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Combining Analytical Hierarchy Process And TOPSIS

Approaches For Supplier Selection In A Cable Company

Article · January 2013

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Journal of Business, Economics & Finance (2013), Vol.2 (2) Onder and Dag, 2013

COMBINING ANALYTICAL HIERARCHY PROCESS AND TOPSIS APPROACHES

FOR SUPPLIER SELECTION IN A CABLE COMPANY

Emrah Onder1, Sundus Dag2

1
School of Business, Department of Quantitative Methods, Istanbul University, Turkey, [email protected].
2
School of Business, Department of Production, Istanbul University, Turkey.

KEYWORDS ABSTRACT
Supplier selection, multi criteria In the competitive business environment of the 21st century,
decision making, analytical organizations must reply quickly and precisely to customer demands.
hierarchy process (AHP), TOPSIS The choice of suppliers and their performance assessment are becoming
method, cable sector. major challenges that face supply chain managers or directors.
Evaluating suppliers and selecting one of them are complicated tasks
due to the fact that various criteria or objectives must be considered in
the decision making process. Also in many real world cases the criteria
are not equally important for the purchase managers. In this study, we
proposed a supplier selection analysis model considering both Analytic
Hierarchy Process (AHP) and Technique for Order Preference by
Similarity to Ideal Solution (TOPSIS) method. Subjective and objective
opinions of purchase managers/experts turn into quantitative form with
AHP. TOPSIS technique is used for calculating the supplier’s ratings.
The aim of this paper is to determine the appropriate supplier providing
the most customer satisfaction for the criteria identified in the supply
chain. In this paper, data taken from a well-known cable manufacturing
company in Turkey is used to illustrate the supplier selection procedure.
Due to the fact that main raw material used in all cables, the company
strongly focuses on supply of the Electrolytic Copper Cathode. The
company detects eight different criteria for procurement of the
Electrolytic Copper Cathode. These are origin, quality, availability,
cost, delivery requirements, cost of conveyance, reliability of supplier
and quality certificates. There are four firms providing the Electrolytic
Copper Cathode for the company.

1. INTRODUCTION
In recent years, firms have been focused their attention on supply chain functions. Supplier
selection is one of the most important functions in supply chain management due to the fact that it
affects the quality of last product and total performance of the company. Also, it provides
companies with opportunities to reduce cost. The supplier selection process requires evaluating
various criteria and different supplier features. This process can be considered as a multi-criteria
decision making problem (MCDM) that includes both quantitative and qualitative factors.
Therefore, firms should take in the consideration all the criteria impact the production process
when evaluating the suppliers.

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Journal of Business, Economics & Finance (2013), Vol.2 (2) Onder and Dag, 2013

Fundamentally, there are two types of supplier selection. In the first type, one supplier can provide
all of the buyer requirements which is called single sourcing. The buyer makes one decision in this
type; which supplier is the best. In the other type, one supplier cannot provide total needs of the
buyer. In this case, buyer has to divide order quantities among several suppliers. This type of
supplier selection is called as multiple sourcing. The buyer should answer two types of questions
in multiple sourcing: which supplier is the best and how much should I purchase from every
supplier (Shahroudi and Rouydel, 2012). In this study, single sourcing is used.
Decision method in supplier selection is usually consisting of four steps. First step is problem
definition, second step is formulation of criteria, third step is pre-qualification and the last step is
final selection. Decision process and activities in steps are shown in Figure 1.
Figure 1: Supplier Selection Process

