Global Supplier Selection - A Fuzzy-AHP Approach

International Journal of Production Research
ISSN: 0020-7543 (Print) 1366-588X (Online) Journal homepage: http://www.tandfonline.com/loi/tprs20
Global supplier selection: a fuzzy-AHP approach
Felix T. S. Chan , N. Kumar , M. K. Tiwari , H. C. W. Lau & K. L. Choy
To cite this article: Felix T. S. Chan , N. Kumar , M. K. Tiwari , H. C. W. Lau & K. L. Choy (2008)
Global supplier selection: a fuzzy-AHP approach, International Journal of Production Research,
46:14, 3825-3857, DOI: 10.1080/00207540600787200
To link to this article: http://dx.doi.org/10.1080/00207540600787200
Published online: 12 Jun 2008.
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Download by: [Australian Catholic University] Date: 08 October 2017, At: 08:55
International Journal of Production Research,
Vol. 46, No. 14, 15 July 2008, 3825–3857
Global supplier selection: a fuzzy-AHP approach
FELIX T. S. CHAN*y, N. KUMARy, M. K. TIWARIz,

H. C. W. LAUx and K. L. CHOYx
yDepartment of Industrial and Manufacturing Systems Engineering,

The University of HongKong, Pokfulam, Hong Kong
zDepartment of Manufacturing Engineering, National Institute of
Foundry and Forge Technology, Ranchi, India
Downloaded by [Australian Catholic University] at 08:55 08 October 2017
xDepartment of Industrial and Systems Engineering, The Hong Kong

Polytechnic University, Hong Kong
(Revision received September 2005)
Global supplier selection has a critical effect on the competitiveness of the entire
supply chain network. Research results indicate that the supplier selection process
appears to be the most significant variable in deciding the success of the supply
chain. It helps in achieving high quality products at lower cost with higher
customer satisfaction. Apart from the common criteria such as cost and quality,
this paper also discusses some of the important decision variables which can play
a critical role in case of the international sourcing. The importance of the
political-economic situation, geographical location, infrastructure, financial
background, performance history, risk factors, etc., have also been pointed out
in particularly in the case of global supplier selection. Supplier selection problem
related to the global sourcing is more complex than the general domestic sourcing
and as a result it needs more critical analysis, which could not be found properly
in past available literatures. This paper discusses the fuzzy based Analytic
Hierarchy Process (fuzzy-AHP) to efficiently tackle both quantitative and
qualitative decision factors involved in selection of global supplier in current
business scenario. The fuzzy-AHP is an efficient tool to tackle the fuzziness of the
data involved in deciding the preferences of the different decision variables
involved in the process of global supplier selection. The triangular fuzzy numbers
are used to transform the linguistic comparison of the different decision criteria,
sub-criteria and performance of the alternative suppliers. The pairwise
comparison matrices help in deciding the synthetic extent value of each
comparison and finally, the priority weights of one alternative over another are
decided in this paper. An example from a manufacturing industry searching for
the global supplier for a critical component is used to demonstrate the effective
implementation procedure of proposed fuzzy-AHP technique. The proposed
model can provide the guidelines and directions for the decision makers to
effectively select their global suppliers in the current competitive business
scenario.
Keywords: Supply chain; Global supplier selection; Analytic hierarchy process;

Fuzzy logic; Multi-attribute decision making problem
*Corresponding author. Email: ftschan@hkucc.hku.hk
International Journal of Production Research

ISSN 0020–7543 print/ISSN 1366–588X online ß 2008 Taylor & Francis
http://www.tandf.co.uk/journals
DOI: 10.1080/00207540600787200
3826 F. T. S. Chan et al.
1. Introduction
In this era of global competition, the modern business organizations pay particular
attention to the identification and selection among alternative supply sources.
Today’s highly competitive environment is forcing the manufacturing organizations
to establish a long-term effective collaboration with the efficient organizations. As a
result an effective supplier selection process is very important to the success of any
manufacturing organization. As the market becomes globalized and all business
boundaries collapsed, the manufacturers that once concentrated on domestic
sourcing are now seeking their supply sources around the world. The search of
global partners or suppliers involves new challenges and complexities. An efficient
supplier selection process is capable to handle the complexity of the current business
scenario. Therefore, the aim of this paper is to (i) provide the insight for the possible
decision variables for the global supplier in context of the current fast changing
world; and (ii) provide the efficient selection technique to guide the decision makers
to decide the preferences of one supplier over another. The supplier selection process
now becomes the strategic issues in most of the organizations. The long-term
strategic relationship between supplier and manufacturer can help in making a
stronger and more efficient supply chain. The goal of the supplier selection process is
to maximize the overall value of the manufacturer, reducing the product supply risk
and maximizing the customer satisfaction level.
In the globalized market many firms are now concentrating on the selection of
global business partners either to supply the goods or to get raw materials from
them. The selection of the global suppliers is a very critical multi-criterion decision
making problem. The globalization of the firm’s sourcing activity signifies the
establishment of long-term business relationship with often unfamiliar and unproven
international supplier. The selection of global supplier is very complicated and risk
prone task. It depends on the broad comparison of suppliers using a common set of
traditional criteria and measures. Selection of suppliers is one of the most important
aspects that firms must incorporate into their strategic processes. As organizations
become more and more dependent on suppliers, the direct and indirect consequences
of poor decision making in selecting the suppliers will become more critical.
The frequent changing in global suppliers is not feasible in the current globalize and
competitive market, therefore this should be done with great precision.
In this paper, initially the critical criteria associated with the global supplier
selection process are identified. This paper goes beyond the general classification of
the decision variables and apart from some of the traditional criteria like cost and
quality, some other criteria like supplier’s background, its service level and the risk
and uncertainty involve in the global sourcing are also included as the principal
criteria. This classification will certainly provide the guidelines for the decision
makers to decide its global suppliers with greater efficiency. The classification and
preferences of different decision criteria may vary depending on the firm’s need,
its preferences about different criteria and the technological strategy. The selection of
decision variables is basically based on the knowledge and information gathered
from the group of experts and the past researches available in the respective areas.
The overall objective of the selection process is to identify the high potential supplier
which can stand on the firm’s specific decision criteria. The manufacturing firm
analyses each supplier’s ability to meet its needs effectively. This may not be easy to
Global supplier selection 3827
convert its needs into useful criteria because needs are often expressed as a general
qualitative concepts while criteria should be quantitatively evaluated. This problem
can be solved in this paper by using the fuzzy based Analytic Hierarchy Process
(fuzzy-AHP) approach. The linguistic preferences are changed into the triangular
fuzzy numbers for the pairwise comparison scale. Many conflicting criteria should be
analyzed with precision, like the low price of purchased materials from a certain
supplier can be offset by the firm’s loose quality standards or chronic financial
instability. On the other hand, the availability of more advanced technology from a
global source can be undermined by the sourcing firm’s high purchasing costs and
excessive tariffs. These are only the few examples of obstacles that the firm has to
face when sourcing overseas. The supplier selection is the vehicle that can be used to
increase the efficiency of the entire supply chain. In this paper, the supplier
development or selection problem is taken when there is no any quantity constraint

and the supplier is able to satisfy the buyer’s requirements of demand, quality,
delivery etc. Here one supplier is able to satisfy the entire buyer’s need for a
particular product. This paper aims to suggest a methodology leading to effective
global supplier selection process.
The remainder of the paper is organized as follows: section 2 discusses the past
researches available in the area of the supplier selection. Section 3 contains the
discussion about fundamentals of AHP and fuzzy set theory. The different decision
criteria and sub-criteria considered in selecting the best global supplier are discussed
in section 4. In section 5, the fuzzy based analytic hierarchy process (fuzzy-AHP) is
discussed in relation with the global supplier selection. Section 6 discusses
the numerical illustration of fuzzy-AHP approach to select the best global
supplier. Section 7 presents the conclusion and provides future research direction
in this area.
2. Literature review
Abundant literatures on various domestic supplier selection techniques are available,

