Using the Analytic Hierarchy Process to Structure the Supplier Selection Procedure

TLDR

Supplier selection is critical to purchasing, yet criteria such as quality, price, delivery, and service often conflict and include both quantitative and qualitative measures. The study proposes a methodology that integrates subjective and objective evaluation measures for supplier selection. The authors describe the Analytic Hierarchy Process and illustrate its application with a detailed hypothetical example. They present a flexible framework that any buying organization can adapt to its specific needs.

Abstract

The supplier selection problem is perhaps the most important component of the purchasing function. Some of the common and influential criteria in the selection of a supplier include quality, price, delivery, and service. These evaluation criteria often conflict, however, and it is frequently impossible to find a supplier that excels in all areas. In addition, some of the criteria are quantitative and some are qualitative. Thus, a methodology is needed that can capture both subjective and objective evaluation measures. The Analytic Hierarchy Process (AHP) is a decision‐making method for ranking alternative courses of action when multiple criteria must be considered. This article shows how AHP can be used to structure the supplier selection process. This method of selection is described, and a detailed, hypothetical example of how AHP can be used also is provided. Finally, a framework is presented that any buying organization can adapt to fit its specific set of needs.