The first step, “Problem Definition”, concerns decision makings which should identify the strategy
of purchases e.g. the duration of new selection. There are two activities in the second step:
identifying the key criteria and determining the sourcing strategy. Pre-qualification, the third step
is the process of identifying potential supply source and gathering a limited pool of suppliers. The
last step in the supplier selection process is final selection. In this step, firstly selection method is
determined and then, best supplier is selected. While qualitative tools are used in the first two
steps, quantitative tools are used in last two steps.
The aim of this paper is to determine the appropriate supplier providing the most customer
satisfaction for the criteria identified in the supply chain. In this paper, data taken from a well-
known cable manufacturing company in Turkey is used to illustrate the supplier selection
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Journal of Business, Economics & Finance (2013), Vol.2 (2) Onder and Dag, 2013

procedure. We proposed a supplier selection analysis model considering both AHP and TOPSIS
method. Subjective and objective opinions of purchase managers/experts turn into quantitative
form with Analytic Hierarchy Process. Technique for Order Preference by Similarity to Ideal
Solution (TOPSIS) technique is used for calculating the supplier’s ratings.
The study is composed of seven sections. The second section provides an overview of existing
methods and studies. The third section shows the structure of the problem in the cable company.
The next section describes the proposed approach and gives information about AHP and TOPSIS.
In section five, an empirical study is illustrated in the cable production industry. Results of the
study are presented in section six. Finally, concluding remarks and discussions follow.
Multi-criteria decision making technique called AHP is applied to determine the relative weights
of the evaluation criteria. AHP approach achieves pairwise comparisons among factors or criteria
in order to prioritize them using the eigenvalue calculation. AHP model was represented in a
questionnaire to survey experts’ opinions. The relative weight of each factor in the model was
calculated.

2. LITERATURE REVIEW

Decision making for supplier selection is complex process due to the fact that various criteria must
be considered in this process. Researchers have been focus on the analysis of selection criteria and
supplier performance measurement since 1960s. Dickson (1966) studied the importance of
supplier evaluation and selection criteriafor purchasing managers and offered 23 supplier criteria
that managers consider in such an evaluation, including quality, delivery, price, performance
history and others. Weber, Current, and Benton (1991) suggested a number of selection criteria to
measure supplier performance, such as price, delivery, quality, productive capability, location,
technical capability, management organization, reputation, industry position, financial stability,
performance history, and maintainability. Mazurak, Rao, and Scotton (1985) applied a linear
weighting model that includes quality, delivery, net price and financial position as selection
criteria. Ellram (1990) proposes three principal criteria: 1) financial statement of the supplier 2)
organizational culture of the supplier 3) technological state of the supplier. Barbarosoglu and
Yazgac (1997) determined three different primary criteria:1) the performance of the supplier, 2)
the technical capabilities and financial situation of the supplier, and 3) the quality system of the
supplier.
Various methods have been suggested for supplier selection problem. All the methods can be
classified in four different categories: MCDM is the first category which contains Analytic
Hierarchy Process (AHP), Analytical Network Process (ANP) and TOPSIS methods. Yahya and
Kingsman (1999) used Saaty’sAHP method to identify priority in selecting suppliers. The
researchers applied vendor rating in supplier selection and in deciding how to distribute business,
as well as in determining where development effort is applied. Chan (2003) developed an
interactive selection model with AHP to facilitate decision makers in selecting suppliers. Liu and
Hai (2005) studied on supplier selection problem by combining a collaborative purchasing
program and a new approach, based on the use of Saaty’s (1980) AHP method. Chan et al. (2007)
suggested an AHP-based decision making approach to solve the supplier selection problem. All
suppliers were evaluated based on 14 criteria. Hou and Su (2007) developed an AHP-based
decision support system for the supplier selection problem in a mass customization environment.
Sarkis and Talluri (2002) appliedANP method to appraise and select the best supplier with regard

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Journal of Business, Economics & Finance (2013), Vol.2 (2) Onder and Dag, 2013

