1. 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

2. Copyright  2006 by CEBT DEECS 2006 - 2Center for E-Business Technology 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

3. Copyright  2006 by CEBT DEECS 2006 - 3Center for E-Business Technology 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

4. Copyright  2006 by CEBT DEECS 2006 - 4Center for E-Business Technology 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)

5. Copyright  2006 by CEBT DEECS 2006 - 5Center for E-Business Technology Five-Step Supplier Evaluation Process pricedelivery quality financial state performance history... factor pool price delivery quality 2) determine factors 3) select utility functions 4) assign weights 1) establish the goal price quality delivery 5) calculation of utilities NameUtilityRank A0.851 B0.622 C0.323 service

6. Copyright  2006 by CEBT DEECS 2006 - 6Center for E-Business Technology Supplier Evaluation Policy - example FactorUtility FunctionWeightConstraints PriceLinear0.4None DeliveryStep0.2None QualityLog0.2None ServiceLinear0.2None Furniture FactorUtility FunctionWeightConstraints PriceLinear0.1None DeliveryStep0.2None QualityLog0.3None Defective RatioLinear0.4None Bearing FactorUtility FunctionWeightConstraints PriceLinear0.5None DeliveryStep0.310 days QualityLog0.2None Stationery  Different evaluation settings for products

7. Copyright  2006 by CEBT DEECS 2006 - 7Center for E-Business Technology 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

8. Copyright  2006 by CEBT DEECS 2006 - 8Center for E-Business Technology 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

9. Copyright  2006 by CEBT DEECS 2006 - 9Center for E-Business Technology 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

10. Copyright  2006 by CEBT DEECS 2006 - 10Center for E-Business Technology Normalization  Convert raw values to fit in a common range, (0, 1)  Hard to know min and max before evaluating  Dynamic normalization  Normalization formula 0 1

11. Copyright  2006 by CEBT DEECS 2006 - 11Center for E-Business Technology 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

12. Copyright  2006 by CEBT DEECS 2006 - 12Center for E-Business Technology 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

13. Copyright  2006 by CEBT DEECS 2006 - 13Center for E-Business Technology Architecture Data Warehouse Factor Pool Utility Function Pool SEP Pool Supplier Evaluation Engine Factor Manager Utility Function Manager SEP Manager Supplier Evaluation Result Analysis GUI Manager UI Database Layer Logic Layer Interface Layer Read onlyRead & Write

14. Copyright  2006 by CEBT DEECS 2006 - 14Center for E-Business Technology Application  installed at iMarketKorea, one of the major e-procurement agency in Korea SEP List Viewer Supplier List Viewer Analysis UI SEP Viewer

15. Copyright  2006 by CEBT DEECS 2006 - 15Center for E-Business Technology Validation of BestChoice  Effectiveness  Evaluation accuracy * RFQ : Request For Quote *

16. Copyright  2006 by CEBT DEECS 2006 - 16Center for E-Business Technology 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