whereas the global supplier selection problem is not adequately discussed in past
researches. Any analytical study on this seems to be virtually absent. This is
understandable given that the significance of international sourcing to a firm’s
success was not fully recognized by many practitioners and academicians until recent
years, when the foreign trade barriers gradually crumbled. Now the increasing
numbers of multinational firms require an efficient analytical approach for the
global supplier selection. The development of analytical approaches for global
supplier selection has been limited, although many attempts have been made to
develop analytical approaches for evaluating various domestic suppliers. For the
review of supplier selection problems one can refer to Weber et al. (1991), Partovi
et al. (1990) and Boer (1998).
There are basically two stages in the global supplier selection process. In first
stage the decision variables, critical for the selection process should be identified and
in the second stage a specific decision making technique should be analyzed to
discuss the preferences of alternative suppliers based on these criteria. Most of the
researchers identified a number of decision criteria for the selection of suppliers
confined in small area, but not much attention has been paid for the global suppliers.
Some of the past literatures classified the decision variables on the basis of
quantitative and qualitative criteria or tangible and intangible criteria. In general
most of the researchers have identified cost, quality and service as their prime
decision criteria. Apart from this some other decision variables identified for the
supplier selection process in past researches are as follows: cultural compatibility,
long-term plan, financial stability, the compatibility of top management, honesty of
the supplier, product range, relationship closeness, conflict resolution, trust and
visibility etc. Weber et al. (1991, 1993) reviewed and classified various articles related
to vendor selection and discussed the impact of just-in-time (JIT) manufacturing
strategy on it. They used Dickson’s (1996) 23 criteria and indicated that net price,
delivery and quality were discussed in 80, 59 and 54% of the 74 articles, respectively
(Liu and Hai 2005). Some other decision criteria considered by other researchers is
listed in appendix A.
In past several methodologies have been proposed for the supplier selection
problem but many of them only discusses the case of domestic supplier not the
international suppliers. As a result, several influential factors in deciding the global
supplier of a manufacturing firm have not been taken in account in the decision
making process. The systematic analysis for domestic supplier selection includes
categorical method, weighted point method (Timmerman 1986), matrix approach
(Gregory 1986), vendor performance matrix approach (Soukup 1986), vendor profile
analysis (VPA) (Thompson 1990), Analytic hierarchy process (AHP) (Saaty 1980,
Narasimhan 1983, Nydick and Hill 1992) and multiple objective programming
(MOP) (Buffa and Jackson 1983, Sharma et al. 1989, Weber and Ellram 1993, Feng
et al. 2001, Ghodsypour and O’Brien 2001). The AHP is widely used for tackling
multi-attribute decision problems in real situations. Many researchers (Saaty 1980,
Narasimhan 1983) have concluded that AHP is a useful, practical and systematic
method for supplier selection. Despite numerous advantages over other existing
approaches, both AHP and MOP have some shortcomings. AHP cannot effectively
take into account risk and uncertainty in assessing the supplier’s performance
because it presumes that the relative importance of sub-criteria affecting the
supplier’s performance is known with certainty (Dyer et al. 1992). MOP’s inherent
computational complexity often prohibits consideration of many sub-criteria
essential for supplier selection. The drawback of MOP is that it requires arbitrary
aspiration levels and cannot accommodate subjective criteria (Khorramshahgol et al.
1988). In MOP problem formulation, many of the objectives are regarded as
constraints but this can be avoided in converting the priorities into the ratings with
regard to each criterion using pairwise comparison.
The selection of the global supplier or partner is much different from the
domestic one and it involves much complexity in terms of the selection of the
different effective criteria (Min 1994). Choy and Lee (2002) used the case based
reasoning approach for intelligent supplier selection to enhance the performance of
the selection as compared to traditional approaches. Liu and Hai (2005) proposed
voting analytic hierarchy process, which allows the purchasing manager to generate
non-inferior purchasing options and systematically analysis the inherent trade-offs
among the relevant criteria. Cakravastia and Takahashi (2004) proposed a multi-
objective model to support the process of supplier selection and negotiation that
considers the effect of these decisions on the manufacturing plan. The model
also takes into account several theoretical concepts in the negotiation process,
concession force, resistance force and effective alternatives. Liu et al. (2000) used
data envelopment analysis (DEA) to compare the performance evaluation of
different supplier for best selection. Ghodsypour and O’Brien (1998) proposed
integration of an AHP and linear programming to consider both tangible and
intangible factors in choosing the best suppliers and placing optimum order
quantities among them. They identified three main criteria for supplier selection as
cost, quality and service. Chan and Chan (2004) developed a supplier selection model
using AHP and quality management system principles. The proposed model has the
flexibility to respond to the changing needs of the organization due to dynamic
business environment. Weber and Ellram (1993) explored the use of a multi-objective
programming approach as a method for supplier selection in just in time (JIT)
setting. Yahya and Kingsman (1999) used Saaty’s AHP to determine priority in
selecting suppliers. Wang et al. (2004) used the advantages of AHP and preemptive
goal programming to incorporate both quantitative and qualitative factor in supplier
selection problem. As the literature review reveals that all the existing approaches are
confined to domestic supplier selection problems and so neglected a host of factors
relevant to global supplier selection. Past empirical studies proved that more than 10
different sub-criteria existed affecting the supplier selection decision (Dempsey 1978,
Shipley 1991). This paper goes beyond the previous literature and tried to consider
most of the decision variables relevant to current business scenario to decide the best
global partner. Lee et al. (2001) proposed the supplier selection and management
system that includes purchasing strategy system, supplier selection system and
supplier management system. They classified the decision variables in strong and
weak criteria and identified quality, cost, delivery and service as prime criteria for
supplier selection.
In this paper fuzzy-AHP is used to tackle the global supplier selection problem
because of the ability of fuzzy sets to resemble with the human-decision nature.
Earliest work in fuzzy AHP appeared in Van laarhoven and Pedrycz (1983). Chang
(1996) introduced a new extent analysis approach for the synthetic extent values of
the pairwise comparison for handling fuzzy-AHP. Apart from this many other
researchers have also used fuzzy AHP in different type of problem environment
(Ching-Hsue 1997, Weck et al. 1997, Cheng et al. 1999). Kahraman et al. (2003) used
the fuzzy AHP for domestic supplier selection with only three criteria and
11 sub-criteria and neglected the many important criteria which create the
uncertainty in supplying the products, i.e. the risk factors involved in global supplier
selection. This paper is aimed to suggest a methodology leading to effective supplier
selection process utilizing information obtained from the past researches regarding
the different decision criteria of global supplier selection. The overview of the past
literatures in supplier selection can also be seen from table 1.
The objective of this paper is to first identify the important decision criteria
relevant to the current global business environment and then provides an effective
tool to decide the preferences of one over another with respect to the need of
manufacturing organizations. Fuzzy triangular numbers are used to transform the
linguistic preferences in the quantitative form and the pairwise comparison concept
from the AHP is taken to decide the preferences and importance of one criterion over
another. Then by using the extent analysis method (Chang 1992), the synthetic extent
value of the pairwise comparison is determined. Using the principle of the
comparison of fuzzy numbers, the weight vectors with respect to each element
Table 1. Summary of some of the relevant researches in supplier selection.
Category Classification Author(s)
Review papers Decision variables and Weber et al. (1991, 1993),

Supplier selection problem Dickson (1996), Boer (1998),
Dempsey (1978).
Supplier selection Weighted point method Timmerman (1986)
approaches
Matrix approach Gregory (1986), Soukup (1986)
Analytic hierarchy process Yahya and Kingsman (1994),
(AHP) Nydick and Hill (1992),
Chan and Chan (2004)
Integration of AHP and linear Ghodsypour and O’Brien
programming (1998)
Case based reasoning Choy and Lee (2002)
Goal programming Buffa and Jackson (1983),
Sharma et al. (1989)
Integration of AHP and pre- Wang et al. (2004)
emptive goal programming
Data envelopment analysis Liu et al. (2000)
Multi-attribute utility Min (1994), Dyer (1993)
approach
Multi-objective programming Weber and Ellram (1993),
Ghodsypour and O’Brien
(2001), Feng et al. (2001)
Voting analytic hierarchy Liu and Hai (2005)
process
under a certain criterion is determined. As a result, the priority weights of the each
supplier is calculated and based on that, the global supplier is selected in this paper.
The global supplier selection problem discussed in this paper involves different types
of decision criteria having various form of uncertainty. This research can provide a
good break through for global business communities and help them to take decisions
with great precision according to the current business scenario.
3. Fundamentals of AHP and fuzzy set theory
This paper aims to discuss the fuzzy-AHP approach to tackle the global supplier
selection problem of a manufacturing firm. Fuzzy-AHP is basically the combination
of the two concepts: fuzzy set theory and the AHP. The fuzzy set theory resembles
human reasoning in its use of approximate information and uncertainty to generate
decisions. It has the advantage of mathematically represent uncertainty and
vagueness to provide formalized tool for dealing with the imprecision intrinsic to
many problems.
3.1 Analytic Hierarchy Process (AHP)

AHP (Saaty 1980) is a well-known multi-criterion decision making technique. It is a
useful, simple and systematic approach. In this approach first a hierarchy is
developed from more general (upper levels) criterion to the particular (bottom levels)
or from the uncertain or uncontrollable to the more certain or controllable one.
The hierarchy of the decision variables is the subject of a pairwise comparison of the
AHP. In the traditional AHP, the pairwise comparison is made using a nine-point
scale (1–9) which converts the human preferences between available alternatives
as equally, moderately, strongly, very strongly or extremely preferred. Thus the
AHP uses only absolute scale numbers for judgments and for their resulting
priorities. Even though the discrete scale of AHP has the advantages of simplicity
and ease of use, it is not sufficient to take in account the uncertainty associated
with the mapping of one’s perception to a number. In spite of its popularity and
simplicity in concept, this method is often criticized for its inability to adequately
handle the inherent uncertainty and imprecision associated with the mapping of the
decision-maker’s perception to exact numbers. In the traditional formulation of

the AHP, human’s judgments are represented as exact (or crisp, according to the
fuzzy logic terminology) numbers. However, in many practical cases the human
preference model is uncertain and decision-makers might be reluctant or unable to
assign exact numerical values to the comparison judgments. Since some of the
evaluation criteria are subjective and qualitative in nature, it is very difficult for the
decision-maker to express the preferences using exact numerical values and to
provide exact pairwise comparison judgments. The traditional AHP cannot
straightforwardly be applied to solving uncertain decision-making problems.
In order to eliminate this limitation, in the next section we discuss the fuzzy set
theory, which is capable for tackling the uncertainty and imprecision of service
evaluation process. It is more desirable for decision makers to use interval or fuzzy
evaluations to handle the vagueness of the data involved in multi-criterion decision
making problems.
3.2 Fuzzy set theory