to organizational factors and strategic performance metrics, which consist of seven evaluating
criteria.Bayazit (2006) proposed an ANP model to evaluate supplier selection process as a
framework for managers. Gencer and Gurpınar (2007) proposed an ANP based model for an
electronic company for supplier evaluation and selection with respect to various assessment
criteria. Jadidi et al. (2010) asserted aTOPSIS based model for multi criteria supplier selection
problem. Vimal et al. (2012) used TOPSIS method to develop a useful approach for a
manufacturing company for selecting the convenient supplier.
The second category is mathematical programming methods. Data envelopment analysis (DEA)
and linear programming methods can be included in this category. Talluri and Sarkis (2002)
applied DEA to measure the performance of suppliers. Garfamy (2006) suggested a DEA model to
evaluate the overall performances of suppliers based on total cost of ownership. Wu et al. (2007)
presented a so-called augmented imprecise DEA for supplier selection. Talluri and Narasimhan
(2003) improved a max-min method basedon linearprogramming to maximize and minimize the
performance of a supplier against the best target measures set by the buyer. Ng(2008) developed a
weighted linear programming method for the supplier selection problem, with an objective of
maximizing the supplier score.
Artificial Intelligence methods, third category, contain Genetic algorithm, artificial neural network
(ANN) and data mining methods. Ding et al. (2005) presented a GA based optimization
methodology for supplier selection. The presented method provided possible configurations of the
potential suppliers, including transportation modes. LiaoandRittscher (2007) formulated a multi-
objective programming model for supplierevaluating under probabilistic demand circumstances.
The GA is employed to solve the supplierselection and supply quantity allocation in this study.
Wei et al. (1997) suggested an artificial neural network model for the supplier selection.In this
study, the performance history, quality history, geography and price of a supplier were selected as
determinant factors effecting the supplier selection. Lee and Ou-Yang (2009) offered aneural
network-based model to forecast supplier's bid price in order to shorten the lead time in
supplierselection.
The last category is integrated approaches. There are so many studies about integrated methods for
supplier selection problem in the literature. Some studies are provided below. Guang et al. (2010)
proposed an approach for the supplier selection problem in nuclear power plant supply chain
systems utilizing AHP and improved technique for order preference by similarity to ideal solution
(TOPSIS). Shahroudi et al. (2011) suggested an integrated model for supplier’s selection and order
allocation in an automotive company. The research was performed in two sections. In first section,
they used AHP-TOPSIS in order to select the best suppliers. In the second section, multi-objective
linear programming model were used for order allocation to every selected suppliers in first
section. Fazlollahtabar et al. (2011) proposed an integrated approach of AHP-TOPSIS, and multi-
objective nonlinear programming to consider both tangible and intangible factors in choosing the
best suppliers. The priorities are calculated for each supplier by use of AHP. TOPSIS is applied to
rank the suppliers. Xu and Lin (2010) two-phase data mining methodology for strategic supplier
selection. In-depth combined pattern mining is considered first to find the first-level or direct
strategic suppliers. Then extend the whole supplier network, with the help of value network, graph
theory and evaluation criteria, the strategic supplier network satisfied the needs of supply network
is generated. After that, by using strategic supplier network, companies can select the most suitable
suppliers.Bhutia and Phipon (2012) developed a methodology to evaluate suppliers in supply chain
cycle based on AHP and TOPSIS. They have calculated the weights for each criterion based on
AHPand then inputted these weights to the TOPSIS method to rank suppliers.

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Journal of Business, Economics & Finance (2013), Vol.2 (2) Onder and Dag, 2013

Demirtas and Ustun (2008) developed an integrated ANP andmulti-objective mixed integer linear
programming approach to selectthe best set of suppliers, and to determine the optimal
orderallocation.Shahroudi and Rouydel (2012) proposed an integrated approach of ANP- TOPSIS
in choosing the best suppliers and defined the optimum quantities order among selected suppliers
by using Multi-Objective Linear Programming. Kahraman et al. (2003) applied a fuzzy AHP to
select the best supplier in a Turkish white good manufacturing company. Chan and Kumar (2007)
also used fuzzy AHP for supplier selection as the case with Kahraman et al. (2003). In the
approach, triangular fuzzy numbers and fuzzy synthetic extent analysis method were used to
represent decision makers’ comparison judgment and decide the final priority of different criteria.
Ramanathan (2007) suggested that DEA could be used to evaluate the performance of suppliers
using both quantitative and qualitative information obtained from the total cost of ownership and
AHP. Sevkli et al. (2007) applied an integrated AHP–DEA approach for supplier selection. AHP
was used for the local weights and DEA was used to calculate the efficiency scores of all
suppliers.Lau et al. (2006) developed an integrated ANN and GA approach for supplier selection.
ANN was responsible for benchmarking the potential suppliers with respect to four evaluating
factors. After that, GA was deployed to determine the best combination of suppliers. The four
evaluating criteria were used again in the fitness function of GA.
The aim of this study is to propose a multi-criteria decision-making approach to evaluate the
experts’ preference orders, to examine experts’ perceptions of supplier selection. The purposes of
this study were to use Saaty’s analytic hierarchy process (AHP) to investigate the factors that
experts consider when choosing supplier, and to derive the relative weight of each factor.

