This publication proposes a procedure for the selection of suppliers through the multi-criteria method, where the best supplier is determined integrally considering several criteria that are the most important for the company and (or) the clients, according to the judgment of experts..
The procedure allows evaluating criteria by means of quantitative scales, providing objectivity to the selection that is made, but qualitative scales are also used, which allows the combination of any type of criteria to choose the best provider, offering many potentialities to make an effective selection.
Abstract
In the present publication it is proposed a procedure for the selection of suppliers using the multiple criteria method, where it is determined the best supplier integrally considering several attributes who are the most important for the enterprise and (or) the clients, according to the opinion of experts. The procedure allows to evaluate attributes by means of quantitative magnitudes, endowing of objectivity the selection, qualitative magnitudes is also used what facilitates the combination of any type of attribute to choose the best supplier, offering many potentialities to carry out an effectiveness selection.
Introduction
In the current conditions where an increasingly dynamic market prevails, and customer demands increase exponentially, it is vitally important to ensure the effectiveness of each of the links that make up the Supply Chain or Logistics System. The first of these links is the one recognized as Supply Management, which establishes the relationships between the supplier and the client, it is in it where the assurance of the necessary resources for the production of goods or the provision of services takes place.
To ensure the effectiveness and efficiency of this logistics subsystem, it is essential to carry out adequate purchasing management, since this is who guarantees that the supplies are of quality, with the best delivery conditions, term, assortment, volume and at the lowest possible price. For purchases, it is crucial to have the best suppliers that guarantee all the above, therefore the effective selection of them contributes to maximizing the benefits of all those involved in the supply chain due to the multiplier effect that is generated in the other links. That is why the correct selection of suppliers has become very important today. There are various models and procedures in the literature to carry it out, in this publication one is proposed that is based on the so-called multicriteria optics, where quantitative and qualitative scales can be related,and it works with different expert techniques that are simple and offer many potentialities to carry out aproper decision making when selecting a provider.
Procedure for the selection of suppliers by the multicriteria method
The proposed procedure consists of six steps (Figure 1), based on multi-criteria optics and working with experts. It enables the selection of those suppliers that offer the best benefits for the company entirely on the basis of a series of qualities defined by the group of specialists.
Source: Own elaboration
Step 1: Selection and formation of the group of experts
As an initial step for the selection of suppliers, the group of experts with whom they will work in the following steps of the procedure must be formed. This selection can be done empirically with those people who have experience in the matter, mainly those who work or have worked in the purchasing processes or related to them; although it is recommended to use some method for the selection of experts.
Once the working group is formed, it is considered appropriate to hold previous sessions to explain the objectives of the procedure, clarify inaccuracies and achieve the identification and commitment of all team members.
Step 2: Determination and classification of the necessary inputs
The working group must define the inputs that the organization needs and once all of them have been listed, they are classified according to their importance for the client and (or) impact on the fulfillment of the company's objectives.
It is recommended to use methods such as Pareto for the ABC classification of inputs; where “A” are those of greatest importance or impact, “B” those of medium importance and “C” those of less relevance. This classification can stratify those inputs that are vital for the company according to the characteristic that is defined to evaluate it, and may be those that generate a greater income quota, or those that represent the highest amount of purchasing costs. It is also proposed to use other methods such as the use of matrices (figure 2) to classify the inputs to be purchased.
Source: Adapted from Kraljic, 1984 {1}
In the specific case of the proposed matrix, the importance of the supplies is evaluated both for the fulfillment of the mission of the company and to satisfy the needs and expectations of the clients. This level of importance is related to the ease of acquisition of these inputs; Therefore, the quadrants shown in figure 2 are defined. Of them, it is pointed out that due to their importance and difficulty in acquiring them, the products belonging to the first quadrant, called Strategic, with preference over the other three types of products, it is necessary carry out supplier selection studies to help overcome the limitations for their acquisition.
Step 3. Determination of relevant criteria for the selection of suppliers
Once the supplies that the company needs to supply have been classified, the criteria that the entity considers most important to select its suppliers are set. They can be understood as those essential qualities that the organization's suppliers want to possess, those that the company values as keys to guaranteeing good performance. Among the most common are the following {2}:
Source: Own elaboration.
Where:
Table 1. Kendall
Source method. Own elaboration.
W: Kendall's coefficient of agreement. If W ≥ 0.5 it can be concluded that the experts agree and the information is considered reliable.
Aij: Judgment of importance given by expert “i” to criterion “j”
T: Comparison factor (mean value of the ranges)
m: number of experts
K: number of criteria
Step 4: Definition of the supplier portfolio
In this step, we proceed to define all the possible suppliers for the company, according to the inputs that have been selected in step 2. Each supplier must be related to the input (s) they offer to facilitate the analysis.
Step 5: Assigning values to the criteria for each provider
To assign values, two scales are proposed, one quantitative and the other qualitative. The quantitative must be established for all those criteria that the company has information on its real values; Among others, it can be the price of the inputs, the value in time units of the order-delivery cycle, service level and others, to which the real value is assigned. This makes it possible to make a more objective selection, since it is based on the historical and current values of several of the criteria chosen by the experts as significant for the selection of suppliers.
The qualitative scale is proposed for those criteria for which it is not possible to establish real values. In these cases, the proposed scale is the following:
Table 2. Qualitative scale for the supplier selection criteria
Source: self made.
Step 6: Development of the multi-criteria method to select the best supplier
In this last step, the multicriteria method is carried out, to do this, the weightings of the criteria obtained by the Kendall (Kj) method in step 3 and the values assigned to the providers in the previous step are related through matrices.
A first matrix is made where the selected criteria are located by rows and by columns (table 3), locating the Yij values as appropriate; given to provider "i" for criterion "j".
Table 3. Natural Matrix of the multicriteria method
Source: Adapted from Trujillo, 1983.
All those criteria that are minimum must be multiplied by (-1), since for every subset "Z" that belongs to the real ones, it is satisfied that:
Max (Z) = - Min (-Z)
Once we have all the values in the Maximum Matrix, we proceed to create the Standardized Matrix with the values "Rij", where the units of measurement do not influence since all the criteria will be taken to homogenized values between 0 and 1; using the following formula:
Rij = Yimax Yjmin / Yij Yimín
Where from each value the minimum of the column is subtracted, and that subtraction is divided by the range of that column, that is, between the difference that exists of the provider with the highest value of that criterion and that of the provider with the minimum value for that same criterion.
Finally, the weightings of the criteria obtained by Kendall's method (Pj) are multiplied by the Rij values of the Standardized Matrix and the value of this multiplication is placed in the corresponding column, then these values are added per row to calculate the total for each supplier, selecting the supplier whose total sum constitutes the highest value (table 4).
Table 4. Standardized matrix to determine the best supplier
Source: Adapted from Trujillo, 1983.
The proposed procedure contributes to improving organizational performance through an effective selection of suppliers that facilitates increasing benefits throughout the entire supply chain. It enables the combination of qualitative and quantitative criteria allowing a greater variety of criteria for the analysis and selection of suppliers. The present procedure is considered to be widely generalizable to any type of organization.
Bibliographic references
{1} Cited by Pupo Rodríguez, Y. (2008) Postgraduate course in Business Logistics.
"Oscar Lucero Moya" University Holguín, Cuba p. 8
{2} Cespón Castro, R. (2003) Administration of the Supply Chain.
Central American Technological University UNITEC. Honduras. p. 113.
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