysis (DEA) and analytic hierarchy process (AHP). To verify the practicality and validity of the proposed analytics-based tool, we applied it to an actual problem facing a US aerospace company.