Evaluation of Supplier’s Performance Using AHS- VZA Method: An Application in The White Good Sector

In an age of intensive competiveness circumstances firms find themselves obliged to increase efficiency, decrease costs, follow up the changing needs of customers and meet the demands of customers fast. In realizing this, supply chain has to be managed effectively. As well as the prior, a performance based Supply Chain Management (SCM) is required. The suppliers providing raw materials in production processes have become important components of SCM. All of the activities of the firms have been influenced by suppliers’ performances. In such regard, an assessment of suppliers’ selection and performance evaluation becomes an important element. Supplier selection become very important issue in the supplier selection and evaluation process. Therefore, supplier selection is discussed in detail. Supplier selection criteria used in the selection process are determined by literature. At this point, determination of the criteria to evaluate the performance of supplier is important. In literature, there are different classifications devoted to supplier selection criteria. In many studies, 23 criteria determined by Dickson (1966) are used. If performance measurement criteria select correctly, the effectiveness of suppliers performance will reveal the correct results. After determining the supplier selection criteria, determining the method to use for measure and evaluate supplier’s performance is a major issue. In literature, there ara several supplier selection method used in the supplier selection. Businesses should prefer to use the most appropriate method among these methods. AHP is very popular to academic researchers for data analysis and model verifications, and to provide critical information for managers to make business decisions. The foundation of the Analytic Hierarchy Process (AHP) is a set of axioms that carefully delimits the scope of the problem environment (Saaty 1986). It is based on the well- defined mathematical structure of consistent matrices and their associated eigenvector’s ability to generate true or approximate weights (Merkin,1979; Saaty,1980). The AHP methodology compares criteria, or alternatives with respect to a criterion, in a natural, pair wise mode. To do so, the AHP uses a fundamental scale of absolute numbers that has been proven in practice and validated by physical and decision problem experiments.Data Envelopment Analysis (DEA) is a widely accepted evaluation method by researchers because it has repeatedly proved its ability to effectively handle multiple conflicting properties associated with the modern requirements of administrative sciences in supplier selection. Much of the research for suppliers evaluation and selection apply DEA. Because DEA is a non-parametric, linear programming based technique for measuring the relative efficiency of homogeneous units. DEA is a relatively new “data oriented” approach for evaluating the performance of a set of peer entities called Decision Making Units (DMUs) which convert multiple inputs into multiple outputs. DEA for measuring the efficiency of a DMU relative to similar DMUs in order to estimate a ‘best practice’ frontier. DEA achieves to classify the units into efficient units that achieve efficiency scores equal to the upper bound and inefficient units that are those that do not succeed to do so. White goods manufacturing is one of the most important industries in Turkey. In recent years, technological advances and globalization have changed the conditions for competition. These changes have significantly affected the white goods industry. The buyer-supplier relationship management practises in this sector vary depending on the necessity of meeting market needs quickly under the competition and environmental conditions. In particular, long term customer-supplier relationships are frequently used in the past has been replaced by a short-term relationships. However coordination and strategic partnerships with suppliers have gained importance (Perona and Saccani, 2004; 189-190). Thus, integration between the main manufacturers (OEMs Original Equipment Manufacturers) and supplied raw materials and component manufacturers have an importance. Therefore establishing the supply chain correctly, developing of good relations with suppliers and measuring the efficiencies for suppliers are among the important activities fort he supply chain success.The purpose of this study is suppliers performance measurement and evaluation of a white goods manufacturer in Turkey. Due to the white goods sector shows development potential in recent years, it was chosen as the subject of research. A success for the firms operating in this sector depends on interoperability with suppliers. For this reason, the appropriate suppliers evaluation and selection appear to be extremely important activities. In that respect the findings of this study reveal useful and practical results both firms and their suppliers in this sector. In this context the implementation process consists of three stages. First supplier evaluation criterias will be determined for firm, then priorities of these criterias will be analyzed with AHP. Finally selected criterias are included DEA model and will be measured and evaluated performance efficiencies of suppliers. In this study, Dickson’s supplier selection criteria are determined for supplier selection and evaluation process. AHP has been applied to determine the criteria that are important in terms of firm and the priorities used in the evaluation process have been obtained. Quality, delivery, price, production facilities and capacity, technical capability, operational controls, performance history and procedural compliance are identified as a high priority. During the evaluation of the supplier’s performance, these criteria are analyzed via DEA. 20 supplier account for four different sub-components supplier are analysed through DEA and supplier’s performance are measured. In consequence of the analysis, it is observed that %35 of suppliers have effective performance. The efficiency levels of the unefficient suppliers ranged from 0,934% to 0,998%. For the inefficient suppliers essential improvement suggestions are made.Having a high performance is important for suppliers as well as the firms. If suggestions for improvements of the suppliers performance take into consideration perform the improvements, suppliers will reach the desired level of activity. In this respect, one of the suggestions to the firm is set up the supplier evaluation and development systems. The other suggestion is to have the supplier certification application. Firm’s evaluation and development activities will help suppliers to improve their performance. And this will develop a long-term and cooperative relations with the suppliers. To work long-term and compatible with suppliers having effective performance will be a positive impact on the company s efficiency and effectiveness.