AHP approach for supplier evaluation and selection in a steel manufacturing company

Abstract

Supplier selection is one of the most critical activities of purchasing management in supply chain. Supplier selection is a complex problem involving qualitative and quantitative multi-criteria. A trade-off between these tangible and intangible factors is essential in selecting the best supplier. The work incorporates AHP in choosing the best suppliers. The results suggest that AHP process makes it possible to introduce the optimum order quantities among the selected suppliers so that the Total Value of Purchasing (TVP) becomes maximum. In this work, an AHP-based supplier selection model is formulated and then applied to a real case study for a steel manufacturing company in Malaysia. The use of the proposed model indicates that it can be applied to improve and assist decision making to resolve the supplier selection problem in choosing the optimal supplier combination. The work represents the systematic identification of the important criteria for supplier selection process. In addition, the results exhibit the application of development of a multi-criteria decision model for evaluation and selection of suppliers with proposed AHP model, which by scoring the performance of suppliers is able to reduce the time taken to select a vendor.