Journal of the Operational Research Society (2001) 52, 511–522 #2001 Operational Research Society Ltd. All rights reserved. 0160-5682/01 $15.00 www.palgrave.com/jors Web based casting supplier evaluation using analytical hierarchy process MM Akarte, NV Surendra, B Ravi* and N Rangaraj Indian Institute of Technology, Bombay, India Manufacturing companies are increasingly dependent on outsourcing to improve their competitive position. At the same time, the approach to supplier selection has dramatically changed from being price-driven to one based on overall capability of the supplier, very much in evidence in the automobile castings sector facing the challenge of mass customization. In this study, 18 criteria have been identified for casting supplier assessment and segregated in four groups—product development capability, manufacturing capability, quality capability, and cost and delivery. A systematic approach to evaluating casting quality suppliers has been developed using the analytical hierarchy process, which enables the combination of tangible and intangible criteria and checking the consistency of decision-making. The approach has been implemented in a prototype web-based system. Keywords: supplier evaluation; outsourcing; AHP; internet; casting Introduction Today, manufacturing companies are facing intense global competition and consequently an incredible pressure to reduce the cost and development time of a new product. It is well known that a substantial proportion of the cost of a typical engineering product is accounted for in raw material, components and other supplies; on average, manufacturers’ purchases of goods and services amounts to 55% of revenue. 1 Purchasing is thus one of the most crucial and vital activities of business, as it has a significant impact on finance, operations and competitiveness of the organization. 2 In this context, outsourcing is rapidly gaining importance due to a number of reasons related to cost, core competence and managerial complexities of organization and activity specialization. 3 Therefore, many organizations are now allocating more resources for outsourcing activities to increase their competitive position. This is mainly achieved by a judicious combination of in-house manufacturing and outsourcing while preserving the core competencies of the organization. Selecting an appropriate supplier for outsour- cing is now one of the most important decisions of the purchasing department, as it has to fulfil the strategic goals apart from operational requirements of the organization. 2 This decision generally depends on a number of different criteria. 4 Traditionally, cost has been the main criterion used in selecting a supplier, but slowly non-price criteria such as quality, delivery and overall capability are becoming equally important. 5 Outsourcing activities have to be organized with the overall goal of customer requirement in terms of cost, quality and delivery. Often the supplier may have to be selected globally to achieve the above objective, in parti- cular, to reduce the lead-time for procurement in a time- based competitive environment. 6 With the emergence of new information technology tools (World Wide Web, Internet and electronic commerce) the time required for information management and data communication have drastically reduced. 7 These technologies can be leveraged to speed up the process of sending enquiries and part drawings to any global supplier, obtaining the quotation from them and even sending invoices and payments in real time. The shift in the approach to supplier selection (from price-based criteria to capability-based criteria) is very much in evidence in the automobile and other engineering sectors with respect to cast components. 3 Casting is the preferred process to manufacture intricate parts (cylinder block, exhaust manifold, differential casting, steering knuckle, brake drum, etc.). Manufacturing a sound casting right first time is, however, a difficult task and it largely depends on the foundry capabilities developed by the engineers over years of experience. Today, a number of newer technologies such as solid modeling, process simu- lation and rapid prototyping are available to foundry engineers to reduce the casting development time. Simi- larly, there are a wide variety of foundry facilities for molding, core making, melting and cleaning. Thus, *Correspondence: B Ravi, Department of Mechanical Engineering, Indian Institute of Technology, Powai, Mumbai 400 076, India. E-mail: [email protected]
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Journal of the Operational Research Society (2001) 52, 511±522 #2001 Operational Research Society Ltd. All rights reserved. 0160-5682/01 $15.00
www.palgrave.com/jors
Web based casting supplier evaluation usinganalytical hierarchy processMM Akarte, NV Surendra, B Ravi* and N Rangaraj
Indian Institute of Technology, Bombay, India
Manufacturing companies are increasingly dependent on outsourcing to improve their competitive position. At the sametime, the approach to supplier selection has dramatically changed from being price-driven to one based on overallcapability of the supplier, very much in evidence in the automobile castings sector facing the challenge of masscustomization. In this study, 18 criteria have been identi®ed for casting supplier assessment and segregated in fourgroupsÐproduct development capability, manufacturing capability, quality capability, and cost and delivery. Asystematic approach to evaluating casting quality suppliers has been developed using the analytical hierarchy process,which enables the combination of tangible and intangible criteria and checking the consistency of decision-making. Theapproach has been implemented in a prototype web-based system.