3. SUPPLIER EVALUATION IN A CABLE COMPANY

An application is performed in a manufacturing company which is the most modern cable factory
in Turkey. The factory has been established in 1989 with the %100 of national capital. With the
understanding of quality and vision of chasing the development of market; the firm has been
producing insulated medium voltage cables from 3,6/6 KV up to 20,3/35 KV and 154 KV high
voltage cables.With modern IT structure and automation technology, the firm has 18.000 tons of
colored and natural PVC granulate production, 24.000 tons of 8 mm copper wire production and
4.000 tons ofXLPE material usage capacity annually.
The firm which has the finest cable factory ornamented with the modern machine park and the test
laboratories gives service with its copper wire drawing machine, cable extrusion lines, PVC
granulate production, automatic coiling and packaging lines on international quality basis.The
company aims to get standard of quality management systems and owns to certificates of TSE-ISO
EN 9000 quality secure systems and TSE-ISO EN 14000 environment management systems.
Due to the fact that main raw material used in all cables, the company strongly focuses on supply
of the Electrolytic Copper Cathode. The company considers eight criteriaduring purchasing of the
Electrolytic Copper Cathode. These are origin, quality, availability, cost, delivery requirements,
cost of conveyance, reliability of supplier and quality certificates. All of the criteria are detected by
purchasing department which is consist of four personnel: purchasing manager and three
purchasing specialist. There are four candidate suppliers for providing the Electrolytic Copper
Cathode to the firm.
The Electrolytic Copper Cathode is analyzed by the Quality Control Laboratory. In this process,
the quality laboratory gives points to the raw material based on convenience of the quality

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specifications determined by international institutions.Availability points are determined by the

purchasing department according to the length of the supply process. The cost values are given as
American dollar per 1000 kg. The cost of conveyance values are given as Turkish Lira per vehicle.
The points of delivery requirement are identified by purchasing department according to the
previous delivery times of suppliers. Reliability of suppliers points are defined with regard to
fulfillments of commitments.
There are three important quality certificates for the firm in the supplier selection process. These
are ISO 9000 Quality System Certificate, ISO 14001 Environmental Management System
Certificate and OHSAS 18001 Occupational Health and Safety Certificate. The firm gives points
to every supplier according to the weight determined by the purchasing department. As a result of
the binary comparison made by purchasing specialist, weights were found 60, 30, 10respectively.
However, the candidate supplier must have ISO 9000 Quality SystemCertificate beside other
certificates. If the suppliers have more than one certificate, the total points is calculated by adding
the weights. These values are determined as the input of TOPSIS method.

4. PROPOSED METHODOLOGY

The questionnaire conducted between the dates 1-7 March 2013 is answered by 4experts. Data
were collected from the expertsin their offices.They are asked to compare the criteria at a given
level on a pair-wise basis to identify their relative precedence. AHP is an effective decision
making method especially when subjectivity exists and it is very suitable to solve problems where
the decision criteria can be organized in a hierarchical way into sub-criteria. The findings of
previous studies about factors influencing experts’ choice of supplier were first identified by
literature review. Experts expressed or defined a ranking for the attributes in terms of
importance/weights. Each experts is asked to fill ‘‘checked mark’’ in the 9-point scale evaluation
table. The AHP allows group decision making. One of the main advantages of the AHP method is
the simple structure.