Fuzzy set theory has proven advantages within vague, imprecise and uncertain
contexts and it resembles human reasoning in its use of approximate information and
uncertainty to generate decisions. It was specially designed to mathematically
represent uncertainty and vagueness and provide formalized tools for dealing with
the imprecision intrinsic to many decision problems. Fuzzy set theory implements
classes and grouping of data with boundaries that are not sharply defined (i.e. fuzzy).
Fuzzy set theory includes the fuzzy logic, fuzzy arithmetic, fuzzy mathematical
programming, fuzzy graph theory and fuzzy data analysis, usually the term fuzzy
logic is used to describe all of these. The major contribution of fuzzy set theory is its
capability of representing vague data.
A fuzzy set is characterized by a membership function, which assigns to each
object a grade of membership ranging between 0 and 1. In this set the general terms
such as ‘large’, ‘medium’ and ‘small’ each will be used to capture a range of
numerical values. A fuzzy set is represented by putting a tilde ‘’ on a letter. If n1, n2
and n3, respectively, denote the smallest possible value, the most promising value and
the largest possible value that describe a fuzzy event then the triangular fuzzy
number (TFN) can be denoted as a triplet (n1, n2, n3). A fuzzy number Ñ expresses
the meaning of ‘about N’. A TFN Ñ is shown in figure 1.
µÑ
1.0
Nr(y)
Nl(y)
0.0 N
n1 n2 n3
Figure 1. A triangular fuzzy number, Ñ.
Some basic definitions of the fuzzy sets and fuzzy numbers after reviewing some
of the past literatures (Zadeh 1965, Buckley 1985, Klir and Yuan 1995, Ross 1997)
in this area are discussed in this section.
Definition 1: The membership function of a TFN which associated with a real
number in the interval [0, 1] can be defined as:
8
< ðx n1 Þ=ðn2 n1 Þ, x 2 ½n1 , n2
~ ¼ ðn3 xÞ=ðn3 n2 Þ, x 2 ½n2 , n3
ðxjNÞ ð1Þ
:
0, otherwise
A fuzzy number can be given by its corresponding left and right representation of
each degree of membership:
~ ¼ ðNlðyÞ , NrðyÞ Þ
N
ð2Þ
¼ ðn1 þ ðn2 n1 Þy, n3 þ ðn3 n2 ÞyÞ, y 2 ½0, 1
where l(y) and r(y) denote the left and right side representation of a fuzzy number
respectively. A non-fuzzy number ‘r’ can be expressed as (r, r, r).
Definition 2: A fuzzy set Ñ in the universe of discourse Y is defined as convex if and
only if:
x ðN1 þ ð1 ÞN2 Þ minðx ðN1 Þ, x ðN2 ÞÞ ð3Þ
for all N1, N2 in Y and all 2 [0, 1], where min denotes the minimum operator.
Definition 3: The height of a fuzzy set is the largest membership grade attained by
any element in that set. A fuzzy set Ñ in the universe of discourse Y is called
normalized when the height of Ñ is equal to 1.
Definition 4: A matrix Ũ is called a fuzzy matrix if at least one element of it is a
fuzzy number.
The fuzzy sum and fuzzy subtraction of any two triangular fuzzy numbers
are also a triangular fuzzy number, but the multiplication of any two triangular
fuzzy numbers is only an approximate triangular fuzzy number. If Ñ1 ¼ (n11, n12, n13)
and Ñ2 ¼ (n21, n22, n23) are two triangular fuzzy numbers then the operational laws of
them can be expressed as follows:
~1 N
N ~ 2 ¼ ðn11 þ n21 , n12 þ n22 , n13 þ n23 Þ ð4Þ
~ 1 N
N ~ 2 ¼ ðn11 n21 , n12 n22 , n13 n23 Þ ð5Þ
~1 N
N ~ 2 ﬃ ðn11 n21 , n12 n22 , n13 n23 Þ ð6Þ
~ 1 ¼ ðn11 , n12 , n13 Þ, where > 0, 2 R
N ð7Þ

~ 1 1 1 1
N1 ¼ , , ð8Þ
n11 n12 n13

The basic definitions and notations used in this section will be used throughout this
paper until otherwise stated.
4. Decision variables
As the global competition among organizations has increased and customer

demands have diversified in the global business environment, the manufacturing
and logistics costs of the firms have been sharply increasing. Most of the
organizations are concentrating on their core competencies and trying to outsource
other functions from the specific experts globally. In this process they are thinking to
establish an organized global supply network to maintain a continuous supply
relationship. One of the important issues to do so is how to select good suppliers
which can help in build up an efficient and profitable supply chain. As more and
more organizations become interested and involved in forming supplier partnerships,
a guide is needed to provide proper guidelines to these organizations in selecting
potential partners and in developing and implementing the partnership. The close
interaction among the manufacturer and suppliers will improve the quality of the
purchased and finished parts which may result in increased profit and better
customer satisfaction. In this section we concentrate ourselves on deciding the
different important decision criteria leading to efficient global supplier selection.
The fast changing business environment has increased pressure on the decision
makers to properly analyze the decision variables having higher level of uncertainty
and risk. This paper tries to provide an efficient way of thinking in this area. Owing
to the large number of factors affecting the decision, it should be made based on an
orderly sequence of steps. Miller (1956) observed that most decision makers cannot
simultaneously handle more than 7–9 factors when making a decision. As such it is
necessary to break down the complex problem into more manageable sub problems.
The problem taken here has four levels of hierarchy having goal, criteria, sub-criteria
and decision alternatives at first, second, third and fourth level respectively. Many
researchers have classified the decision variables on the basis of qualitative–
quantitative, tangible–intangible, managerial–non-managerial, primary–secondary,
strong–weak and many other. In this paper we classified the decision variables on the
basis of the intensive review of the available past researches in the area of supplier
Level 1: Goal
Global supplier selection
Level 2: Criteria
Cost of ownership Quality Service Background Risk factors
Level 3: Sub-criteria
Product cost Conformance to Delivery Technological Geographical

specification reliability capability location
Total logistics Product Information Financial Political stability
management cost reliability sharing status and foreign policies
Tariff Quality assessment Flexibility and Facility and Exchange rates and
and taxes technique responsiveness infrastructure economic position
Process capability Customer Market Terrorism and
response reputation crime rate
Level 4: Alternatives
Supplier 1 Supplier 3
Figure 2. Hierarchy for the global supplier selection.
selection, current business scenario and analyzing the complexities and challenges
encountered during the global sourcing. In this paper five prime criteria are identified
as total cost of ownership, quality, service, supplier’s background and risk factors.
These criteria can be broken down into various other sub-criteria. Nineteen critical
sub-criteria are identified under the broad comparison of main criteria. Some of the
interesting issues like market reputation, plant location, political stability, exchange
rates, economic position, terrorism, crime rate, etc., are also analyzed in this paper,
which can play a very important role in taking the decision of the selection of best
global supplier.
In this paper criteria are denoted by Ci, sub-criteria by Sj and alternatives by Ak
(where i, j, k ¼ 1, 2, . . .). The hierarchy of the selection criteria, sub-criteria and
decision alternatives in context with global supplier selection can be seen from
figure 2. In the hierarchy, the overall objective is placed at level 1, criteria at level 2,
sub-criteria at level 3 and the decision alternatives at level 4.
4.1 Total cost of ownership (C1)

The profit of an organization can directly be affected by the cost of the operation.
It is the most influential factor in the supplier selection process. In the current global
market, the firm must find a low cost supply base where it can minimize its purchase
price, import duties, documentation cost, transportation cost, communication cost
and cost of investigating the potential supplier’s past performances and financial
background. The factors (sub-criteria) which can affect this criterion are as follows:
. Product cost (S1): The cost of the product is one of the direct preference
measurement factors of the supplier. Low cost products always attract the
attention of large numbers of customers. In this cut throat competition,
manufacturing firms’ primary goal is to provide the most cost effective
products to customers to increase its profitability. The firm therefore must
prefer the supplier providing low manufacturing cost. The cost of the product
involves the processing cost, maintenance cost, warranty cost and other costs
related to the manufacturing of the product.
. Total logistics management Cost (S2): In global sourcing it is customary to
check the high logistics cost of each supplier with a great precision. This
contains the lengthy distribution channel cost, transport expenses, inventory
cost, handling and packaging cost, damages in the way and insurance costs,
these are usually high when suppliers are international. The firm should also
carefully look into various freight terms and condition among different
countries.
. Tariff and taxes (S3): Each country has its own guidelines for the tariff
imposed on the import-export of goods. A foreign government wants to
attract buyers from other countries to boost its economy, whereas the
importing country would like to impose high tariffs to protect its domestic
industry. Therefore despite the general agreement on tariffs and trade
(GATT), tariffs will be imposed on the goods and services purchased from
foreign countries. The manufacturing firm (buyer) should carefully estimate
these additional charges before choosing its global supplier since tariff and
dumping duties can lead to a substantial increase in purchasing price. The
preferences are given to the nations with less duties and taxes, because it
ultimately helps in reducing the final price of the product to the customers.
4.2 Quality of the product (C2)

