Even though the research on supplier selection is abundant, the works usually only consider the critical success factors in the buyer–supplier relationship. However, the negative aspects of the buyer–supplier relationship must also be considered simultaneously. The main objective in this study is to propose an analytical approach to select suppliers under a fuzzy environment. A fuzzy analytic hierarchy process (FAHP) model, which incorporates the benefits, opportunities, costs and risks (BOCR) concept, is constructed to evaluate various aspects of suppliers. Multiple factors that are positively or negatively affecting the success of the relationship are analyzed by taking into account experts’ opinion on their importance, and a performance ranking of the suppliers is obtained. TFT-LCD manufacturers in Taiwan, which is the largest TFT-LCD producer country in the world, are facing increasing competition nowadays, and the selection of the most appropriate suppliers for cooperation is essential for firms to achieve competitive advantage. A case study of backlight unit supplier selection for a TFT-LCD manufacturer is presented, and the proposed model is applied to facilitate the decision process. The model is a general form that can be tailored and applied by firms that are making decisions on supplier selection.
Outsourcing has become an important business approach since a competitive advantage may be gained by the cooperation with suppliers to provide products/services more effectively and efficiently (McCarthy & Anagnostou, 2004). Under the domain of inter-organizational linkage, the relationship between purchasing organizations and their suppliers has been of particular interest. Many of today’s buyer–supplier relationships are operating well beyond the traditional arm’s length mode, with different degrees of alliance. Closer buyer–supplier relationships can be effective ways to guarantee good quality materials, diffuse new technologies rapidly, enter a new market, overcome financial constraints, bypass governmental restrictions, and learn quickly from the leading firms in a given field (Elmuti and Kathawala, 2001 and Monczka et al., 1998). With strategic alliances ranging from nontraditional contracts to the creation of a new equity, many firms develop supplier linkages that fell somewhere between these two extremes (Achrol, 1997, Argyres, 1996, McCutcheon and Stuart, 2000 and Sinclair et al., 1996). Firms develop mutually beneficial, longer-term relationships with the best of their key suppliers so that the suppliers are more willing to invest in skills or technologies specific to the partner firm (McCutcheon & Stuart, 2000). Buyers and suppliers may broaden their contact and share business and technology information. Suppliers may expand their roles to provide services beyond traditional purchasing transactions, such as participating in the buyer’s design and development work or providing advice, assistance or training from their areas of expertise (McCutcheon & Stuart, 2000). In the past two decades, a surge in the formation of a longer-term relationship that fosters cooperation among suppliers and customers has been witnessed. However, many managers find it difficult to determine which suppliers should be targeted for long-term relationships.
While there are many supplier selection models in literature, most studies only concern with the benefits that can be gained from selecting a supplier. In fact, various aspects of costs and risks should be considered extensively too. Therefore, in this research, we adopt the analytic hierarchy process (AHP) with benefits, opportunities, costs and risks (BOCR) for constructing the supplier selection model. In addition, fuzziness and vagueness are usually present in the decision-making process, and thus, the fuzzy set theory is incorporated into the model.
The global TFT-LCD industry is becoming extremely competitive, and a cooperative buyer–supplier relationship is essential for a TFT-LCD manufacturer to survive and to acquire reasonable profit. Since backlight units (BLU) comprise the largest portion of raw material in TFT-LCD modules and are essential for the final quality of the units, the selection of the most appropriate backlight unit supplier is very important. The main objectives in this study are to propose a fuzzy AHP with BOCR model for supplier selection and to apply the model to the backlight unit supplier selection for TFT-LCD manufacturer in Taiwan. This paper is organized as follows. Section 2 reviews the supplier selection literatures. Section 3 goes over the key concepts of analytic hierarchy process (AHP), fuzzy set theory, and benefits, opportunities, costs and risks (BOCR) methods. A fuzzy analytic hierarchy process (FAHP) model will be constructed to evaluate the suppliers in Section 4. Section 5 provides a case study of TFT-LCD manufacturer in evaluating backlight unit suppliers. Some concluding remarks are made in the last section.
In this paper, a fuzzy analytic hierarchy process (AHP) model with the consideration of benefits, opportunities, costs and risks (BOCR) is constructed for supplier selection. Although there are many supplier selection models available, most models usually only stress the criteria that are required by the buyers, but seldom the opportunities, costs and risks that need to be faced by the buyers if they select a specific supplier. Therefore, this research provides a comprehensive model that considers the four merits simultaneously. In addition, fuzzy set theory is incorporated into the model to overcome the uncertainty and ambiguity in human decision-making process.
A case study of a TFT-LCD manufacturer in selecting the most appropriate BLU manufacturers is presented to examine the practicality of the proposed model. By applying the model, decision makers can evaluate the expected performance of each supplier on various factors and can determine the overall ranking of the suppliers. The model also provides the importance of the factors that decision makers should consider in supplier selection. The model can also be modified as required by a firm in any other industry to help it select the best supplier(s).