4.1. Using AHP to analyze priorities

AHP was developed in the 1970s by Thomas Saaty is a multi-criteria decision making (MCDM)
methodology. It has been used extensively for analyzing complex decisions. The approach can be
used to help decision-makers for prioritizing alternatives and determining the optimal alternative
using pair-wise comparison judgments (Liberatore and, Nydick, 1997, p. 595;Yoo and Choi p.
137, 2006).Weighting the criteria by multiple experts avoids the bias decision making and
provides impartiality (Dagdeviren, 2009).
The AHP is a selection process that consists of following steps (Saaty, 1990, 2008; Saaty and
Vargas, 2001):
1. Define the problem and determine the criteria. Factors and related sub factors must be correlated
(Lee, 2012).
2. Structure the decision hierarchy taking into account the goal of the decision.
3. Construct a set of all judgments in a square comparison matrix in which the set of elements is
compared with itself (size nxn) by using the fundamental scale of pair-wise comparison shown in

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Table 1 assign the reciprocal value in the corresponding position in the matrix. Total number of
comparison is n.(n-1)/2 (Lee, 2012).
Table 1: The fundamental scale of pair-wise comparison for AHP
Intensity of
Definition Explanation
Importance
Two activities have equal contribute to the
1 Equal importance
objective
Experience and judgment slightly favor one
3 Moderate importance
activity over another.
Experience and judgment strongly favor one
5 Strong importance
activity over another
Very strong on demonstrated
7 An activity is favored very strongly over another
importance
The evidence favoring one activity over another
9 Extreme importance
is of the highest possible order of affirmation
For compromise between the Sometimes one needs to interpolate a
2,4,6,8
above values compromise judgment numerically

4. Use overall or global priorities obtained from weighted values for weighting process. For
synthesis of priorities obtain the principal right eigenvector and largest eigenvalue.
Matrix A=(aij) is said to be consistent if aij.ajk=aik and its principal eigenvalue (λmax) is equal to n.
The general eigenvalue formulation is:

 1 w 1 /w 2 . w1 /w n   w1 
 w /w 1 . w 2 /w n  .  (1)
Aw   2 1  nw
 . . . .  . 
  
 w n /w 1 w n /w 2 . 1   wn 

a i j  wi / w j , i, j  1,2,....n (2)

Aw  max w (3)

For measure consistency index (CI) adopt the value:

CI  (max  n) /(n  1) (4)

.
Accept the estimate of w if the consistency ratio (CR) of CI that random matrix is significant
small. If CR value is too high, then it means that experts’ answers are not consistent (Lee,
2012;Saaty, 1980). Acceptable values of CR must be less than 0.1 (Saaty, 1990). The CR is
obtained by comparing the CI with an average random consistency index (RI).

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CI (5)
CR 
RI

The following gives the average RI:.

Table 2: Average RI values

n 1 2 3 4 5 6 7 8 9 10

Random Consistency Index(RI) 0 0 0.52 0.89 1.11 1.25 1.35 1.40 1.45 1,49

Briefly, maximized eigenvalue, CI and CR are found to obtain the weights of each criteria (Lee,
2012). Experts are asked to compare the criteria on a pair-wise basis to determine their relative
importance. AHP was used in order to determine which supplier selection attributes are important
and precedence order of eight criteria, i.e., origin of raw material, quality, availability, cost,
delivery requirements, cost of conveyance, quality certificates and reliability of the suppliers.

