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 A decision support system for supplier  selection in the airline industry  F T S Chan1*, H K Chan1, R W L Ip2,  and  H C W Lau3 1 Department of Industrial and Manufacturing Systems Engineering, University of Hong Kong, Pokfulam, People’s People ’s Republ Republic ic of China  2 Department of Manufacturing Engineering and Engineering Management, City University of Hong Kong, People’s People ’s Republ Republic ic of China  3

Department of Industrial and Systems Engineering, The Hong Kong Polytechnic University, Hung Hom, People’s Republ People’s Republic ic of China  The manuscript was received on 28 April 2006 and was accepted after revision for publication on 27 November 2006. DOI: 10.1243/09544054JEM629

Supplier ier selection selection has increasingly increasingly been regarded regarded as one of the most import important ant  Abstract:   Suppl strategies in the globalization era. While many companies require different resources from the supply market, airline companies require supplies of parts and repair and maintenance services. The suppliers of these products and services are regarded as critical for the industry.  With the multidimensional nature of the problem, supplier selection involves both tangible and int intang angible ible selection selection cri criter teria. ia. Thi Thiss pap paper er pre presen sents ts a cas case e stu study dy on solv solving ing the sup suppli plier er selection problem in the airline industry through a decision support system that employs the analytica analyticall hie hierarc rarchy hy pro proces cesss (AH (AHP). P). The sys system tem was imp implem lement ented ed wit with h the aid of the commerc com mercial ial soft software ware package package Exp Expert ert Cho Choice ice.. The sign signifi ifican cance ce of the stu study dy is to pro provid vide e a  new platform platform for air airlin line e com compan panies ies in sel select ecting ing sup suppli pliers ers on the basis of the proposed proposed decision support system, which was tested with a Hong Kong-based airline company during  the course of development. In addition, the model highlights the areas of most concern to airline companies in supplier selection. Unlike many similar studies, sensitivity analysis has been performed in order to improve the robustness of the results, and to understand the importance importa nce of differe different nt criter criteria ia with respect to the selected decision. decision. Keywords:   decision support system, system, airline industry, case study, supplier supplier selection, analytical hierarchy process

*Corresponding author: Industrial and Manufacturin Manufacturing g Systems  Engineering, The University of Hong Kong, Room 814, Haking 

In addi additio tion, n, the exp expans ansion ion of tou tourism rism,, apa apart rt fro from m  widening cultural opportunities for millions of people, has also led to greater economic prosperity in many previously underdeveloped countries. Because of all sorts of economic benefits and national security it y co cons nsid ider erat ation ions, s, th the e in indu dust stry ry has lo long ng be been en treate tre ated d by nat nation ional al gove governm rnment entss as a pro proprie prietary  tary  industry and received strict government control [1 [ 1]. However, governments around the world are reducing their regulatory roles in the airline industry [2 [ 2]. Deregulation Deregu lation and privat privatization ization have increa increased sed the competition compe tition within the indust industry, ry, with the appearance of new airlines that have adopted low cost/low  price as their marketing strategy [3 [ 3], combined with rapid expansion into new markets by many of the

Wong Building, Pokfulam Road, Hong Kong, People’s Republic  of China. email: [email protected] 

established new airlines [4 [4]. This also partly explains  why a number of alliances have been formed [5].

1

INTROD INT RODUCT UCTION ION

The airline industry is a distinctive business. Over the last few decades, international air transport has played a key role in the development of the world economy by stimulating exchanges between countries tri es and faci facilit litatin ating g int intern ernatio ational nal eco econom nomic ic acti acti-viti vi ties es.. It ha hass al allow lowed ed a nu numb mber er of in indu dust stri ries es to expand expan d their geographical geographical markets and to introd introduce uce innovative innov ative just-i just-in-time n-time techn techniques iques.. The globaliz globalizaation of production and sales structures has contributed to an improved use of resources worldwide.

