Application of Analytical Hierarchy Process (AHP) Technique To Evaluate and Selecting Suppliers in an Effective Supply Chain

Abstract

With increasingly competitive global world markets, companies are under intense pressure to find ways to cut production and material costs to survive and sustain their competitive position in their respective markets. Since a qualified supplier is a key element and a good resource for a buyer in reducing such costs, evaluation and election of the potential suppliers has become an important component of supply chain management. Most supplier selection models consider the buyer’s viewpoint and maximize only the buyer’s profit. This does not necessarily lead to an optimal situation for all the members of a supply chain. This paper deals with a brief review of the literature regarding AHP technique and its relevancy to its application in supplier selection process. Supplier selection is a complicated process. This process needs evaluation of multiple criteria and various constraints associated with them. After analysis of the results we found that for manufacturing firms, supplier reliability, product quality and supplier experience are the top three supplier selection problems that needs to be taken up on priority for effective vendor selection.