4.2. Using Technique for Order Preference by Similarity to Ideal Solution (TOPSIS) to rank
the alternatives

Technique for Order Preference by Similarity to Ideal Solution (TOPSIS) was first presented by
Yoon (1980) and Hwang and Yoon (1981), for solving multiple criteria decision making (MCDM)
problems based upon the concept that the chosen alternative should have the shortest Euclidian
distance from the positive ideal solution (PIS) and the farthest from the negative ideal solution
(NIS). For instance, PIS maximizes the benefit and minimizes the cost, whereas the NIS
maximizes the cost and minimizes the benefit. It assumes that each criterion require to be
maximized or minimized. TOPSIS is a simple and useful technique for ranking a number of
possible alternatives according to closeness to the ideal solution. Expanded developments of
TOPSIS were done by Chen and Hwang in 1992, Lai, Liu and Hwang (1994). This MCDM
technique is widely used in many fields, including financial performance evaluation, supplier
selection, tourism destination evaluation, location selection, company evaluation, selecting the
most suitable machine, ranking the carrier alternatives (Behzadian, 2012). One of the advantages
of TOPSIS is that pair-wise comparisons are avoided. TOPSIS is conducted as follows (Tsaur,
2011).
Step 1.Establish a decision matrix for the ranking. TOPSIS uses all outcomes ( xij ) in a decision

matrix to develop a compromise rank. The viable alternatives of the decision process are A1, A2,
..., An. The structure of the decision matrix denoted by X  ( xij ) n m can be expressed as follows:

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m Criteria
C1 C2  C j  Cm
 x11 x12  x1 j  x1m  A1 
x x22  x2 j  x2 m  A2 
 21   (6)
        
X    n Alternatives
 xi1 xi 2  xij  xim  Ai 
       
  
 xn1 xn 2  xnj  xnm  An 

xij is the outcome of ith alternative with respect to jth criteria. W  ( w1 , w2 ,  , w j ,  , wm ) is

the relative weight vector about the criteria, and w j represents the weight of the jth attribute and
m
 j 1
wj  1 .

Step 2.Normalize the decision matrix using the following equation:

wij (7)
rij  i=1,2,3,…,n j=1,2,3,…,m
n 2
 k 1
w ij

Step 3.Weighted normalized decision matrix is calculated by multiplying the normalized decision
matrix by its associated weights as:

vij  w j rij i=1,2,3,…,n j=1,2,3,…,m (8)

Step 4.Identify the positive ideal solution (PIS) and negative ideal solution (NIS), respectively, as
follows:


PIS  A*  v1* , v2* ,..., vm*    max v | j    , min v | j   
i
ij b
i
ij c (9)


NIS  A  v1 , v2 ,..., vm    min v | j    ,  max v | j   
i
ij b
i
ij c (10)

 b is associated with benefit criteria, and  c is associated with cost criteria.

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Step 5.Determine the Euclidean distance (separation measures) of each alternatives from the ideal
and negative-ideal solution as below respectively:

m 2
di*  v
j 1
ij  v*j  , i=1,2,3,…,n (11)

m 2
di  v
j 1
ij  vj  , i=1,2,3,…,n (12)

Step 6. Calculate the relative closeness of the ith alternative to ideal solution using the following
equation:

di
RCi  * , i=1,2,3,…,n
di  di (13)
RCi   0,1

Step 7.By comparing RCi values, the ranking of alternatives are determined. The higher the
closeness means the better the rank. Ranked the alternatives starting from the value that closest to
1 and in decreasing order.

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4.3. Combining AHP and TOPSIS to determine the rank of alternatives

Figure 2: Steps of proposed method

In analyzing the data, Analytical Hierarchy Process (AHP) and Technique for Order Preference by
Similarity to Ideal Solution (TOPSIS) methodologies are used for the outranking of supplier
alternatives. Fig. 2 shows the steps of the proposed method.

5. SOLVING ILLUSTRATIVE PROBLEM

To apply proposed method a real world supplier selection problem was solved. In this supplier
selection problem there are 8 criteria and 4 alternatives. The hierarchical structure to select the best
supplier is shown in Fig 3.The firm prefers the Electrolytic Copper Cathode originating from
America, Europe and Asia. An interview was performed with the purchasing department in order
to identify weight coefficients regarding origin of the Electrolytic Copper Cathode. As a result of
the binary comparison made by specialist, weights were found as follows: America (0.249),
Europe (0.087) and Asia (0.039). These values are determined as the input of TOPSIS method.
Criteria to be considered in the selection of supplier are determined by literature review and
experts in the cable firm. Past experience and the back-ground of the experts are utilized in the
determination of the criteria and 8 important criteria to be used for supplier selection are
established. These 8 criteria are as follows: Origin of Raw Material (C1), Quality (C2),
Availability (C3), Cost (C4), Delivery Requirements (C5), Cost of Conveyance (C6), Quality
Certificates (C7)and Reliability of Supplier (C8).