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Nevertheless, severe intra- and interalliance competition still exists.  As consumers are quite accustomed to looking for low fare opportunities, and because the air transport product is rather difficult to differentiate [6 [6], airline compan com panies ies hav have e bee been n exp exploit loiting ing int intern ernet et tec techno hno-logies at the customer interface for promotion and sales of travel services. In spite of this, it is still quite

to we wear ar ou out, t, an and d fai failu lure ress co coul uld d po poss ssib ibly ly oc occu cur. r. Maintenance is then performed to ensure that an accept acc eptable able lev level el of safe safety ty is ach achiev ieved ed thr throug oughou houtt the th e li life fe of th the e ai airc rcra raft ft an and d it itss co cons nsti titu tuen entt pa part rtss and components. Manufacturing, maintenance, and repair errors can negate design safety features and intr in trod oduc uce e ha hazar zards ds th that at ma may y no nott be im imme medi diate ately  ly  apparent [11 [11]. ]. Hence, people who are responsible

unl unlike ikely ly tha thatt airl airline inessonwou would be abl able eside to gai gain n suf sufficient improvement theldrevenue only. Asfia  consequence, more attention should be paid to the contro con troll or red reduct uction ion of ope operat ration ional al cos costs ts [7], fo forr exam ex ample ple,, by se sele lect ctin ing g th the e be best st su supp pplie liers rs (w (whi hich ch may not necessarily be those offering the cheapest products). Many companies have realized the importance of  thei th eirr su supp pplie liers rs to th the e su succ cces esss of th thei eirr lon long-t g-ter erm m growth. Hence, they have been striving to develop and main maintain tain an opt optimum imum sup suppli plier er str struct ucture ure tha thatt could be beneficial to both sides. The first step in achi ac hiev evin ing g th this is is su supp pplie lierr-ba base sed d ma mana nage geme ment nt,,  which includes supplier evaluation, with subsequent selection of the best subset and reduction in the size of the base [8 [8]. In other words, supplier evaluation

for these functions play aincident vital rolewould in company survival since any notable deteriorate the cus custome tomerr imp impress ression ion of air saf safety ety.. Sub Substan stantia tiall expenses have been incurred in maintenance, materials, rial s, and ove overhau rhaull by som some e worl world-c d-class lass airl airline ines. s. Maintenance Maint enance deficiencies deficiencies have been estimated to be involved in approximately 12 per cent of major aircraft accidents and 50 per cent of engine-related flight delays and cancellations [12 [ 12]. ]. This highlights the importance of suppliers in the airline industry.  A number of o f reports in the literature have pointed out that one important aspect of supply chain management is the selection of suppliers [13 [13– –15 15]. ]. In the past, pas t, man many y firm firmss hav have e ten tended ded to use qua quanti ntitati tative ve factors, such as delivery timeliness, cost, etc., in the selection selec tion of suppli suppliers. ers. Recently, Recently, resea research rch has shown

and sel select ection ion are pre prereq requis uisite itess for the suc succes cesss of  any supplier strategy. Given the importance of suppliers and the selection of suppliers in a rather general perspective, suppliers to the airline companies  were defined as component or spare parts suppliers and technical repairers or maintenance service providers in the context of the present study. The objective of this study is to design a decision support system (DSS) based on the analytical hierarchy process (AHP) to solve the supplier selection probl pr oblem em in th the e ai airli rline ne in indus dustr try, y, wi with th th the e as assi siststance of the commercial software Expert Choice [9 [ 9] to achi achieve eve this pur purpose pose.. AHP has bee been n emp employe loyed d in many applications in DSSs to help management make decisions [10 [10]. ]. The organization of this paper is as fol follows lows.. Sec Sectio tion n 2 rev reviews iews rel relate ated d lit litera eratur ture. e. Section 3 gives a brief introduction of the methodology of this study. Section 4 presents the DSS, while section 5 is a complementary section to section 4, discussing discu ssing related issues by conducting a sensi sensitivity  tivity  analys ana lysis. is. Sen Sensit sitivi ivity ty ana analys lysis is is imp import ortant ant in the sens se nse e th that at it pr prov ovid ides es an un unde derst rstand andin ing g of th the e importance of the criteria, and hence could improve the robustness of the results. However, it is usually  overlooked in the literature. Finally, section 6 concludes the paper.