The most important factor leading to overseas sourcing is the high quality of foreign
products resulting from the emphasis placed on quality—at the source. The quality
of the product can be measured by following sub-criteria:
. Conformance to specification (S4): The supplier’s ability to provide the
products that conform to the manufacturer’s specification is one of the
measuring factors to check the quality of the product. The rejection of
the products on the basis of unfulfilled criteria from the manufacturer gives
the information about the bad quality of the product.
. Product reliability (S5): The suppliers should deliver the reliable and durable
products to the manufacturer. This can be measured in terms of the ability of
the supplier to deliver the required product to the specified manufacturer in
the specified period of time.
. Quality assessment techniques (S6): This encounters the issues like frequent
quality assessment of the part is done by the supplier or not. Accordingly the
buyer should investigate whether or not potential suppliers are certified for
strict quality assurance and have a strong commitment for preventing quality
failures.
. Process capability (S7): This attribute helps in investigating the supplier’s
ability to produce the quality products.
4.3 Service performance (C3)

The performance of the supplier in providing service to the manufacturer is the
prime criteria to decide its suitability for a particular product. The good service given
by the supplier may help in increase the customer base and so this criterion
is important in global supplier selection. It is analyzed based on the following
sub-criteria:
. Delivery reliability (S8): The major obstacle to global sourcing is the

transport delays and the subsequent increase in lead time which disrupts the
successful implementation of Just-in-time (JIT) principles. In the process of
selection of the most appropriate supplier the manufacturer should access the
complete supply chain network on time and have the ability to follow the
exact delivery schedule according to the customer’s demand.
. Information sharing (S9): The ease of communication and negotiability with
the suppliers decides the long-term relation between the supplier and
manufacturer and so this should be included in deciding the global supplier
selection. Since languages, business customs, ethics and communication
devices vary from country to country, the manufacturing firm should
consider sub-criteria such as cultural similarity, ethical standard and
electronic data interchange capabilities in order to ensure effective
communication and negotiation with the foreign supplier. A good relation-
ship can help to better understand their objectives and they can help each
other to enhance their performance towards customers.
. Flexibility and responsiveness (S10): The ability of the supplier to change
according to the customer’s demand, price structure, order frequency and
current business scenario has a great importance in the selection of global
suppliers. These things can affect the performance of the firm in case of
urgent and uncertain demand. More flexible and responsive suppliers in
terms of the demand constraints can be chosen for better performance
towards the customer.
. Customer response (S11): The response of the customer towards the supplier
is one of the important factors to decide the performance of the supplier.
A good customer response equates to satisfaction with the supplier and this is
the ultimate aim of each organization. Suppliers with good customer base
should be preferred more than the others with no satisfied customers.
4.4 Supplier’s background (C4)

The performance and past history of the suppliers help in selecting the best global
supplier of particular product. Manufacturers should keep suppliers’ information on
files and gather information about its past performance. The supplier information
files include the name of each supplier, a list of material available from each supplier,
the suppliers’ quality records, the supplier’s overall desirability and general
information concerning the supplier’s plant and management. The different
characteristics of the supplier should be checked based on past history to decide
the superiority of the organization over other. Some of the sub-criteria to be
analyzed and can be stated as below:
. Technological capability (S12): The technological advances are moving at a
very fast pace in this competitive world to satisfy the customer first and get
its appreciation. Furthermore suppliers are more likely to assume greater
responsibility for outsourced design, engineering service, prototype develop-
ment and research to increase the performance of the products. The supplier
ability to provide advanced technological and R&D support to produce a
good product is of prime concern in global supplier selection. The advanced

technology also helps to maintain better communication between the supplier
and the manufacturing firm which further helps to maintain a long-term
relation.
. Financial status (S13): The financial status of the supplier can be analyzed by
getting the information about the annual turn over of the supplier and their
financial structure based on the past history. Foreign supplier’s shaky
financial situation will gradually weaken the long-term relation with the
manufacturer. Financial stability is the necessary requisite for long-term
partnership programs.
. Facility and infrastructure (S14): The production facilities and ability of the
supplier to increase its capacity should also be taken in account to judge the
best global supplier. The potential production capability of each supplier
should be analyzed to meet a specified production plan and also to develop a
new product according to the demand of market.
. Market reputation (S15): The performance history of the supplier should be
analyzed carefully keeping in mind the competitive nature of the supplier,
its past production schedule, response to market, and its ability to make
commercial relations and business references. The honesty, discipline and
ability of the supplier to cope up with the manufacturers help in building the
good reputation in the market.
4.5 Risk factor (C5)

Owing to a number of exogenous factors influencing international sourcing, global
supplier selection is much riskier than its domestic counterpart. Consequently,
the global supplier selection decision is most strongly affected by perceived risks.
The shock of 9/11 was to be a wake-up call to the uncertainty of a global
environment. Effective supply risks require the identification and monetization of
risk events, probability of occurrence, and the firm contingencies for alternative
sources of supply. A risk and uncertainty lens is the newest and perhaps one of the
most important capabilities and contributions that can be made to a firm’s
competitiveness and viability. The risk factors which can affect the selection process
of the global supplier can be taken in account in this paper.
. Geographical location (S16): The location of the supplier and its physical and
social status should be analyzed properly before selecting a global partner.
The mother country of the supplier, the location of plant, the nature of
natural calamities and other factors should be checked before the selection
because for long-term relation it may create problems in the supply of the
goods. The larger distance between supplier and manufacturer may also
affect the product supply and so this should also be analyzed.
. Political stability and foreign policies (S17): The political status of the
supplier’s country and its nature towards the business policies may affect the
long-term relations of supplier with the manufacturer. The more stable
government should be preferred because upon changing the political
leadership, different foreign policies can change and this may create big
problems in maintaining further the relations with supplier. The business
policies of the communist government in China and Russia are different from
the democratic government of USA and India, therefore this must be

analyzed with great precision.
. Exchange rates and economic position (S18): Different countries have their
own currency and relative value of the currencies changes frequently, so the
exchange rate of the currency may also play an important role in deciding
the product and transportation cost. This should also be properly discussed
in the process of global supplier selection. The economic status of the
supplier’s country can affect the currency exchange rate, local price control,
inflation rate and so forth. This can result high hidden costs for international
sourcing and so these should be factored into the global supplier selection
decision.
. Terrorism and crime rate (S19): Terrorism is identified as a great enemy of the
business process after the 9/11 incident. Manufacturers should avoid the
supplier which is situated in the terrorist areas. Nowadays manufacturers are
more concerned about it because it can hamper the delivery schedule and
ultimately the performance of the firm towards the customer will be affected
badly. The manufacturer should choose the supplier base situated in the area
having less crime rate and less terrorist activities as compared to other
possible sources.
The above mentioned criteria and sub-criteria help in deciding the best global
supplier for a firm. The preference of one over other is decided by the experts and
researchers of the respective areas based on the questionnaire form (discussed in
appendix B). The critical criteria and sub-criteria indicated that the selection of
global supplier is more complex than the domestic one.
5. Solution methodology
In this paper fuzzy-AHP methodology has been discussed for the global supplier
selection. Basically fuzzy-AHP is the fuzzy modified form of AHP. It has the
ability to extract the merits of both approaches to efficiently and effectively tackle
the multi-attribute decision making problems like supplier selection. The AHP is one
of the extensively used multi-criterion decision making methods but it has been
generally criticized because of the use of a discrete scale of one to nine which
cannot handle the uncertainty and ambiguity present in deciding the priorities of
different attributes. The relative importance of different decision criteria in global

supplier selection involves a high degree of subjective judgment and individual
preferences. The linguistic assessment of human feelings and judgments are vague
and it is not reasonable to represent it in terms of precise numbers. It feels more
confident to give interval judgments than fixed value judgment. To improve the AHP
method, this paper discusses a fuzzy modified AHP approach using triangular fuzzy
numbers to represent decision makers’ comparison judgments and fuzzy synthetic
extent analysis method to decide the final priority of different decision criteria.
In particular, the approach developed can adequately handle the inherent
uncertainty and imprecision of the human decision making process and provide
the flexibility and robustness needed for the decision maker to understand the
decision problem. These merits of the approach developed would facilitate its use in
real situations for making effective decisions.