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Figure 3: Hierarchical Structure for Supplier Selection

As a result, only these 8 criteria were used in evaluation and decision hierarchy is established
accordingly. Decision hierarchy structured with the determined alternative supplier and criteria is
provided in Fig. 3.There are three levels in the decision hierarchy structured for supplier selection
problem. The overall goal of the decision process is ‘‘the selection of the optimal supplier” in the
first level of the hierarchy. The criteria are on the second level and alternative suppliers are on the
third level of the hierarchy.After forming the decision hierarchy for the problem, the weights of the
criteria to be used in evaluation process are calculated by using AHP method. In this phase, the
experts in the expert team are given the task of forming individual pairwise comparison matrix by
using the Saaty’s 1-9 scale.

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Table 3: The pairwise comparison matrix for criteria

C1 C2 C3 C4 C5 C6 C7 C8
C1 1,00 0,27 0,22 0,13 0,56 0,71 0,67 0,45
C2 3,71 1,00 1,39 0,58 3,36 3,31 4,36 2,00
C3 4,56 0,72 1,00 0,45 1,73 2,21 2,82 1,00
C4 7,97 1,73 2,24 1,00 5,03 5,89 5,14 3,13
C5 1,78 0,30 0,58 0,20 1,00 1,15 0,51 0,40
C6 1,41 0,30 0,45 0,17 0,87 1,00 0,80 0,40
C7 1,50 0,23 0,35 0,19 1,97 1,26 1,00 0,51
C8 2,21 0,50 1,00 0,32 2,51 2,51 1,97 1,00

Geometric means of experts’ choice values are calculated to form the pairwise comparison matrix
on which there is aagreement (Table 4). The results obtained from the calculations based on the
pairwise comparison matrix provided in Table 3, are presented in Table 4.
Figure 4: Resulting weights of criteria obtained with AHP

Reliability of supplier 0,118

Quality certificates 0,065
Cost of conveyance 0,054
Delivery requirements 0,059
Cost 0,323
Availability 0,140
Quality 0,199
Origin of the raw material 0,041

0,000 0,050 0,100 0,150 0,200 0,250 0,300 0,350

The C4 (cost), C2 (quality) and C3 (availability) are determined as the three most important
criteria in the supplier selection process by AHP. Consistency ratios of the experts’ pairwise
comparison matrixes are calculated as 0.074 (expert 1), 0.077 (expert2), 0.096 (expert 3) and 0.083
(expert 4). They all are less than 0.1. So the weights are shown to be consistent and they are used
in the selection process. The most important criterion is “cost” (0.323) and the least important
criterion is “origin of the raw material” (0.041).

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Table 4: Results obtained by AHP

Expert 1 Expert 2 Expert 3 Expert 4 Geometric Mean

Criteria Weights (w) Weights (w) Weights (w) Weights (w) Weights (w)

Origin of the raw material 0.054 0.037 0.025 0.052 0.041

Quality 0.121 0.254 0.302 0.122 0.199
Availability 0.168 0.114 0.071 0.242 0.140
Cost 0.372 0.234 0.284 0.302 0.323
Delivery requirements 0.029 0.081 0.089 0.047 0.059
Cost of conveyance 0.105 0.079 0.020 0.052 0.054
Quality certificates 0.045 0.049 0.107 0.076 0.065
Reliability of supplier 0.105 0.152 0.101 0.106 0.118

λmax 8.726 8.762 8.949 8.817 8.142

CI 0.104 0.109 0.136 0.117 0.020
RI 1.410 1.410 1.410 1.410 1.410
CR <0,1 0.074 0.077 0.096 0.083

Finally, TOPSIS method is applied to rank the alternative suppliers. The priority weights of
alternative suppliers with respect to criteria, calculated by AHP and shown in Table 4, can be used
as input ofTOPSIS (Table 5). The weighted normalized decision matrixcan be seen from Table 6.