The level of safety of an aircraft is initially set by the

that more com that compan panies ies hav have e adop adopted ted cha channe nnell rel relaationships (i.e. buyer–supplier relationships) in their supplier evaluation programmes, or in forming partnerships with suppliers [16 [16]. ]. Wagner [8 [8] advocated that the value being generated by a company does not come solely from within the company or from the com compan pany’s y’s pur purcha chasin sing g or rel relate ated d fun functi ctions ons.. It is, to a certain extent, defined by the supply market. Therefore, suppliers can significantly contribute to the company’s value. This also highlights the nece necesssity sit y and importanc importance e of hav having ing and maintaini maintaining ng a  good supplier-based management system. However, relational factors, such as the feeling of  trust, tru st, the lev level el and ope openne nness ss of com commun munica icatio tion, n, etc., are likely to be difficult to quantify. Regarding  these aspects, Barbarosoglu and Yazgac [15 [15]] noted that evaluation of intangible factors requires expert  judgements. Usually, the more a person knows aboutt the sit abou situat uation ion,, the bet better ter and mor more e rel reliab iable le result can be expected from that person. Therefore, supplier suppl ier selec selection tion is certa certainly inly a multid multidimens imensional ional problem involving both tangible and intangible factors, making it more complex to solve [17 [17– –19 19]. ]. In this connection, in order to integrate both tangible and intangible factors into a logical and effective framework, a DSS based on AHP is proposed in this study. stu dy. The sys system tem provides provides a fra framewo mework rk to cope  with a multicriteria situation, involving intuitive, rationa rati onal, l, qua qualita litativ tive, e, and qua quantit ntitati ative ve asp aspect ects, s, to solve the supplier selection problem. In fact, a number of authors conducted research

airworthiness to which it is life, designed and built. However,standards during their operating parts start

into qua into quanti ntifyi fying ng som some e int intang angibl ible e fac factors tors so tha thatt a qu quan anti titat tativ ive e ap appr proac oach h co coul uld d be em empl ploy oyed ed for

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deci cisi sion on-m -mak akin ing g as ea earl rly y as in th the e 19 1980 80ss [20 ]. de 20]. Recently, Degraeve   et al . [21 21]] developed a mathematical programming model by using total cost of  ownership for airline selection of a case company. The theory behind this is to quantify all the factors assoc as socia iate ted d wi with th th the e pu purc rcha hasin sing g pr proc oces esss in co cost st items. As a matter of fact, not all intangible factors could be quantified. That is why AHP is still appli-

comparison process since one element in a cluster coul co uld d be co comp mpare ared d wit with h ot othe herr el elem emen ents ts in th the e same cluster more than once. These pairwise comparisons are used to derive ‘local’ priorities of the elements in a cluster with respect to their parent. The principle of hierarchical composition or synthesis is applied to multiply the local priorities of element me ntss in a cl clus uste terr by th the e ‘g ‘glob lobal’ al’ pr prio iori rity ty of th the e

cab cable inudy some som situat sit uation and is ch employ emp loyed ed iniabl this thi case ca sele st stud y ine or orde der r ions to s ta take ke su such unqu un quan antif tifia ble es fact fa ctors ors in into to co cons nsid ider erat ation ion.. In fac fact, t, ‘q ‘qua uant ntify ifyin ing  g  approaches’ are useful in quantifying some factors for pairwise comparison (to be discussed later) in the proposed AHP model so that subjectivity of the model could be further reduced as much as possible. Nevertheless, it is not our intention to review  such methodologies in this paper. However, intereste es ted d re read ader erss sh shou ould ld re refe ferr to a re rele leva vant nt re revi view  ew  cond co nduc ucte ted d by De Bo Boer er   et et al . [22 22]] fo forr fu furt rth her reference.  AHP, which was developed by Saaty [23 23], ], is a  decision-ma decis ion-making king process to help people in setti setting  ng  prior pr iorit itie iess an and d ma makin king g th the e be best st de deci cisi sion onss wh when en both quantitative and qualitative aspects need to be