facilities, certi®cation and awards. Casting accuracy and
surface ®nish are mainly governed by the day-to-day shop
¯oor practices adopted, developed over many years. Test-
ing facilities (sand lab, physical lab, chemical lab, spectro-
meter and non-destructive testing or NDT facilities like
radiography, ultrasonic and dye penetration) available in a
foundry enable characterization of materials and products
during various stages of manufacturing. Certi®cation is an
assurance by, or under the supervision of a competent and
independent organization, that products produced are
consistently in conformity with a standard or speci®cation.
This includes ISO 9000, QS 9000 and self-certi®cation.
Foundries with quality awards will be preferred over others
as these are an indication of past performance.
Cost and time
This group comprises two criteria: total casting cost and
sample delivery time. Total cost of casting is given by the
summation of net price after discount (if any), transporta-
tion cost and unloading cost. Also important is the product
development time, especially for time based competitive
products. It is the sum of the time required in casting design
and development, including the tooling fabrication and
sample testing of a product.
Supplier evaluation using AHP
As described in the previous section, level 1 of AHP model
contains the overall objective of supplier selection, level 2
contains the four groups of criteria and level 3 contains
different criteria under each group. The bottom level of the
Table 1 Casting supplier evaluation criteria
Group criteria Criteria Sub-criteria Criteria value
Product development capability Maximum casting sizeMinimum section thicknessCasting complexity Low, medium, high, very highSoftware aid Solid modeling, process simulation, NC
process planningPattern making Inhouse, outsourcing
520 Journal of the Operational Research Society Vol. 52, No. 5
comparisons to assign criteria weights or to quantify the
qualitative ratings being cumbersome, a set of default
values is provided by the system. The user may change
these for a particular class of components (in terms of
geometry, material, process and quality requirements), and
set these values as default when suppliers for a similar
casting have to be evaluated. Another issue is regarding the
validity of the company pro®le data entered by a casting
supplier during registration for the service; this may have
to be veri®ed by the buyer or by a third party. Finally,
organizational aspects of suppliers such as the level of
training, employee± employer relationships and ®nancial
position (pro®t=loss) have not been considered, because
of the dif®culty in obtaining such information at present,
and may need to be considered by the buyer during ®nal
negotiations. These issues may be taken up for further
investigations, and for making the system more `intelligent'
and automated.
The entire system facilitates casting buyers to identify a
larger pool of potential suppliers worldwide, communicate
order requirements, short-list capable suppliers, and ®nally
evaluate them in a systematic mannerÐall with virtually
zero `paperwork' and in days instead of weeks by the
conventional route. The proposed methodology and the
prototype version have been demonstrated to potential
users through a series of one-day workshops in the past
few weeks. This has received very good response and
encouragement for further work. Based on the response, a
scaled-up version for full-¯edged use is being planned for
implementation with support from the industry.
AcknowledgementsÐThe authors wish to acknowledge the support of
Advanced Reasoning Technologies Private Limited for providing access
to their metalcastingworld.com web site and the assistance of the team
comprising of Amit Deshpande, Ashish Rangnekar, Kumar Swamy, Manish
Kumar Jalan, Prakash Babu and Rajiv Jain for developing the appropriate
facilities for linking and testing the supplier evaluation program. The
feedback from over 50 practicing engineers and managers, who participated
in the series of `Computer-Aided Casting' workshops is also acknowledged.
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Received February 1999;
accepted November 2000 after two revisions
522 Journal of the Operational Research Society Vol. 52, No. 5