The fuzzy-AHP is the fuzzy extension of AHP to efficiently handle the fuzziness
of the data involved in the decision of best global supplier. It can effectively handle
both qualitative and quantitative data in the multiple attribute decision making
problems. In this approach triangular fuzzy numbers are used for the preferences of
one criterion over another and then by using the extent analysis method, the
synthetic extent value of the pairwise comparison is calculated. Based on this first
the weight vectors of alternatives, sub-criteria and criteria are decided. As a result,
the final priority weights of the alternative global suppliers are decided based on the
different weights of criteria and sub-criteria. The highest priority would be given to
the supplier with highest weight.
The fuzzy-AHP approach used in this paper is discussed as follows:
If the object set is represented as P ¼ {p1, p2, . . . , pn} and the goal set as,
Q ¼ {q1, q2, . . . , qm}, then according to the concept of extent analysis (Chang 1991,
1996), each object is taken and extent analysis for each goal Qi is performed
respectively. The fuzzy sets and notations discussed in this section are same as
discussed in section 3. The algebraic operations on triangular fuzzy numbers follow
the same mathematical rule and definitions discussed in section 3. The m extent
analysis values for each object are denoted as:
N1oi , N2oi , . . . Nm
oi , where i ¼ 1, 2, . . . , n:
where all the Njoi (j ¼ 1, 2, . . . , m) are triangular fuzzy numbers. Nm
oi represents the
value of the extent analysis of the ith object for mth goal.
The value of fuzzy synthetic extent with respect to the ith object is defined as:
" #1
X
m n X
X m
Fi ¼ Njoi Njoi ð9Þ
j¼1 i¼1 j¼1
P j
The value of m j¼1 Noi can be found by performing the fuzzy addition operation
of m extent analysis values from a particular matrix such that:
!
X
m
j
Xm X
m X
m
Noi ¼ n1j , n2j , n3j ð10Þ
j¼1 j¼1 j¼1 j¼1
P P j
and the value of ½ ni¼1 m j¼1 Noi can be obtained by performing the fuzzy addition
j
operation of Noi (j ¼ 1, 2, . . . , m) such that
!
X n X m
j
X n X
n X
n
Noi ¼ n1j , n2j , n3j ð11Þ
i¼1 j¼1 i¼1 i¼1 i¼1
Pn P m j 1
and ½ i¼1 j¼1 Noi can be calculated by the inverse of the previous equation (11)
as follows:
" #1
n X
X m
1 1 1
Njoi ¼ Pn , Pn , Pn ð12Þ
i¼1 j¼1 i¼1 n3i i¼1 n2i i¼1 n1i
The degree of possibility of N1 ¼ (n11, n12, n13) N2 ¼ (n21, n22, n23) is defined as
VðN1 N2 Þ ¼ sup½minðN1 ðxÞ, N2 ðyÞÞ ð13Þ
xy
when a pair(x, y) exists such that x y and N1 ðxÞ ¼ N2 ðyÞ ¼ 1, then we have
VðN1 N2 Þ ¼ 1: Since N1 and N2 are convex fuzzy numbers so, ð14Þ
VðN1 N2 Þ ¼ 1 if n11 n21 ð15Þ
and VðN2 N1 Þ ¼ hgtðN1 \ N2 Þ ¼ N1 ðdÞ, ð16Þ

where d is the ordinate of the highest intersection point D between N1 and N2
(shown in figure 3).
When N1 ¼ (n11, n12, n13) and N2 ¼ (n21, n22, n23) then ordinate of D is
computed by
VðN2 N1 Þ ¼ hgtðN1 \ N2 Þ ð17Þ
n11 n23
¼ ð18Þ
ðn22 n23 Þ ðn12 n11 Þ
For the comparison of N1 and N2, both the values of V(N1 N2) and V(N2 N1)
are required.
The degree possibility for a convex fuzzy number to be greater than k convex
fuzzy numbers Ni(i ¼ 1, 2, . . . , k) can be defined by
VðN N1 , N2 , . . . , Nk Þ ¼ V½ðN N1 Þ and ðN N2 Þ and . . . and ðN Nk Þ ð19Þ
¼ min VðN Ni Þ, i ¼ 1, 2, . . . , k: ð20Þ
If mðPi Þ ¼ min VðFi Fk Þ, ð21Þ

for k ¼ 1, 2, . . . , n; k 6¼ i. then the weight vector is given by
Wp ¼ ðmðP1 Þ, mðP2 Þ, . . . , mðPn ÞÞT , ð22Þ

where Pi(i ¼ 1, 2, . . . , n) are n elements.
After normalizing Wp, we get the normalized weight vectors
W ¼ ðwðP1 Þ, wðP2 Þ, . . . , wðPn ÞÞT , ð23Þ

N2 N1
1.0
V(N2 ≥ N1)
0.0
n21 n22 n11 d n23 n12 n13
Figure 3. Intersection between N1 and N2.
where W is a non fuzzy number and this gives the priority weights of one alternative
over other.
5.1 Merits of fuzzy-AHP

In the traditional formulation of the AHP, human’s judgements are represented as
exact (or crisp, according to the fuzzy logic terminology) numbers. In many practical
cases the human preference model is uncertain and decision makers might be
reluctant or unable to assign exact numerical values to the comparison judgements.
Since some of the evaluation criteria are subjective and qualitative in nature, it is very
difficult for the decision maker to express the preferences using exact numerical
values and to provide exact pairwise comparison judgements. In place of the exact
number for the comparison, triangular fuzzy numbers are used in fuzzy-AHP to
transform the linguistic preferences into the quantitative form for comparison. The
triangular fuzzy numbers helps in tacking the problems encountered in the AHP.
Fuzzy-AHP methodology discussed in this paper has the ability to effectively handle
the vague and imprecise information involves in the multi-attribute decision making
problems. The conventional AHP is mainly used in nearly well structured decision
applications and its rankings are not precise, whereas the fuzzy-AHP is more
effective and precise to handle the uncertain and conflicting decision criteria. The
Fuzzy-AHP with extent analysis is simple and easy to implement to prioritize
customer requirements as compared with the conventional AHP (Kwong and Bai
2003). This can improve the imprecise ranking of customer requirements inherited
from studies based on the conventional AHP. The simplicity, ease of use,
flexibility and its ability to handle complex and ill structured problems have led to
its popularity as a multi-attribute decision making tool. The mathematical
programming model applied to supplier selection always encounters problems

including qualitative criteria that are very important in the decision making,
especially for supplier partnership policies (Ghodsypour and O’Brien 1998).
Therefore fuzzy extended approach is applied in this paper, since it is a more
efficient approach in treating the fuzziness of data involved in analyzing the
qualitative factors than other methods such as weighting or mathematical
programming models.
6. Numerical illustration
In this global environment, manufacturers with limited resources want to spend as

much time and effort as possible in evaluating the potential suppliers for their critical
parts that have relative importance in making the final products. The global supplier
selection problem of a manufacturing organization has been taken in account in this
section to discuss the numerical illustration of the fuzzy-AHP. The company wants
to take into account all the possible important criteria which are affecting the supply
of the product. A decision making group is formed which consists of the experts from
each strategic decision area. A long discussion on every criterion, attribute and
alternative suppliers has been conducted and based on intensive discussion, five
prime criteria are identified. The discussion has been further prolonged to decide the
nineteen sub-criteria and three potential suppliers.
The following steps have been considered to form the hierarchy:
1. Define the global supplier selection problem.
2. Identify the overall objective. What the firm trying to accomplish?
3. Identify the criteria and sub-criteria that must be satisfied to fulfill the overall
objectives.
4. Identify decision alternatives or outcomes.
5. Structure the hierarchy placing the objective at first level, criteria at second
level, sub-criteria at third level and decision alternatives at fourth level.
The whole hierarchy of the selection of best global supplier can be easily visualized
from figure 2.
After the construction of the hierarchy the different priority weights of each
criteria, sub-criteria and alternatives are calculated using the fuzzy-AHP approach.
According to the questionnaire form (as discussed in appendix B), the preferences of
one criterion or sub-criterion over another has been decided. The past available
research in supplier selection, need of the company, current open and risky market
scenario and the view of the experts in political and economic field are the main basis
in deciding the preferences.
The computational procedure for calculating the priority weights of the different
decision variables and finally deciding the best global supplier using the fuzzy-AHP
technique can be summarized as follows:
Step 1: Construct the fuzzy comparison matrices of criteria with respect to the goal
with the help of the questionnaire form (discussed in appendix A).
Step 2: Determine the fuzzy synthetic extent value with respect to the each criterion
with the help of the equations discussed.
Step 3: Determine the degree of possibility of the superiority of each fuzzy

synthetic extent value with respect to each other.
Step 4: Decide the minimum degree of possibility of the superiority of each
criterion over another.
Step 5: Determine the weight vectors of the criteria with the help of minimum
degree of possibility of superiority of each criterion.
Step 6: Normalize this weight vectors and determine the final weight of the
decision criteria with respect to the goal.
Step 7: Repeat this process to decide the final weight of all the sub-criteria with
respect to their specific criteria.
Step 8: Similarly decide the priority of the decision alternatives with respect to the
sub-attributes.
Step 9: Multiply the priority weights of the decision alternatives with the
sub-criteria and decide the priority of the alternatives with respect to the main
criteria.
Step 10: Multiply the priority weights of the decision alternatives with the priority
weight of criteria and decide the final priority of the decision alternatives with respect
to the primary goal.
Step 11: Decide the best global supplier with the highest priority weight.
The numerical analysis of deciding the weight vectors of the criteria with respect
to goal is discussed as follows:
First the fuzzy comparison matrix of the criteria is constructed by the pairwise
comparison of the different criterion relevant to the overall objective, which is
shown in table 2. The fuzzy synthetic extent value with respect to each criterion is
calculated by using equation (9).
The different values of fuzzy synthetic extent with respect to the five different
criteria are denoted by F1, F2, F3, F4 and F5, respectively.
F1 ¼ ð11, 13, 15Þ ð40:33, 33:74, 27:90Þ1