paren parent, t, produ producing priorities throughout hierarchy andcing thenglobal addingprior theities global priorities the for the lowest-level elements (the alternatives).  As a matter of fact, AHP has been widely applied by a nu numbe mberr of res resear earche chers rs and pra practi ctitio tioner nerss to solve sol ve mul multic ticrit riteri erion on pro proble blems, ms, alb albeit eit in div divers erse e areas [27 [27– –33 33]. ]. For instance, Hafeez et Hafeez  et al.  al.   [31 31]] used  AHP to determine key capabil capabilities ities of a firm,  whereas Cheng and Li [25 25]] employed AHP to allocate resou resources rces by prior prioritizin itizing g const construct ruction ion infor infor-mation and to determine the key information. In particular, in the field of supplier or vendor selection, AHP has also been suggested and applied by  a number of researchers [34 [ 34,,   35 ]. They suggested 35]. that AHP be appli applied ed in this field mainly because because of  its inherent capability to take both qualitative and

considered conside red.. It all allows ows dec decisi isionon-mak makers ers to mode modell a  complex problem in a hierarchical structure, which shows the relationship of the goal of the problem, assessment areas, objectives (criteria), subobjectives (subcriteri (subc riteria), a), and alternatives, alternatives, like that prese presented nted in Fig. 1. That is, it allows the complex problem to be broken down into smaller parts at different levels. Uncert Unc ertain aintie tiess and oth other er inf influe luenci ncing ng fac factors tors can also be included. Rebstock and Kaula [24 [ 24]] described the established hierarchy as a flexible and dynamic model that can be modified if new information or insight ins ight is acq acquir uired. ed. Dec Decisi isionon-make makers rs the then n make simple pairwise judge judgements, ments, typically with redun redun-dancy throughout the hierarchy, to arrive at overall priorit pri orities ies for the alte alterna rnativ tives. es. AHP work workss by fir first st struct str ucturi uring ng the problem problem int into o a for form m of hie hierarc rarchy  hy   with several levels. Then all the elements in a level are pair pairwis wisely ely comp compare ared d wit with h res respec pectt to the ele ele-ments at the level above. This process leads to higher consistency since pairwise comparison requires the decision-maker to think precisely before giving the answer [25 [25]. ].  AHP is based on three basic principles: decomposition, positi on, compara comparative tive judgem judgements, ents, and hierar hierarchical chical comp co mpos osit itio ion n or sy synt nthe hesis sis of pr prio iori riti ties es [26 ]. Th The e 26]. decomposition principle, which was mentioned previously, is applied to structure a complex problem into a hierarchy of clusters (levels), subclusters, subsubclusters, and so on. The principle of comparative  judgements is applied to construct pairwise comparisons of all combinations of the elements in a 

quantitative quantitati ve crite criteria ria into cons considera ideration tion in vend vendor or selection problems. Some Som e res resear earche chers rs hav have e form formula ulated ted and use used d a  criterion framework to evaluate suppliers and subsequen seq uently tly sel select ect the bes bestt alt altern ernati ative ve [15 15,,   18 18,,   34 34,, ]. On th the e ot othe herr ha hand nd,, ot othe hers rs ha have ve pe perf rfor orme med d 36]. 36 surveys with intended targets, and then developed evaluation evalu ation criteria or supp supplier lier manag managemen ementt tools that th at ar are e cu curr rren entl tly y us used ed by th the e ta targ rget et gr grou oups ps of  companies [13 [13,,  16  16,,  37  37], ], rather than using a supplier selection model. There is some discussion regarding the criteria determining the process, and the number of criteria involved in the AHP. In a study  on the supplier selection process using the analytic network process (ANP), a generalized form of AHP, Sarkis and Talluri [18 [18]] concluded that the choice and the number of factors to be included in the supp su ppli lier er se sele lect ctio ion n pr proc oces esss mu must st be ca caut utio ious usly  ly  determined, and a large number of factors (40 in that study) and relationships in the model could make deci decision-m sion-makers akers feel exha exhausted usted.. More Moreover, over, they pointed out that reducing the dimensionality  of the problem problem to an acc accept eptabl able e min minimu imum m lev level el  will speed up the decisiondecision-making making process and make ma ke th the e pr proc oces esss le less ss co comp mple lex. x. In ad addi diti tion on,, in anothe ano therr stu study dy tha thatt app applie lied d AHP to sol solve ve ven vendor dor select sel ection ion pro proble blems ms in tel telec ecomm ommuni unicat cation ionss sys sys-tems, Tam and Rao Tummala [34 [ 34]] noted that the presence of too many criteria makes the pairwise comparison compa rison in evalu evaluating ating vendors a diffic difficult ult and time-consuming process, which may also lead to

