Professional Documents
Culture Documents
• In order to
• Improve the QUALITY of goods and services.
• Maximize the OVERALL VALUE of
manufacturer.
• Reducing the product supply RISK.
• Maximizing the customer SATISFACTION level.
Why supplier selection?
• To establish a LONG-TERM EFFECTIVE
COLLABORATION with the efficient
organizations.
Level 1 Objective
…
Criterion 1 Criterion 2 Criterion K
Level 2
9
The Analytic Hierarchy Process
Step 1. Decompose the problem into a hierarchy of interrelated
9
The basic procedure is as follows:
A B C D Inverse of entities
given below the
diagonal
B 1 e12
e13
C e21 1 e23
D e31 e32 1
Degree of
preference of rows
over the column
AHP-Steps…
Step2: Determination of Normalized value
Divide j column
elements with
e11/A e12/B e13/C summation of column
A=e11+e21+e31
e31/A e32/B e33/C
B=e12+e22+e32
C=e13+e23+e33
This matrix is
known as the
Normalized matrix
AHP-Steps…
Step3: Determination of principal vector or
Eigen Vector
Represents the
relative importance
C= C2 = K2/3
k1=e11/A+ e12/B +e13/C
C3 K3/3 k2=e21/A+ e22/B +e23/C
k3=e31/A+ e32/B +e33/C
Consistency Ratio
The purpose is to make sure that the original
preference ratings were consistent.
18
Limitations
No more than about 7 elements should be
compared at one time because the
inconsistency will be large and determining
which value to change will be difficult
B 3 1
Example
An organization is trying to select the best supplier from
a set of three suppliers. The company want to use AHP
to help it decide which one to select. The organization
has four criteria they will base their decision that are as
following:
1. Property price
2. Distance
3. Quality
4. Cost of labor.
Matrices given criteria
and preferences
Performance evaluation Identification of SCN Identification of transshipment
A B C
A B C A B C
A 1 3 2
A 1 1/3 1 A 1 6 1/3
B 1/3 1 1/5
B 3 1 7 B 1/6 1 1/9
C 1/2 5 1
C 1 1/7 1 C 3 9 1
Step 1
Performance evaluation
A B C
A 1 3 2
+ + +
First sum (add up) all
B 1/3 1 1/5
the values in each
+ + + column.
C 1/2 5 1
= 11/6 9 16/5
Step 2
A B C
A 111/6 = 6/11 39 = 3/9 216/5 = 5/8
Next the values in each
+ + +
column are divided by
B 1/311/6 = 2/11 19 = 1/ 9 1/516/5 1/16
the corresponding
+ + + column sums.
C 1/211/6 = 3/11 59 = 5/9 116/5 = 5/16
= 1 1 1
Performance evaluation
A B C Row Average
A 6/11 ~.5455 + 3/9~.3333 + 5/8~ .6250 = 1.5038 3 = .0512
B 2/11~.1818 + 1/9~.1111 + 1/16~.0625 = .3544 3 = .1185
C 3/11~.2727 + 5/9~.5556 + 5/16~.3803 = 1.2086 3 = .3803
1.000
Step 4
Apply Step 1-3 on each criteria that results in the average for
all the criteria.
Performance
evaluation 1 1/5 3
Identification
of SCN 5 1 9
Identification
1.000
Row average= preference
vector for the criteria
CRITERIA
Price .18033
Distance .74813
Quality .07154
FINAL CALCULATIONS
CRITERIA
Supplier Price Distance QUALITY
A .5012 .2819 .1790 Price .18033
X
B .1185 .0598 .6850 Distance .74813
C .3803 .6583 .1360
QUALITY .07154
This is the
A .3091 best
supplier
B .1595
C .5314
1.0000