¼ ð0:27, 0:38, 0:54Þ
F2 ¼ ð6:9, 8:5, 10:17Þ ð40:33, 33:74, 27:90Þ1
¼ ð0:17, 0:25, 0:36Þ
F3 ¼ ð3:85, 4:83, 6:07Þ ð40:33, 33:74, 27:90Þ1
¼ ð0:09, 0:14, 0:22Þ
F4 ¼ ð3:85, 4:83, 6:07Þ ð40:33, 33:74, 27:90Þ1
¼ ð0:09, 0:14, 0:22Þ
F5 ¼ ð2:30, 2:58, 3:02Þ ð40:33, 33:74, 27:90Þ1
¼ ð0:05, 0:08, 0:11Þ
Table 2. The Fuzzy comparison matrix of criteria with respect to the overall objective.
O C1 C2 C3 C4 C5 Weight
C1 (1.0, 1.0, 1.0) (1.5, 2.0, 2.5) (2.5, 3.0, 3.5) (2.5, 3.0, 3.5) (3.5, 4.0, 4.5) 0.46
C2 (0.4, 0.5, 0.67) (1.0, 1.0, 1.0) (1.5, 2.0, 2.5) (1.5, 2.0, 2.5) (2.5, 3.0, 3.5) 0.19
C3 (0.28, 0.33, 0.4) (0.4, 0.5, 0.67) (1.0, 1.0, 1.0) (0.67, 1.0, 1.5) (1.5, 2.0, 2.5) 0.12
C4 (0.28, 0.33, 0.4) (0.4, 0.5, 0.67) (0.67, 1.0, 1.5) (1.0, 1.0, 1.0) (1.5, 2.0, 2.5) 0.12
C5 (0.22, 0.25, 0.28) (0.28, 0.33, 0.4) (0.4, 0.5, 0.67) (0.4, 0.5, 0.67) (1.0, 1.0, 1.0) 0.11
The degree of possibility of Fi over Fj(i 6¼ j) can be calculated by equations (16)

and (18).
VðF1 F2 Þ ¼ 1, VðF1 F3 Þ ¼ 1, VðF1 F4 Þ ¼ 1, VðF1 F5 Þ ¼ 1,

0:27 0:36
VðF2 F1 Þ ¼ ¼ 0:41
ð0:25 0:36Þ ð0:38 0:27Þ
VðF2 F3 Þ ¼ 1, VðF2 F4 Þ ¼ 1, VðF2 F5 Þ ¼ 1,
Similarly, VðF3 F1 Þ ¼ 0:26, VðF3 F2 Þ ¼ 0:31, VðF3 F4 Þ ¼ 1, VðF3 F5 Þ ¼ 1,
VðF4 F1 Þ ¼ 0:26, VðF4 F2 Þ ¼ 0:31, VðF4 F3 Þ ¼ 1, VðF4 F5 Þ ¼ 1,
VðF5 F1 Þ ¼ 1:14, VðF5 F2 Þ ¼ 0:54, VðF5 F3 Þ ¼ 0:25,
VðF5 F4 Þ ¼ 0:25,
With the help of equation (21), we obtain the minimum degree of possibility as
mðC1 Þ ¼ min VðF1 F2 , F3 , F4 , F5 Þ

¼ min ð1, 1, 1, 1Þ ¼ 1,
Similarly, mðC2 Þ ¼ 0:41,
mðC3 Þ ¼ 0:26,
mðC4 Þ ¼ 0:26,
mðC5 Þ ¼ 0:25:
Therefore the weight vector is given as
Wc ¼ ð1, 0:41, 0:26, 0:26, 0:25ÞT

and after normalizing it we get the weight vector with respect to decision criteria C1,
C2, C3, C4 and C5 as
Wo ¼ ð0:46, 0:19, 0:12, 0:12, 0:11ÞT

The complete result is also given in table 2.
Now the different sub-criteria are compared under each of the criterion
separately by following the same procedure as discussed above. Whenever the
value of (n11 n23)40, the elements of the matrix must be take normalized and then
do the same process to find the weight vector of each attribute. The fuzzy
Table 3. The fuzzy comparison matrix of the sub-criteria with respect to criterion C1.
C1 S1 S2 S3 Weight
S1 (1.0, 1.0, 1.0) (1.0, 1.0, 1.0) (1.5, 2.0, 2.5) 0.36
S2 (1.0, 1.0, 1.0) (1.0, 1.0, 1.0) (1.5, 2.0, 2.5) 0.33
S3 (0.4, 0.5, 0.67) (0.4, 0.5, 0.67) (1.0, 1.0, 1.0) 0.31
C2 S4 S5 S6 S7 Weight
S4 (1.0, 1.0, 1.0) (1.5, 2.0, 2.5) (2.5, 3.0, 3.5) (1.5, 2.0, 2.5) 0.52
S5 (0.4, 0.5, 0.67) (1.0, 1.0, 1.0) (1.5, 2.0, 2.5) (1.0, 1.0, 1.0) 0.09
S6 (0.28, 0.33, 0.4) (0.4, 0.5, 0.67) (1.0, 1.0, 1.0) (0.67, 1.0, 1.5) 0.16
S7 (0.28, 0.33, 0.4) (1.0, 1.0, 1.0) (0.67, 1.0, 1.5) (1.0, 1.0, 1.0) 0.23
S8 (1.0, 1.0, 1.0) (2.5, 3.0, 3.5) (1.5, 2.0, 2.5) (1.5, 2.0, 2.5) 0.41
S9 (0.28, 0.33, 0.4) (1.0, 1.0, 1.0) (1.5, 2.0, 2.5) (1.5, 2.0, 2.5) 0.17
S10 (0.4, 0.5, 0.67) (0.4, 0.5, 0.67) (1.0, 1.0, 1.0) (1.0, 1.0, 1.0) 0.21
S11 (0.4, 0.5, 0.67) (0.4, 0.5, 0.67) (1.0, 1.0, 1.0) (1.0, 1.0, 1.0) 0.21
S12 (1.0, 1.0, 1.0) (2.5, 3.0, 3.5) (1.0, 1.0, 1.0) (1.5, 2.0, 2.5) 0.40
S13 (0.28, 0.33, 0.4) (1.0, 1.0, 1.0) (0.28, 0.33, 0.4) (0.67, 1.0, 1.5) 0.14
S14 (1.0, 1.0, 1.0) (2.5, 3.0, 3.5) (1.0, 1.0, 1.0) (1.5, 2.0, 2.5) 0.40
S15 (0.4, 0.5, 0.67) (0.67, 1.0, 1.5) (0.4, 0.5, 0.67) (1.0, 1.0, 1.0) 0.06
S16 (1.0, 1.0, 1.0) (0.67, 1.0, 1.5) (0.67, 1.0, 1.5) (1.5, 2.0, 2.5) 0.32
S17 (0.67, 1.0, 1.5) (1.0, 1.0, 1.0) (1.0, 1.0, 1.0) (1.5, 2.0, 2.5) 0.32
S18 (0.67, 1.0, 1.5) (1.0, 1.0, 1.0) (1.0, 1.0, 1.0) (1.5, 2.0, 2.5) 0.32
S19 (0.4, 0.5, 0.67) (0.4, 0.5, 0.67) (0.4, 0.5, 0.67) (1.0, 1.0, 1.0) 0.04
comparison matrices of sub-criteria and the weight vectors of each sub-criterion are
shown in tables 3–7.
Similarly the fuzzy evaluation matrices of decision alternatives and corres-
ponding weight vector of each alternative with respect to corresponding sub-criteria
Table 8. The fuzzy comparison matrix of the decision alternatives with respect to
sub-criterion S1.a
S1 A1 A2 A3 Weight
A1 (1.0, 1.0, 1.0) (2.5, 3.0, 3.5) (1.5, 2.0, 2.5) 0.76
A2 (0.28, 0.33, 0.4) (1.0, 1.0, 1.0) (1.5, 2.0, 2.5) 0.08
A3 (0.4, 0.5, 0.67) (0.4, 0.5, 0.67) (1.0, 1.0, 1.0) 0.16
a
Only two of a total of 19 tables are given here.
Table 9. The fuzzy comparison matrix of the decision alternatives with respect to
sub-criterion S2.a
S2 A1 A2 A3 Weight
A1 (1.0, 1.0, 1.0) (1.5, 2.0, 2.5) (1.5, 2.0, 2.5) 0.66
A2 (0.4, 0.5, 0.67) (1.0, 1.0, 1.0) (1.0, 1.0, 1.0) 0.17
A3 (0.4, 0.5, 0.67) (1.0, 1.0, 1.0) (1.0, 1.0, 1.0) 0.17
are also calculated but to make the paper concise only comparison matrices
with respect to sub-criteria S1 and S2 are shown in the paper in tables 8 and 9.
Other comparison matrices of decision alternatives with respect to sub-criteria S3 to
S19 can easily be formed as similar to the S1 and S2. Figure 4 shows the weight
vectors of the sub-criteria with respect to the criteria at level 2 and the weight
vectors of decision alternatives with respect to the sub-criteria at level 3 of the
hierarchy.
The priority weights of suppliers with respect to the each criterion are given
by adding the weights per supplier multiplied by weights of the corresponding
sub-criteria. The results are shown in tables 10–14.
Finally the priority weights of each supplier can be calculated by weights per
supplier multiplied by weights of the corresponding criterion. The highest score of
the supplier gives the idea about the best global supplier of the manufacturing
company. The results are shown in table 15.
According to the final score the alternative supplier A1 is the most preferred
supplier and supplier A2 is the alternative supplier after this. Through the illustration
of the fuzzy-AHP model, it is found that the global supplier selection problem can be
solved in a structural and timely manner. The sensitivity of each decision alternatives
with respect to the sub-criteria and main criteria can be shown in figures 5 and 6,
respectively. The final priority weights of each supplier can also be seen from
figure 7.
The final priority weights of the different criteria shows that the total cost of
ownership is the most important criteria in the global supplier selection problem and
it is followed by the quality, service, background of supplier and the risk factors.
The service performance of the supplier and its background carry the same priority
weights in this global supplier selection problem, which is also justified in context of
the search of mostly unfamiliar and unknown suppliers in the global environment.
The potential risk factors have been also identified and properly taken into account
in the supplier selection problem in this paper. In this study some of the interesting
Level 1: Goal Global supplier selection
Level 2: Criteria
Cost of Ownership Quality Service Background Risk factors

