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 deliveryquality

financial stateperformance

history...

factor pool

pricedeliveryquality

2) determine factors

3) select utility functions

4) assign weights

1) establish the goal

pricequality

delivery

5) calculation of utilitiesName 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

Factor Utility Function Weight Constraint

sPrice Linear 0.4 NoneDelivery Step 0.2 NoneQuality Log 0.2 NoneService Linear 0.2 None

Furniture Factor Utility Function Weight Constraint

sPrice Linear 0.1 NoneDelivery Step 0.2 NoneQuality Log 0.3 NoneDefective Ratio Linear 0.4 None

Bearing

Factor Utility Function Weight Constraint

sPrice Linear 0.5 NoneDelivery Step 0.3 10 daysQuality 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 formula0

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 Pool Utility FunctionPoolSEP Pool

Supplier EvaluationEngine Factor Manager Utility 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