BestChoice: A Decision Support System for Supplier Selection in e-Marketplaces

1. BestChoice: A Decision Support System for Supplier Selection in e-Marketplaces June 26, 2006 Dongjoo Lee, Tahee Lee, Sue-kyung Lee, Ok-ran Jeong, Hyeonsang Eom, and Sang-goo Lee Seoul National University, Korea

2. Contents • Introduction • Supplier Selection Problem in e-ProcurementAgency • BestChoice • Supplier Evaluation • Supplier Evaluation Policy • Analysis of Supplier Evaluation Results • Implementation • Architecture • Application • Validation of BestChoice • Conclusion Center for E-Business Technology

3. Supplier Selection Problem • Problems • supplier selection depends on experience of agents • not enough experienced agents that deal with supplier selection which is excessively time-consuming • Benefits of decision support system • evaluate suppliers by logical evaluation model • support visualization and analysis of evaluation • store knowledge of experienced agents to be transferred to inexperienced agents • speed up the selection process Center for E-Business Technology

4. BestChoice • Framework for supplier evaluation • supplier evaluation is expressed as numeral value : Utility • five-step supplier evaluation process • once the evaluation is done, necessary information to evaluate suppliers is stored in Supplier Evaluation Policy (SEP) Center for E-Business Technology

5. Five-Step Supplier Evaluation Process 3) select utility functions price delivery quality 2) determine factors 4) assign weights price quality delivery price delivery quality service 5) calculation of utilities financial state ... performance history factor pool 1) establish the goal Center for E-Business Technology

6. Supplier Evaluation Policy - example • Different evaluation settings for products Bearing Furniture Stationery Center for E-Business Technology

7. Supplier Evaluation Policy • Rule for evaluating the suppliers • when item involved in S is requested to purchase, evaluate suppliers by this method • Reuse of SEP for similar purchase requests speeds up the selection process • SEP allows the inexperienced to learn from the expertise of experienced agents Center for E-Business Technology

8. Supplier Evaluation • Multi Attribute Utility Theory (MAUT) • The value of alternatives consist of measures over the criteria contributing to worth; all converted to a common scale of utility • Factors • indicate suppliers’characteristics and performance • qualitative – product quality, service satisfaction • quantitative – delivery, price and financial state Center for E-Business Technology

9. Utility Calculation • Raw values of factors are calculated to the normalized numeral values through Utility Function • Utility functions are used for the property of the factors Center for E-Business Technology

10. 1 0 Normalization • Convert raw values to fit in a common range, (0, 1) • Hard to know min and max before evaluating • Dynamic normalization • Normalization formula Center for E-Business Technology

11. Weight Assessment • Weight : numeral expression of importance of the factor • Various methods • AHP • technique for converting subjective assessments of relative importance into a set of weights. • By using simple Pairwise comparison, importance of factor can be calculated as numeral value Center for E-Business Technology

12. Analysis ofsupplier evaluation results • the agents can grasp the evaluation results with ease • help inexperienced agents to acquire experience and knowledge of experienced agents • Methods • What if analysis • Similarity analysis • Sensitivity analysis Center for E-Business Technology

13. Supplier Evaluation Result Analysis GUI Manager UI Interface Layer Supplier Evaluation Engine SEP Manager Factor Manager Utility Function Manager Logic Layer Data Warehouse Database Layer SEP Pool Factor Pool Utility Function Pool Read only Read & Write Architecture Center for E-Business Technology

14. SEP List Viewer SEP Viewer Analysis UI Supplier List Viewer Application • installed at iMarketKorea, one of the major e-procurement agency in Korea Center for E-Business Technology

15. Validation of BestChoice • Effectiveness • Evaluation accuracy * * RFQ : Request For Quote Center for E-Business Technology

16. Conclusion & Future Work • Other decision support systems are focused on evaluation model but BestChoice is focused on reuse of domain expertise and making selection process quick • BestChoice • reduce human effort and time to evaluate suppliers • make knowledge base to utilize domain expertise • effectiveness and evaluation accuracy was validated with application installed in iMarketKorea • Future Work • Integrating BestChoice into theSupplier Relationship Management System Center for E-Business Technology