clusterr wit cluste with h res respec pectt to the parent parent of that that clu cluste ster. r. Redundancy Redu ndancy normally ensues durin during g the pairwise pairwise

evaluator assessment bias. In their study, Tam and Rao Tummala [34 [34]] used 33 criteria. Min [36 [36]] also

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Fig. 1   Proposed analytical analytical hierarchy process process model

sugg gges este ted d a fr fram amew ewor ork k fo forr se sele lect ctin ing g th the e be best st su supplier internationally in response to globalization of the wor world ld eco econom nomy. y. The fra framew mework ork con consis siste ted d of eve even n fewe fewerr crit criteria eria,, 26 only only.. Neve Neverthe rtheless less,, thes these e frameworks, together with other literature, have provided vide d the pres present ent auth authors ors with abun abundant dant ins insight ightss into various various area areas, s, part particul icularly arly into the the theory ory and

 As literature concern concerning ing supplie supplierr selectio selection n in the airline industry seems virtually non-existent, a large numbe nu mberr of sou sourc rces es ha have ve be been en re revie viewed wed in ord order er to obta obtain in the char characte acterist ristics ics of the airl airline/ ine/avia aviation tion indus ind ustry try and to de desi sign gn th the e AH AHPP-bas based ed mod model. el. At

application of AHP, the nature of supplier selection, and the criteria determining the process.

the sam same e tim time, e, a Ho Hong ng Kon Kong-b g-base ased d air airli line ne com com-pany was invited to participate in this development.

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RESEARCH RESE ARCH METH METHODOL ODOLOGY  OGY 

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informa rmation tion were collected collected from vari various ous Data and info sources, including international journals, referen reference ce books, websites, airline company annual reports, materials from aviation-related organizations/authorities, and so on. A reference number was assigned to each materi mat erial al onc once e it had be been en col collec lected ted an and d exa examin mined ed..  Analysis  Anal ysis was the then n carr carried ied out to form the analy analytica ticall hierarchical model.

 worst. Result analysis was performed with the function provided by the software. Sensitivity analyses  were also performed to investigate the sensitivity of  the th e alt alter erna nati tive vess (i (i.e .e.. su supp ppli lier er ca cand ndid idat ates es)) wi with th respect to the changes in the priorities of the criteria. Expe Ex pert rt Ch Choi oice ce ta take kess th the e pr pres esum umpt ptio ion n ou outt of  decision-making based on AHP. It provides a systematic mat ic appr approac oach h to org organiz anizing ing pro proble blems, ms, res resulti ulting  ng 

information informati on database established establish edss.forAft the pu An purp rpose ose of fac facili ilitat tatin ing g th the e was analy ana lysi siss pro proce cess. After er reviewin revi ewing g each material, material, the possible possible crit criteria eria to be applied to the airline industry were accommodated in the information database. The information database acco accommod mmodated ated vari various ous typ types es of info informat rmation ion about each journal, including assigned journal number, topic of the paper, name of journal, publishing   year, criteria criteria being used or possible criteria, criteria, and other important points and their implications. In addition, the current supplier management framework being  used by the case study company was also included in the database.  After setting up the database, with the data prefiltered at the examination or reviewing stage, comparisons were initially carried out across the journal

in informed logical enables a decisionmaker graphically todecisions. portray theItrelationship between many facets of a complex problem, and to incorporate both quan quantita titative tive and qual qualitat itative ive info informat rmation, ion, including experience and intuition. A hierarchy is a  representation of a complex problem in a multilevel structure whose first level is the goal followed successively sive ly by leve levels ls of fact factors, ors, criteria, criteria, subc subcrite riteria, ria, and so on, down to a bottom level of alternatives. In the nextt two sect nex sections ions,, the prop proposed osed deci decision sion support system is presented and discussed.

