Supplier Choice Model

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In Supply chain management every element plays its important role. In SCM Supplier selection is the most important process to find out better option available in the market. While supplier development involves embracing supplier expertise and aligning it to the buying organization’s business need. In a literature survey and explorative interviews, relevant criteria including supplier improvement potential through buyer involvement, strategic factors of the supplier development program as well as project success factors in supplier development. Subsequently a decision model based on the analytic hierarchy process (AHP) is applied to the supplier selection.
Keywords: Supply chain management, Supplier development, Analytical hierarchy process.
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In the following years a lot of work in this field was done by a number of researchers who propose systematic models to the selection problem. In an extensive literature review [11] the existing research of the final choice models into five categories.
(1) Linear weighting models: linear weighting models are the most commonly used method in supplier selection. All criteria are attributed with weights, with the highest weighted criteria having the highest importance. These criteria weights are then multiplied with a supplier’s rating and summed in order to obtain the final rating. In linear weighting the analytic hierarchy process (AHP) and its derivatives are very popular due to their ability to provide criteria weights and performance scores by verbal, qualitative statements or quantitative statements in complex
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Localization of volumes How much would the development of the supplier help for the strategy of localizing volumes?
Once the questions were formulated, an individual rating scale for each question was created based on the possible values. The options on each rating scale depended very much on the availability of information for evaluation of a criterion and the nature of this information. A rating scale with quantitative intervals is used for most cost reduction potentials for example whereas management capability was rather graded in qualitative options.

Table 5: Rating scales from the supplier evaluation questionnaire
Long-term price savings potential < 1 % 1 – 2 % 2 – 3 % 3 – 5 % > 5 %
Top management capability very low low Satisfactory high very high

In order to guarantee a consistent rating of the suppliers even when evaluated by different purchasing agents, a detailed instruction on how to rate the suppliers was created.

Table 6: Rating instruction for the top management capability
Very low Low Satisfactory High Very
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