AHP Model for Supplier Selection in Supply Chain Risk Management for New Product Introduction of Electrical Equipment

Yang Ling

Abstract

In an assembly manufacturing company, supply chain management and risk mitigation within the supply chain is crucial to ensure an economical product, acceptable product quality and time to market. Therefore, management of supplier base especially qualification and selection is key to a successful product build. Procurement team in the company needs to decide on the optimum supplier for component and material supply, and convince the relevant stakeholders of their decision. The project focuses on developing a methodology to support the decision making process to select the optimum supplier for new projects. Analytical Hierarchy Process (AHP) models of supplier selection is utilized for this purpose with the aim to minimize the overall supply risk, so as to be cost-effective in ensuring timely material supply. With a quantifiable output, decision makers can select evaluation outcomes to identify the best choice of suppliers. To illustrate this, a case study for the company which produces electrical equipment is presented to demonstrate and verify the effectiveness of the proposed AHP-based algorithm. Finally, sensitivity analysis is performed to test the stability of the priority ranking. Therefore, this report illustrates how the AHP model could be implemented to help procurement team determines the supplier selection quickly and effectively.