BestChoice: A Decision Support System BestChoice: A Decision Support System

for Supplier Selection in e-Marketplacesfor 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

DEECS 2006 - 2Copyright 2006 by CEBT Center for E-Business Technology

ContentsContents

Introduction Supplier Selection Problem in e-Procurement Agency

BestChoice Supplier Evaluation

Supplier Evaluation Policy

Analysis of Supplier Evaluation Results

Implementation Architecture

Application

Validation of BestChoice

Conclusion

DEECS 2006 - 3Copyright 2006 by CEBT Center for E-Business Technology

Supplier Selection ProblemSupplier 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

DEECS 2006 - 4Copyright 2006 by CEBT Center for E-Business Technology

BestChoiceBestChoice

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)

DEECS 2006 - 5Copyright 2006 by CEBT Center for E-Business Technology

Five-Step Supplier Evaluation ProcessFive-Step Supplier Evaluation Process

price delivery

qualityfinancial state

performancehistory

...

factor pool

pricedeliveryquality

2) determine factors

3) select utility functions

4) assign weights

1) establish the goal

pricequality

delivery

5) calculation of utilities

Name Utility Rank

A 0.85 1

B 0.62 2

C 0.32 3

service

DEECS 2006 - 6Copyright 2006 by CEBT Center for E-Business Technology

Supplier Evaluation Policy - exampleSupplier Evaluation Policy - example

FactorUtility

FunctionWeight

Constraints

Price Linear 0.4 None

Delivery Step 0.2 None

Quality Log 0.2 None

Service Linear 0.2 None

Furniture FactorUtility

FunctionWeight

Constraints

Price Linear 0.1 None

Delivery Step 0.2 None

Quality Log 0.3 None

Defective Ratio

Linear 0.4 None

Bearing

FactorUtility

FunctionWeight

Constraints

Price Linear 0.5 None

Delivery Step 0.3 10 days

Quality Log 0.2 None

Stationery

Different evaluation settings for products

DEECS 2006 - 7Copyright 2006 by CEBT Center for E-Business Technology

Supplier Evaluation PolicySupplier 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

DEECS 2006 - 8Copyright 2006 by CEBT Center for E-Business Technology

Supplier EvaluationSupplier 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

DEECS 2006 - 9Copyright 2006 by CEBT Center for E-Business Technology

Utility CalculationUtility 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

DEECS 2006 - 10Copyright 2006 by CEBT Center for E-Business Technology

NormalizationNormalization

Convert raw values to fit in a common range, (0, 1)

Hard to know min and max before evaluating

Dynamic normalization

Normalization formula

0

1

DEECS 2006 - 11Copyright 2006 by CEBT Center for E-Business Technology

Weight AssessmentWeight 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

DEECS 2006 - 12Copyright 2006 by CEBT Center for E-Business Technology

Analysis ofAnalysis of supplier evaluation resultssupplier 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

DEECS 2006 - 13Copyright 2006 by CEBT Center for E-Business Technology

ArchitectureArchitecture

Data Warehouse Factor PoolUtility Function

PoolSEP Pool

Supplier EvaluationEngine

Factor ManagerUtility Function

ManagerSEP Manager

Supplier Evaluation ResultAnalysis GUI

Manager UI

Database Layer

Logic Layer

Interface Layer

Read only Read & Write

DEECS 2006 - 14Copyright 2006 by CEBT Center for E-Business Technology

ApplicationApplication

installed at iMarketKorea, one of the major e-procurement agency in Korea

SEP ListViewer

SupplierList Viewer

AnalysisUI

SEPViewer

DEECS 2006 - 15Copyright 2006 by CEBT Center for E-Business Technology

Validation of BestChoiceValidation of BestChoice

Effectiveness

Evaluation accuracy

* RFQ : Request For Quote

*

DEECS 2006 - 16Copyright 2006 by CEBT Center for E-Business Technology

Conclusion & Future WorkConclusion & 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 the Supplier Relationship Management System