(0.36,0.33,0.31) (0.52,0.09,0.16,0.23) (0.41,0.17,0.21,0.21) (0.40,0.14,0.40,0.06) (0.32,0.32,0.32,0.04)
Level 3: Sub-criteria
Product cost Conformance to Delivery reliability Technological capability Geographical location

(0.76,0.08,0.16) specification (0.08,0.27,0.65) (0.56,0.03,0.41) (0.19,0.32,0.49)
(0.83,0.15,0.02)
Total logistics Product reliability Formation sharing Financial status Political stability
management cost (0.14,0.43,0.43) (0.28,0.32,0.40) (0.34,0.33,0.33) and foreign policies

(0.66,0.17,0.17) (0.32,0.40,0.28)
Tariff and taxes Quality assessment Flexibility and Facility and Exchange rates and
(0.02,0.83,0.15) technique responsiveness infrastructure economic position
(0.17,0.66,0.17) (0.41,0.03,0.56) (0.76,0.08,0.16) (0.34,0.33,0.33)
Process capability Customer response Market reputation Terrorism and
(0.34,0.33,0.33) (0.49,0.49,0.02) (0.55,0.18,0.27) crime rate
(0.14,0.43,0.43)
Figure 4. Weight vectors of the decision alternatives and the sub-criteria with respect to the
sub-criteria and criteria, respectively.
Table 10. Summary combination of priority weights: Sub-criteria of criterion C1.
Alternative
S1 S2 S3 priority weight
Weight 0.36 0.33 0.31

Alternatives
A1 0.76 0.66 0.02 0.50
A2 0.08 0.17 0.83 0.34
A3 0.16 0.17 0.15 0.16
S4 S5 S6 S7 Alternative priority weight
Weight 0.52 0.09 0.16 0.23

Alternatives
A1 0.83 0.14 0.17 0.34 0.55
A2 0.15 0.43 0.66 0.33 0.30
A3 0.02 0.43 0.17 0.33 0.15
Alternative
S8 S9 S10 S11 priority weight
Weight 0.41 0.17 0.21 0.21

Alternatives
A1 0.08 0.28 0.41 0.49 0.27
A2 0.27 0.32 0.03 0.49 0.27
A3 0.65 0.40 0.56 0.02 0.46

Alternative
Weight 0.40 0.14 0.40 0.06

Alternatives
A1 0.56 0.34 0.76 0.55 0.61
A2 0.03 0.33 0.08 0.18 0.10
A3 0.41 0.33 0.16 0.27 0.29
Alternative
Weight 0.32 0.32 0.32 0.04

Alternatives
A1 0.19 0.32 0.34 0.14 0.28
A2 0.32 0.40 0.33 0.43 0.35
A3 0.49 0.28 0.33 0.43 0.37
Table 15. Summary combination of priority weights: Main criteria of the overall objective.
Alternative
C1 C2 C3 C4 C5 priority weight
Weight 0.46 0.19 0.12 0.12 0.11

Alternatives
A1 0.50 0.55 0.27 0.61 0.28 0.47
A2 0.34 0.30 0.27 0.10 0.35 0.30
A3 0.16 0.15 0.46 0.29 0.37 0.23
Thus the supplier 1 is the best global supplier and the alternative supplier after this is supplier 2.
0.9 A1 A2 A3
0.8
0.7
Priority weights
0.6
0.5
0.4
0.3
0.2
0.1
0
S1 S2 S3 S4 S5 S6 S7 S8 S9 S10 S11 S12 S13 S14 S15 S16 S17 S18 S19
Sub-criteria
Figure 5. Sensitivity of each decision alternatives with respect to the sub-criteria.

0.7 A1 A2 A3
0.6
Priority weights
0.5
0.4
0.3
0.2
0.1
0
C1
C2 A3
C3
C4 A2
Criteria C5 A1
Figure 6. Sensitivity of each decision alternatives with respect to the criteria.
0.5
0.45
0.4
Priority weights
0.35
0.3
0.25
0.2
0.15
0.1
0.05
0
A1
A2
A3
Suppliers
Figure 7. Final priority weights of each supplier.

and most relevant risk factors have been identified and analyzed. Some of the risk
factors identified and emphasized in this paper could not been seen in any previous
studies, which have the significant capability to affect the selection process of the
global supplier. The selection of the risk factors in this study are well justified
considering in mind the long-term effects of unfavorable government policies,
unstable economic growth and terrorism. Nowadays terrorism is identified as a
reasonable possible threat on business flow and therefore it has been included as a
decision variable by most of the organizations to decide its business strategies.
Most of past researchers (Weber et al. 1991, 1993, Dickson, 1996) also identified
the cost, quality and service as the most important criteria in supplier selection.
The importance of the supplier’s past history and the risk factors like geographical
location, political and economic policies, exchange rate, etc., cannot be ignored in
the process of the selection of international suppliers. The perception and assessment
of risk factors associated with global supplier selection may be biased and subjective,
thus great precision is required to decide its preference over other factors.
The classification of the decision criteria in assessing the overall performance of
the international suppliers are well justified in context with the current business and
political scenario.
7. Conclusion and future research
In supply chain, manufacture-supplier collaboration is typically a difficult and

important link which can control the channel of distribution. The good coordination
and information exchange with the suppliers may be very helpful in deciding the
performance of the firm. Efficient supplier is always important for the firm because
the failure of its coordination results in excessive delays, and ultimately leads to poor
customer services. In this paper a fuzzy modified AHP (fuzzy-AHP) approach is used
to select the best global supplier. The main criteria and sub-criteria are decided
considering the current business scenario and experience of the experts in the
respective fields. The large number of criteria and sub-criteria show that the selection
of global supplier is not an easy task. We have tried to take most of the important
deciding factors which can affect the supply from global sourcing. Keeping in mind
the complexities of new business scenario, different risk factors are also considered in
making the decision. The risk factors discussed in this paper can properly take care
of the issues like political stability, geographical condition, economic condition of
country, affect of terrorism on business, etc. The fuzzy-AHP model discussed in this
paper is proved to be simple, less time taking and having less computational expense
(Chang 1996). The use of fuzzy AHP does not involve cumbersome mathematical
operation and so it is easy to handle the multi-attribute decision making problems
like global supplier selection. It has the ability to capture the vagueness of human
thinking style and effectively solve multi-attribute decision making problems.
The illustrative example shows the thoughtfulness, flexibility and efficiency of the
proposed model to directly tap the subjectivity and preferences of the decision
makers. The paper attempts successfully to identify the possible threats on global
supplier selection process and tried to analysis it using fuzzy extended AHP
approach.
Despite the aforementioned various advantages of the proposed approach for the
global supplier selection, this research work can be extended to add more supplier
alternatives which encompass both domestic and international suppliers but this can
increase the computational complexities. The multi-objective treatment of global
supplier selection and order splitting among the chosen suppliers should also be
added in the supplier selection problems. Generally the supplier selection process is
time and demand sensitive and it may vary in specific period of time, so more
emphasis can be given to the flexibility of the decision process in future. The paper
can be extended to incorporate the supplier’s capacity constraints and the buyers’
aggregate quality and service limitations in the supplier selection process. The global
supplier selection decision may include environmental and ethical guidelines set by
the manufacturing firm.
Acknowledgement
The authors are very much thankful to two anonymous referees for their valuable
suggestions and comments which significantly helped us to make this paper more
valuable and easily understandable.
Appendix A. Some of the other decision criteria
Some other decision criteria, considered in the past literatures related to supplier
selection problem are listed below:
. Reliable delivery
. Corruption perception
. Currency stability
. Labor skill
. GDP growth rate
. Political and economical stability
. Satisfactory order processing
. Ability to keep promises
. Prompt response to requests
. Regular communications
. Communication openness
. Supplier’s believability and honesty
. Legal claims
. Ethical standards
. Attractive credit terms
. Competitive prices
. Attractive discounts
. After-sales service
. Cultural similarity
. Assurance about the handling of problems
. Existence of a refund policy
. Positive attitude toward complaints
. Negotiability
. R and D capabilities
. Technical know-how
. IT experience
. Supplier representative’s competence
. Existence of IT standards
. Adaptability to future IT market requirements
Appendix B. Questionnaire
The form of questionnaire to facilitate the comparison of Criteria, Sub-criteria and

