Product-driven supply chain selection using AHP

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Product-driven supply chain selection using AHP

• 937806 ???

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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
• 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

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Agenda

• Introduction of AHP
• Product characteristics and supply chain strategy
• Problem definition and SCOR model
• Solution methodology
• Illustrative example
• Conclusion

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Introduction of AHP(1/2)

• AHP (Analytic Hierarchical Process)
• ??????? (AHP) ?Thomas, L. Saaty ?l971
  ??????????????,?????????????????????????????????,?
  ????????????????????,??,??????????,???????,???????
  ????????????
• AHP???????????
• 1.???????????
• 2.?????????????????????
• 3.???????????

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Introduction of AHP(2/2)

• AHP?ANP (Analytic Network Process) ???
• ???????(ANP)?1996??Saaty???,??????????
  ?????(Analytic Hierarchy Process,
  AHP)???????????????????????????????????????(feedba
  ck)?????????????
• ??AHP????????????,?????????????????????,
  ????ANP?????????,?????????????????????????????ANP?
  ???????????????????????????????????

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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

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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

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Product characteristics and supply chain strategy

• Supply chain classification based on product type
  and product life cycle

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Problem definition and SCOR model

• Problem definition
• Company A produce m products.
• For each products pi (i1,2,,m), it may consists
  ni components, which need to be outsourced.
• For each outsource component cij (j1,2ni),
  there are kij potential supplier to choose from.
• Each supplier Sijx (x1,2,,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

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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)

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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)

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Solution methodology

• The developed methodology
• To choose most favorable suppliers through
  qualitative method (AHP)
• To order various quantities through quantitative
  method (preemptive goal programming)

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Solution methodology

• An integrated AHP-PGP algorithm for supplier
  selection

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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
• Where
• X supplier index, x1,2,3,,kij
• f goal (priority) index, f1,2,3,.,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

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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

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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.

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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.

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Illustrative example
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Illustrative example
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Illustrative example

• Result

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Illustrative example

• The decision variables
• X1,2,3
• f1,2
• F2
• Kij3
• The constrains are

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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

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??

• ?????????,??????goal programming??goal
  programming???linear programing?
• ????
• ????Word??????????,??????,????

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Conclusion

• 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.

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Conclusion

• 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 (CRlt0.1)
  is applied.

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• Thanks for your listening!!!