An Integrated Approach To Supplier Selection Problem

Mohamed Khaled, Omar and Mohd. Razali, Muhamad and Abdul Hafiz, Abdul Rajak (2010) An Integrated Approach To Supplier Selection Problem. Project Report. UTeM, Melaka, Malaysia. (Submitted)

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Abstract

AN INTEGRA TED APPROACH TO SUPPLIER SELECTION PROBLEM (Keywords: supplier selection, decision tree, equal probability failure)Most of the literatures have used stand alone approaches to solve supplier selection problem and in fact, only a few have used integrated approaches in solving the subject matter. This project proposed another integrated approach that could enhance the solution provided by the stand alone approaches proposed in the literatures. A h~o-phase methodology which integrates decision tree which is a single objective decision making (SODM) approach, and analytic hierarchical process (AHP) which is a multiple criteria decision making (MCDM) approach to solve supplier selection problem is proposed. In the first phase, the decision tree model is used to dete1mine the optimal number of suppliers considering the risks of having assigned suppliers to be unable to perform in certain inevitable circumstances. Then, the AHP model is used to rank the suppliers accordingly based on multiple selection criteria which include price, quality and delivery in the second phase. Finally, based on the results from the h¥0 phases, the best suppliers are selected. In order to examine the advantages of the proposed integrated approach, one example problem regarding supplier selection as proposed and solved in the previous literature was considered and solved. The results of the solutions comparison indicated that the decision tree model proposed in the previous literature can provide a solution that can only suggest the optimal number of suppliers. The decision tree model is unable to select the best suppliers based on multiple selection criteria. The solution provided by the proposed integrated approach managed to successfully provide the optimal number of suppliers as well as the best suppliers that should be selected based on the multiple selection criteria. Decision tree and AHP are complement to each other since each of the approaches compensated each other's drawback in supplier selection problem. The decision making process solved by usrng this integrated approach is described as Multiple Criteria Decision Making under Risk and it has been proven to enhanced the solution provided by the stand alone approaches proposed in the previous literatures for supplier selection problem.

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