Decision alternatives is given in figures T1, T2 and T3. If the left side criterion is
more important than right side then put mark to the left side of the importance
‘Equal’ else mark to the right side of it.
Sample questions:
‘How important is criterion C1 when it is compared with criterion C2?’
‘How important is criterion C1 when it is compared with criterion C3?’
‘How important is sub-criterion S1 when it is compared with S2?’ and so on.
Table B1. With respect to the overall objective of the global supplier selection the questionnaire form of criteria is as follows.
With
respect
to to
overall
objective Importance/preference of one criteria over another
Absolute Very strong Fairly strong Weak Equal Weak Fairly strong Very strong Absolute
Criterion (3.5, 4.0, 4.5) (2.5, 3.0, 3.5) (1.5, 2.0, 2.5) (0.67, 1.0, 1.5) (1.0, 1.0, 1.0) (0.67, 1.0, 1.5) (1.5, 2.0, 2.5) (2.5, 3.0, 3.5) (3.5, 4.0, 4.5) Criterion
p
C1 p C2
C1 p C3
C1 p C4
C1 p C5
C2 p C3
C2 p C4
C2 p C5
C3 p C4
C3 p C5
C4 C5
3853
3854
Table B2. With respect to the main-criteria the questionnaire form of sub-criteria is as follows.
With respect
to sub-
criterion C1 Importance/preference of one sub-criterion over another
Absolute Very strong Fairly strong Weak Equal Weak Fairly strong Very strong Absolute sub-
sub-criterion (3.5, 4.0, 4.5) (2.5, 3.0, 3.5) (1.5, 2.0, 2.5) (0.67, 1.0, 1.5) (1.0, 1.0, 1.0) (0.67, 1.0, 1.5) (1.5, 2.0, 2.5) (2.5, 3.0, 3.5) (3.5, 4.0, 4.5) criterion
p
S1 p S2
S1 p S3
S2 S3
With respect Importance/preference of sub-criterion over another

to main
criterion
C2
F. T. S. Chan et al.
sub-criterion Absolute Very strong Fairly strong Weak Equal Weak Fairly strong Very strong Absolute sub-
(3.5,
p 4.0, 4.5) (2.5, 3.0, 3.5) (1.5, 2.0, 2.5) (0.67, 1.0, 1.5) (1.0, 1.0, 1.0) (0.67, 1.0, 1.5) (1.5, 2.0, 2.5) (2.5, 3.0, 3.5) (3.5, 4.0, 4.5) criterion
S4 p S5
S4 p S6
S4 p S7
S5 p S6
S5 p S7
S6 S7
Only two of the five questionnaire forms are shown here.
Table B3. With respect to the sub-criteria the questionnaire form of decision alternatives is as follows.
With respect
to sub- Importance/preference of
criterion S1 one alternative over another
Decision Absolute Very strong Fairly strong Weak Equal Weak Fairly strong Very strong Absolute Decision
alternatives (3.5,
p 4.0, 4.5) (2.5, 3.0, 3.5) (1.5, 2.0, 2.5) (0.67, 1.0, 1.5) (1.0, 1.0, 1.0) (0.67, 1.0, 1.5) (1.5, 2.0, 2.5) (2.5, 3.0, 3.5) (3.5, 4.0, 4.5) alternatives
A1 p A2
A1 p A3
A2 A3
With Importance/preference of
respect to one alternative over another
main
criterion S2
Decision Absolute Very strong Fairly strong Weak Equal Weak Fairly strong Very strong Absolute Decision
alternatives (3.5,
p 4.0, 4.5) (2.5, 3.0, 3.5) (1.5, 2.0, 2.5) (0.67, 1.0, 1.5) (1.0, 1.0, 1.0) (0.67, 1.0, 1.5) (1.5, 2.0, 2.5) (2.5, 3.0, 3.5) (3.5, 4.0, 4.5) alternatives
A1 p A2
A1 p A3
A2 A3
Only two of the 19 questionnaire forms are shown here.
3855
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International Journal of Production Research

ISSN: 0020-7543 (Print) 1366-588X (Online) Journal homepage: http://www.tandfonline.com/loi/tprs20

Global supplier selection: a fuzzy-AHP approach

Felix T. S. Chan , N. Kumar , M. K. Tiwari , H. C. W. Lau & K. L. Choy

To link to this article: http://dx.doi.org/10.1080/00207540600787200

Published online: 12 Jun 2008.

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Global supplier selection: a fuzzy-AHP approach

FELIX T. S. CHAN*y, N. KUMARy, M. K. TIWARIz,

yDepartment of Industrial and Manufacturing Systems Engineering,

xDepartment of Industrial and Systems Engineering, The Hong Kong

(Revision received September 2005)

Keywords: Supply chain; Global supplier selection; Analytic hierarchy process;

*Corresponding author. Email: ftschan@hkucc.hku.hk

International Journal of Production Research

development or selection problem is taken when there is no any quantity constraint

Abundant literatures on various domestic supplier selection techniques are available,

Table 1. Summary of some of the relevant researches in supplier selection.

Category Classification Author(s)

Review papers Decision variables and Weber et al. (1991, 1993),

3. Fundamentals of AHP and fuzzy set theory

3.1 Analytic Hierarchy Process (AHP)

decision-maker’s perception to exact numbers. In the traditional formulation of

3.2 Fuzzy set theory

Figure 1. A triangular fuzzy number, Ñ.

n11 n12 n13

As the global competition among organizations has increased and customer

Cost of ownership Quality Service Background Risk factors

Product cost Conformance to Delivery Technological Geographical

Figure 2. Hierarchy for the global supplier selection.

4.1 Total cost of ownership (C1)

4.2 Quality of the product (C2)

4.3 Service performance (C3)

. Delivery reliability (S8): The major obstacle to global sourcing is the

4.4 Supplier’s background (C4)

good product is of prime concern in global supplier selection. The advanced

4.5 Risk factor (C5)

the democratic government of USA and India, therefore this must be

different attributes. The relative importance of different decision criteria in global

real situations for making effective decisions.

VðN1 N2 Þ ¼ 1 if n11 n21 ð15Þ

and VðN2 N1 Þ ¼ hgtðN1 \ N2 Þ ¼ N1 ðdÞ, ð16Þ

¼ min VðN Ni Þ, i ¼ 1, 2, . . . , k: ð20Þ

If mðPi Þ ¼ min VðFi Fk Þ, ð21Þ

Wp ¼ ðmðP1 Þ, mðP2 Þ, . . . , mðPn ÞÞT , ð22Þ

W ¼ ðwðP1 Þ, wðP2 Þ, . . . , wðPn ÞÞT , ð23Þ

Figure 3. Intersection between N1 and N2.

5.1 Merits of fuzzy-AHP

programming model applied to supplier selection always encounters problems

In this global environment, manufacturers with limited resources want to spend as

Step 3: Determine the degree of possibility of the superiority of each fuzzy

F1 ¼ ð11, 13, 15Þ  ð40:33, 33:74, 27:90Þ1

The degree of possibility of Fi over Fj(i 6¼ j) can be calculated by equations (16)

VðF1 F2 Þ ¼ 1, VðF1 F3 Þ ¼ 1, VðF1 F4 Þ ¼ 1, VðF1 F5 Þ ¼ 1,

mðC1 Þ ¼ min VðF1 F2 , F3 , F4 , F5 Þ

Wc ¼ ð1, 0:41, 0:26, 0:26, 0:25ÞT

Wo ¼ ð0:46, 0:19, 0:12, 0:12, 0:11ÞT

C3 S8 S9 S10 S11 Weight

C4 S12 S13 S14 S15 Weight

F1 ¼ ð11, 13, 15Þ ð40:33, 33:74, 27:90Þ1