database. databas e. Thi Thiss pro proces cesss gen genera erated ted a larg large e num number ber of criteria. Then, the set of criteria was compared again ag ainst st th the e su supp ppli lier er ma mana nage geme ment nt fra frame mewor work k of  the case study company, together with other materials, ria ls, suc such h as pub public licatio ations ns from the Air Tra Transp nsport ort  Association. With the consideration of the airline industry characteristics and its needs, further filtration tio n and sel select ection ion of the cri criter teria ia wer were e per perform formed, ed, leading to the formation of a criterion hierarchy in this study. At the same time, a number of questions  were raised during the analysis process. In response to this, these questions were sent to the procurement department of the case study company. In addition, the feedback was used for adjusting the final set of  criteria. Figure 1 presents the proposed AHP-based model. The next phase was data input and evaluation – the criterion hierarchy was input to the commercial software Expert Choice [9 [9]. This is a computerized DSS for analysis, synthesis, and justification of complex decisions and evaluations. In fact, it has been used use d by dif differ ferent ent org organi anizati zations ons and gov govern ernmen ments ts for a wide variety of applications, including allocating resou resources, rces, value pricin pricing, g, selec selecting ting altern alternative, ative, cost–b cos t–bene enefit fit ana analys lysis, is, sup supplie plierr eva evaluat luation ion,, cre credit dit analysis, etc. As of 1995, Expert Choice was being  used in 57 countries throughout the world, and there  were over 1000 journal and other citations about  AHP [38 ]. Pairwise comparisons and/or direct data  38]. input inp ut wer were e the then n mad made e for every element element at eve every  ry  level against other elements at that level. All judge-

4.1 4. 1

The model goal, which was placed at the top level,  was to select the best supplier for the airline industry  (see Fig. 1). The second level was composed of three main mai n ass assess essmen mentt asp aspect ectss or are areas: as: per perform formanc ance e assessment, continuous improvement and innovation, and company background/business structure. In each area, a number of criteria were identified, as discussed in section 3. Performance assessment includes four criteria: cost, satisfaction of supplier servic ser vice, e, qua quality lity,, and ass assuran urance ce of sup supply ply.. Und Under er continuous improvement and innovation, a further four criteria are included in the model: proactive in measuring measu ring suppl supply y chain/ chain/own own suppl suppliers, iers, e-bus e-business iness initiatives initi atives,, conti continuous nuous improv improvement ement program programme/ me/ TQM/six-sigma programme, etc., and research and development (R&D). Under company background/ busi bu sine ness ss st stru ruct ctur ure, e, si sixx cr crit iter eria ia ar are e co cons nsid ider ered ed:: organizational culture and strategic issues, compatibility (buyer and suppli supplier er partne partnership) rship),, perce perceived ived risk ri sk,, fi fina nanc ncia iall is issu sues es,, te tech chno nolog logic ical al is issu sues es,, an and d safety, environmental, and education issues. A total of 36 sub subcri criter teria ia wer were e ide identi ntifie fied. d. Exp Explan lanatio ation n and  justification of each criterion and subcriterion are listed in Table 1. For the sake of simplicity, it is assumed that there are only five potential suppliers in this study, abbreviated as supp1, supp2, supp3, supp4, and supp 5 in sub subseq sequen uentt dis discus cussio sion. n. The They y are comp competi eting ng to be the best supplier in the assessment of the case

ments were then synthesized, with the alternatives (i.e. (i. e. sup suppli plier er can candid didates ates)) pri priori oritiz tized ed from bes bestt to

stud st udy y co comp mpan any. y. They They ar are e re real al su supp ppli lier erss th that at  were drawn from the existing supplier base of the

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PROPOSED DECIS PROPOSED DECISION ION SUPP SUPPORT ORT SYST SYSTEM EM FOR SUPPLIER SELECTION AHP AH P mo mode dell

