bestchoice: a decision support system for supplier selection in e-marketplaces june 26, 2006 dongjoo...
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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