1. Problem Definition
Vendor is a business partner that plays an important role in ensuring the availability of the supply of goods needed by the company. Vendor performance will affect the performance of the company. Therefore, companies need to assess vendor carefully and continuously.
Vendor assessment requires a variety of criteria that can describe the overall performance, therefore evaluation should be based on criteria that may have added value to the current conditions and in the future conditions. During this time, Company evaluate vendor only focused to the current value criteria and the valuation models are not classified according to the classification of vendor.
Each company has different criteria in assessing vendor, depending on the objectives to be achieved by the company. Most companies assess vendor focused solely on the price of items, quality of items and delivery time without any notice given on the influence of the total cost. What are the parameters should be consider in vendor evaluation? What is the most affecting?
2.Identify the Feasible Alternative
Several factors that need to be assess:
- After sales service
There are two factors used in designing relationships with contractor
- The level of strategic importance for the company
- Level of difficulty managing the purchase of items.
3. Development of the Outcome for Alternative
Parameter selection with analytical hierarchy process (AHP) method
- Perform pairwise comparison
The fundamental scale of absolute numbers
The consistency ratio (C.R.) for the comparison above is calculated to determine the acceptance of the priority weighting. Based on Saaty’s empirical suggestion that a C.R. = 0.10 is acceptable
Estimating the consistency ratio is as follows:
Dividing all the elements of the weighted sum matrices by their respective priority
Then compute the average of these values:
Random consistency (RI) for size of matrix 4 is 0.9
As the value of CR < 0.1, the judgments are acceptable
Composite priority weights for sub sub-criteria
4. Selection Criteria
Criteria that having biggest global weights will be selected the most parameters that influence for vendor selection.
5. Analysis and Comparison of the Alternative
6. Selection of the Preferred Alternative
Based on comparison table, price (within budget) is the most influence in selecting vendor.
7. Performance Monitoring and the Post Evaluation of Result
Companies that have chosen to be a vendor should always be monitored on their performance through periodic assessments. The results of this assessment are used as input for the supplier to improve their performance.
1. Saaty, T. L. (2008). Decision making with the analytic hierarchy process. Int. J. Services Sciences.
2. SupplyChainOpz. (2014, May). Segmenting Supply Chain using Portfolio Matrix (2×2 Matrix). Retrieved from http://www.supplychainopz.com/2013/05/supply-chain-portofolio-matrix.html
3. Emerald Group Publishing (Bingley, Gran Bretan) (1985). Handbook of business strategy. Bingley: Emerald Group Publishing.