BestChoice: A Decision Support System
for Supplier Selection in e-Marketplaces
June 26, 2006
Dongjoo Lee, Tahee Lee, Sue-kyung Lee,
Ok-ran Jeong, Hyeonsang Eom, and Sang-goo Lee
Seoul National University, Korea
Contents
 Introduction

Supplier Selection Problem in e-Procurement Agency
 BestChoice

Supplier Evaluation

Supplier Evaluation Policy

Analysis of Supplier Evaluation Results
 Implementation

Architecture

Application

Validation of BestChoice
 Conclusion
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Supplier Selection Problem
 Problems

supplier selection depends on experience of agents

not enough experienced agents that deal with supplier selection
which is excessively time-consuming
 Benefits of decision support system

evaluate suppliers by logical evaluation model

support visualization and analysis of evaluation

store knowledge of experienced agents to be transferred to
inexperienced agents

speed up the selection process
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BestChoice
 Framework for supplier evaluation

supplier evaluation is expressed as numeral value : Utility

five-step supplier evaluation process

once the evaluation is done, necessary information to evaluate
suppliers is stored in Supplier Evaluation Policy (SEP)
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Five-Step Supplier Evaluation Process
3) select utility functions
price
quality
delivery
2) determine factors
price
4) assign weights
delivery
service
quality
financial state
performance ...
history
factor pool
price
quality
delivery
1) establish the goal
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5) calculation of utilities
Name
Utility
Rank
A
0.85
1
B
0.62
2
C
0.32
3
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Supplier Evaluation Policy - example

Different evaluation settings for products
Bearing
Furniture
Factor
Factor
Price
Utility Function
Weight
Constraints
Linear
0.1
None
Utility Function
Weight
Constraints
Linear
0.4
None
Delivery
Step
0.2
None
Delivery
Step
0.2
None
Quality
Log
0.3
None
Quality
Log
0.2
None
Defective Ratio
Linear
0.4
None
Service
Linear
0.2
None
Price
Factor
Utility Function
Weight
Constraints
Linear
0.5
None
Delivery
Step
0.3
10 days
Quality
Log
0.2
None
Price
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Stationery
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Supplier Evaluation Policy

Rule for evaluating the suppliers

when item involved in S is requested to purchase, evaluate suppliers by this
method

Reuse of SEP for similar purchase requests speeds up the selection
process

SEP allows the inexperienced to learn from the expertise of experienced
agents
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Supplier Evaluation
 Multi Attribute Utility Theory (MAUT)

The value of alternatives consist of measures over the criteria
contributing to worth; all converted to a common scale of utility
 Factors

indicate suppliers’ characteristics and performance

qualitative – product quality, service satisfaction

quantitative – delivery, price and financial state
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Utility Calculation
 Raw values of factors are calculated to the normalized numeral
values through Utility Function
 Utility functions are used for the property of the factors
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Normalization

Convert raw values to fit in a common range, (0, 1)

Hard to know min and max before evaluating

Dynamic normalization
1
0

Normalization formula
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Weight Assessment
 Weight : numeral expression of importance of the factor
 Various methods
 AHP

technique for converting subjective assessments of relative
importance into a set of weights.

By using simple Pairwise comparison, importance of factor can be
calculated as numeral value
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Analysis of supplier evaluation results
 the agents can grasp the evaluation results with ease
 help inexperienced agents to acquire experience and knowledge
of experienced agents
 Methods

What if analysis

Similarity analysis

Sensitivity analysis
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Architecture
Supplier Evaluation Result
Analysis GUI
Interface Layer
Logic Layer
Database Layer
Supplier Evaluation
Engine
Data Warehouse
Read only
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SEP Manager
SEP Pool
Manager UI
Factor Manager
Utility Function
Manager
Factor Pool
Utility Function
Pool
Read & Write
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Application
 installed at iMarketKorea, one of the major e-procurement
agency in Korea
SEP List
Viewer
SEP
Viewer
Supplier
List Viewer
Analysis
UI
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Validation of BestChoice
*
* RFQ : Request For Quote
 Effectiveness
 Evaluation accuracy
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Conclusion & Future Work
 Other decision support systems are focused on evaluation model
but BestChoice is focused on reuse of domain expertise and
making selection process quick
 BestChoice

reduce human effort and time to evaluate suppliers

make knowledge base to utilize domain expertise

effectiveness and evaluation accuracy was validated with application
installed in iMarketKorea
 Future Work

Integrating BestChoice into the Supplier Relationship Management
System
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