Integration of Data Envelopment Analysis with Analytical Hierarchy Process and Entropy Measurement in the Optimization of Supplier Selection

Abstract

Supplier selection is perceived as important decision-making process in any supply chain management. In this study, the best supplier for a company is being determined based on five main criteria chosen which are delivery, capacity, warranty, cost, and quality. The Analytic Hierarchy Process (AHP) and Entropy Measurement (EM) methods are integrated with Data Envelopment Analysis (DEA) was applied to set ranking and choose the best supplier as conventional DEA is not able to provide complete ranking among inefficient units. The mathematical modelling is executed using LINGO software. Supplier 3 has obtained efficient result of score 1 for both hybrid method and in Super Efficiency method as the most efficient supplier. Then, the results are validated using Spearman’s Rank Correlation Coefficient (SRCC) which shows positive correlation between both integrated methods. Finally, findings of this study indicate the feasibility of integrated AHP-DEA and EM-DEA for supplier selection with multiple criteria.