Table 5: Input values of the TOPSIS analysis

Weight 0,041 0,199 0,140 0,323 0,059 0,054 0,065 0,118
Origin of
Delivery Cost of Quality Reliability
the raw Quality Availability Cost
requirements conveyance certificates of supplier
material
Supplier A 0,249 40 80 7450 85 500 90 90
Supplier B 0,249 25 60 7400 75 430 100 60
Supplier C 0,039 15 70 7550 80 400 90 85
Supplier D 0,087 10 80 7430 90 400 60 100

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Table 6: Weighted evaluation for the supplier selection

Origin of
Delivery Cost of Quality Reliability
the raw Quality Availability Cost
requirements conveyance certificates of supplier
material
Supplier A 0.028 0.158 0.077 0.161 0.030 0.031 0.034 0.063
Supplier B 0.028 0.099 0.057 0.160 0.027 0.027 0.038 0.042
Supplier C 0.004 0.059 0.067 0.163 0.029 0.025 0.034 0.059
Supplier D 0.010 0.039 0.077 0.161 0.032 0.025 0.023 0.070
+ + + - + - + +
A* 0.028 0.158 0.077 0.160 0.032 0.025 0.038 0.070
A- 0.004 0.039 0.057 0.163 0.027 0.031 0.023 0.042

By using TOPSIS method, the ranking of alternative suppliers are calculated. Table 7 shows the
evaluation results and final ranking of alternative suppliers.

Table 7: TOPSIS results

Alternatives di * di - RCi
Supplier A 0.010 0.124 0.924
Supplier B 0.068 0.066 0.490
Supplier C 0.103 0.031 0.231
Supplier D 0.121 0.035 0.226

Depends on theRCj values, the ranking of the alternatives from top to bottom order are supplier A,
supplier B, supplier C and supplier D. Proposed model results show that supplier A is the best
alternative with RC value of 0.924.

Table 8: Weighted and unweighted rankings

Rank Weighted RCi Weighted Ranking UnweightedRCi Unweighted Ranking
1 0.924 Supplier A 0.858 Supplier A
2 0.490 Supplier B 0.626 Supplier B
3 0.231 Supplier C 0.302 Supplier D
4 0.226 Supplier D 0.269 Supplier C

6. CONCLUSION

Supplier selection decision becomes more important strategic decision in complex and competitive
business life. Choosing the suitable supplier involves the evaluation of subjective and objective
factors;the decision criteria in Cable Company case are origin of raw material, quality, availability,
cost, delivery requirements, and cost of conveyance, quality certificates and reliability of the
suppliers. The results show that cost, quality and availability are most important criteria for the
company to evaluate suppliers.Supplier A has the highest priority weight.Another important
finding is that the proposed model is more reflecting the relation of how the selection criteria
affect the selected suppliers and at the same time what is more important for the suppliers among

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the selection criteria.Using multi criteria decision techniques such as AHP and TOPSIS methods
provides a useful approach for Cable Company for selecting the best supplier.This supplier
evaluation framework will give direction and help the cable company in establishing a process for
supplier selection. Main purpose of this paper is to combine AHP and TOPSIS methods to select
suitable supplier for the Cable Company from available alternative suppliers. The weights of
criteria (input of TOPSIS) are important. It is shown that final TOPSIS ranking can by criteria
weights.
Supplier selection for a Cable Company involves multiple criteria decision making. The TOPSIS
is a successful MCDM method for ranking the alternatives. AHP-TOPSIS framework was
proposed for evaluating and ranking of supplier alternatives. In next studies analytic network
process (ANP) may be used to structure network and identifydependence among criteria. The
proposed methodology can also be applied to any other selection problem involving multiple
and conflicting criteria. Selection of the suppliers can also be done using other MCDM techniques
including MOORA, PROMETHEE, VIKOR etc. for comparing the results.

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