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Unformatted text preview: SCM 371 – Procurement and Supply Management – Fall 2011 Analytic Hierarchy Process Team Assignment Your task is to provide guidance in a vendor selection problem that your boss has been struggling with (three possible vendors need to be evaluated). The challenge within the problem is that vendors unfortunately only provided very limited quantitative information on the dimensions you specified in the RFQ (the material you are purchasing is very rare, so vendors have a lot of bargaining power, and thus did not feel obliged to provide you very detailed information). The vendor only provided quantitative information on the cost dimension, but not on the other three dimensions of quality, delivery and flexibility. Therefore, in these last three cases where you do not have any quantitative (“hard numbers”) information available, the evaluation has been challenging for the department, since they had to rely on their qualitative judgment in evaluating the vendors. You remembered this very neat approach that you learned in your SCM 371 course, called AHP, and thought you would give it a try. This was the approach that can bring structure into decision problems involving several alternatives and decision attributes (characteristics) when uncertainty is involved, and when you do not have quantitative information available. You therefore decided to apply AHP in evaluating the vendors along the four characteristics/dimensions of quality, delivery, flexibility and cost. When thinking about how to implement the approach in comparing the vendors across the characteristics, you also thought it be prudent to bring better structure in the comparison of the four characteristics determined as important in this purchase (quality, delivery, flexibility, cost). You are certain that this structured and quantitative approach will likely impress your boss, paving the way for you for a rapid acceleration on your career path. In a first preparatory step, you have already obtained all quantitative information available from the suppliers (the suppliers only provided cost information in quantitative form). If no quantitative information was available, you consulted with your procurement colleagues and/or colleagues in relevant departments, and let them evaluate how each vendor stacks up against the others for each evaluation criterion (you had them do the pairwise comparisons). You also obtained their input in the relative importance of the individual attributes. The summary of this preparatory step (the statements that they agreed on, in terms of how important the attributes are, and how each vendor’s relative performance is for each of the attributes) is provided below. Based on this information, you have mapped out the following plan of action [these are also the deliverables for the assignment]: 1. Draw the decision hierarchy (diagram) 2. Evaluate the attributes, and provide an assessment on the consistency of the statements 3. Evaluate the vendors against each attribute, and provide an assessment on the consistency of the statements 4. As a last step, you plan on putting it all together and calculating the final weights for each supplier, providing guidance on which one should be chosen. Make sure you consider this evaluation also against the results you obtained above. Can you rely on the results? 1 Summary of the pairwise comparisons by your procurement colleagues: A. Pairwise comparison of attributes: In terms of quality, your colleagues have indicated to you that quality is moderately preferred to delivery, moderately to strongly preferred to flexibility, and very strongly preferred to cost. Further, delivery is moderately to strongly preferred to both flexibility and cost. And lastly, flexibility is equally to moderately less preferred to cost. B. Pairwise comparison of the vendors along the quality dimension For the pairwise comparison of the vendors along the quality dimension, you have obtained the following statements: Vendor 2 is moderately preferred to Vendor 1, and Vendor 3 is strongly preferred to Vendor 1. In addition, Vendor 3 is equally to moderately preferred to Vendor 2. C. Pairwise comparison of the vendors along the delivery dimension For delivery, Vendor 2 is moderately to strongly preferred to Vendor 3 and strongly less preferred than Vendor 1. The consensus also found that Vendor 1 is strongly to very strongly preferred to Vendor 3. D. Pairwise comparison of the vendors along the flexibility dimension For flexibility you came up with the following statements, which reflect the collective judgment of your colleagues: Vendor 1 is moderately preferred to Vendor 2, and Vendor 1 is also equally to moderately preferred to Vendor 3. In addition, Vendor 3 is moderately to strongly preferred to Vendor 2. E. Information on the cost performance of all vendors For the cost dimension you can rely on “hard numbers” provided by the vendors. As such, Vendor 1 is quoting you a price of $600, Vendor 2 a price of $1,289, and Vendor 3 a price of $1,001. Deliverable As a deliverable, you are asked to upload your complete Excel spreadsheet to the dropbox for this assignment on Angel. Make sure that all formulas are intact, and that your work is logical (i.e., that I can follow your though process – therefore, feel free to make annotations and comments, and provide the information in a structured fashion). The spreadsheet must contain all calculations necessary to solve the AHP problem. Make sure you show and address all four deliverables noted on the first page. In a textbox at the end of your spreadsheet, provide a brief overall decision/recommendation on which vendor to go with, and any other points that you feel are worth mentioning. The assignment is due on Monday, November 7th, by 10:00 am. Only one team member needs to submit the Excel spreadsheet via the dropbox, but please ensure that all team member names are listed in the first line on the spreadsheet. 2 ...
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- Fall '11