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Product-driven supply chain selection using AHP. 937806 林伯鴻. Reference. Wang Ge., R., Huang S.H., Dismukes J.P., 2004. “product-driven supply chain selection using integrated multi-criteria decision-making methodology,” International Journal of Production Economics vol.91, pp1-15

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  • Wang Ge., R., Huang S.H., Dismukes J.P., 2004. “product-driven supply chain selection using integrated multi-criteria decision-making methodology,” International Journal of Production Economics vol.91, pp1-15
  • Korpela, J., Lehmusvaara. A., Tuominen, M., 2001.”Customer service based design of the supply chain”, International journal of production economics, vol.69, pp193-204
  • Ramanathan. R., Ganesh,L.S.,1995. “Using AHP for resource allocation problems,” European Journal of Operation Research vol. 80 pp 410-417
  • Satty, T.L.,1980, The analytic Hierarchy Process, New York: McGraw-Hill
  • Introduction of AHP
  • Product characteristics and supply chain strategy
  • Problem definition and SCOR model
  • Solution methodology
  • Illustrative example
  • Conclusion
introduction of ahp 1 2
Introduction of AHP(1/2)
  • AHP (Analytic Hierarchical Process)

分析層級程序法 (AHP) 是Thomas, L. Saaty 在l971 年發展出的一種多屬性決策方法,能支援個人或群體的決策。分析層級程序法主要是用來協助群體決策的制定,是最常用來協助決策者找出最佳策略方案的工具,例如,資訊系統的評估與選擇,旅遊方案的選擇,資源分配的問題及供應鏈中供應商的選擇。

  • AHP的執行步驟可分成三階段:




introduction of ahp 2 2
Introduction of AHP(2/2)
  • AHP與ANP (Analytic Network Process)的差別

分析網路程序法(ANP)於1996年由Saaty所提出,此方法藉由早期之分析階層程序法(Analytic Hierarchy Process, AHP)所衍生而來並加以結合網路系統型態所呈現。主要優勢乃是將分析階層程序法結合一回饋(feedback)之機制而加以闡述及發展之。


product characteristics and supply chain strategy
Product characteristics and supply chain strategy
  • Generally, product can be categorized into three types :
    • Functional product:

accurately forecasted, market share fairly constant, enjoy a long life cycle

    • Innovative product:

new developed product, more adapted to the customer requirements

    • Hybrid product

mix of functional and innovative product

product characteristics and supply chain strategy1
Product characteristics and supply chain strategy
  • Typically, supply chain can be classified into three categories :
    • Lean supply chain (LSC)

focus on elimination of waste, reduction of set-up times, small quantities, achieving cost reduction, flexibility, customer requirements

    • Agile supply chain (ASC)

focus on achieving a speedier delivery and lead time flexibility

    • Hybrid supply chain (HSC)

focus on “assemble to order”, achieving mass customization by postponing product differentiation

product characteristics and supply chain strategy2
Product characteristics and supply chain strategy
  • Supply chain classification based on product type and product life cycle
problem definition and scor model
Problem definition and SCOR model
  • Problem definition
    • Company A produce m products.
    • For each products pi (i=1,2,…,m), it may consists nicomponents, which need to be outsourced.
    • For each outsource component cij (j=1,2…ni), there are kijpotential supplier to choose from.
    • Each supplier Sijx (x=1,2,…,kij) has a known production capacity Rijx.
    • According to the production plan, company A will purchase Tij units of components cij form one or more suppliers
problem definition and scor model1
Problem definition and SCOR model
  • Supply chain operations reference (SCOR) model
    • Supply Chain Council (SCC) constructed a descriptive framework called SCOR (SCC, 1999)
    • SCOR is a standard supply chain process reference model designed to embrace all industrials.
  • The SCOR model endorses 12 performance metrics, which fall into four defining categories:
    • Delivery reliability
      • Delivery performance (DR1)
      • Fill rate (DR2)
      • Order fulfillment lead time (DR3)
      • Perfect order fulfillment (DR4)
problem definition and scor model2
Problem definition and SCOR model
  • Flexibility and responsiveness
    • Supply chain response time (FR1)
    • Production flexibility (FR2)
  • Cost
    • Total logistics management cost (CT1)
    • Value-added productivity (CT2)
    • Warranty cost or returns processing cost (CT3)
  • Assets
    • Cash-to-cash cycle time (AT1)
    • Inventory days of supply (AT2)
    • Asset turns (AT3)
solution methodology
Solution methodology
  • The developed methodology
    • To choose most favorable suppliers through qualitative method (AHP)
    • To order various quantities through quantitative method (preemptive goal programming)
solution methodology1
Solution methodology
  • An integrated AHP-PGP algorithm for supplier selection
solution methodology2
Solution methodology
  • Step1 : Define decision variables for goal programming
    • Qx : purchasing quantity form supplier x
    • Ef : Amount of over-achievement for goal f
    • Uf : Amount of underachievement for goal f


    • X : supplier index, x=1,2,3,…,kij
    • f : goal (priority) index, f=1,2,3,….,F
  • Step2 : Define the parameters
    • Tij : customer demand for component j of product i
    • TVP : total value of purchase
    • TCP : total cost of purchase
    • Dx : unit purchasing cost of supplier x
    • Rx : production capacity of supplier x
    • F : number of goals (priorities)
    • Kij: total number of potential alternatives for component j of product i
    • Wx: AHP weight for supplier x
solution methodology3
Solution methodology
  • Step3 : State the constraints
  • Step4 : Determine the preemptive priorities incorporating AHP weights
    • Priority 1. Maximize the TVP,
    • Priority 2. Minimize the total cost of purchase
solution methodology4
Solution methodology
  • Step5 : Determine the detrimental deviation
    • P1 : U1
    • P2 : E2
  • Step6 : State the priority objectives
    • P1 : min U1 ………(6)
    • P2 : min E2 ………(7)
  • Step7 : Find the optimal solution
    • By using commercial software tool for goal programming, such as WinQSB, Lingo, the optimal solution to the goal programming can be obtained.
illustrative example
Illustrative example
  • GW Inc. is a car manufacturer that can produce various functional components, such as, engine, body, glass components, etc.
  • Only three components need to be outsourced, i.e. tires, electronics, and peripherals.
    • Tires : focus on reducing costs, while flexibility and responsiveness are not so important.
    • Peripherals: focus on rapid changes, while cost is not so important.
    • Electronics : require mass customization, yet its aggregated demand is stable.
illustrative example4
Illustrative example
  • The decision variables
    • X=1,2,3
    • f=1,2
    • F=2
    • Kij=3
  • The constrains are
illustrative example5
Illustrative example
  • The priorities are as follows
    • Priority 1. Maximize TVP
    • Priority 2. Minimize total cost of purchase (TCP)
  • Optimal solution can be decided :

supplier A1 and A3 are chosen with 400 and 600

  • 根據老師上課的指示,要我先去瞭解goal programming並把goal programming轉換成linear programing。
  • 轉換過程:
  • 我有附上Word檔即是詳細的轉換流程,請老師您查閱,謝謝您。
  • The integrated AHP-PGP methodology can select the best set of multiple suppliers to satisfy capacity constraint.
  • It can be concluded that LSC strategy should be deployed for component tires, ASC for peripherals and HSC for electronics.
  • The mathematical results from the AHP model perfectly match the above theoretical analysis.
  • Which will influence the final quantity?
    • Since PGP uses AHP ratings as input, the variations of pairwise comparisons in AHP will influence the final order quantity
    • To make sure that the decision maker (managers) does not make mistakes that cause conflicting rating, a final inconsistency checking (CR<0.1) is applied.