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Table 1   Explanations and justifications justifications of the criteria and subcriteria in the proposed AHP model model

 A 

 A1

 

Crit Cr iter eria ia an and d su subc bcri rite teri ria a

Expl Ex plan anat atio ions ns an and d ju just stif ific icat atio ions ns

Cost

Cost has been considered and employed as one of the criteria in supplier selection in many studies. Seristo [7] performed a survey of 28 executives from 17 European airlines and found that high operating costs ranks as one of the critical problem areas in the respondents’ airlines With the extensive use of the internet nowadays, passengers can easily collect information on different aspects of airfreights, such as fares and services, from different airlines. Therefore, keeping a stable pricing strategy is important and attractive to customers [4 [4,  39  39]. ]. Condom [1 [1]

Price stability

 A2

Contractual obligation

 A3

Cost reduction initiatives

B

Satis Sat isfa faccti tio on of su supp ppli lier  er  service

B1

Supp Su ppor ortt le leve vell

B2

Proact Proa ctiv ive e gi givi ving ng ou outt st stat atus us update or performance

B3

Levell of co Leve coop oper erat atio ion n an and d communication

B4

Conf Co nfid iden enti tial alit ity y

C

Quality

C1

Pro rovi visi sion on of wo work rksh shop op report

C2

MTBUR/ MTBU R/MT MTBU BUF F (a (act ctu ual versus guarantee)

shared a similar view from a more fundamental perspective that people choose to fly only if  safe, reliable, reliable, and conven convenient ient air services are offe offered red at a reasonable reasonable price. This view also highlight high lightss the fact that peop people le have a high concern on price Contractual obligation refers to the level of fulfilment with respect to all contract terms and conditions that are established and agreed legally between an airline and its suppliers. Minor adjustment depends upon the agreement of the two parties, subject to certain special conditions. Obligation fulfilment also reflects the degree of respect to the contract As the growth of the airline industry depends on global economic growth, and because of  deregulation and privatization, severe competition has been created in the marketplace. If  suppliers could be proactive, or have a positive attitude, in initiating cost reduction activities, they should gain the rewar rewards ds in order to overco overcome me and adap adaptt to this enviro environment nment.. Barbarosoglu and Yazgac [15 [15]] defined cost reduction activities as the actual cost reduction achieved by the firm as a result of corrective actions and technological investments, and it is reflected in its pricing policies. Such a definition may act as a reference for the airline industry  as well Nowadays, supplier services have become important for manufacturing companies. More and more of these companies have been offering an integrated package of products and services to their customers. Aviation suppliers are expected to provide high-quality  products as well as good supporting services as a ‘total solution’ to airlines. By offering a  higher level of service together with products of higher quality than that of the competitors, a supplier has competitive advantage over other suppliers Not su Not surp rpri risi sing ngly ly,, ma many ny ai airl rlin ines es de desi sire re th thei eirr su supp ppli lier erss to pr prov ovid ide e pr prod oduc ucts ts wi with th hi high gh qu qual alit ity y as  well as aftersales services. Those suppliers that could perform better than their competitors in terms of aftersales services are more attractive to the airlines. This criterion refers to the degree of focus to airlines’ needs, quick and concrete response to inquiry, and the performance of other customer service issues Suppliers play a vital role in terms of providing highly reliable and quality goods as well as maintenance and repair services. In conjunction with that, giving status updates is also an important service. The status update includes any major changes in organization levels, technical techni cal levels, and produ product ct level levels, s, in parti particular cular the latter two. For insta instance, nce, the daily  maintenance or checking procedures, or proper operating specifications, may be revised by  component suppliers. It is therefore important for them to give updated information to their customers. Giving a status update is a means to ensure that all publications, such as operating manuals, that are kept in the airline companies are current and applicable to the components purchased Simpson et Simpson  et al. [ al.  [16 16]] pointed out that communication is an important factor for maintenance of a channel relationship. They stated that ‘once suppliers have a good understanding of  customer needs, they can improve their performance on specific dimensions’. Therefore, a  good supplier should adopt a proper attitude in communicating with its customers As th the e co cost st of ch chan angi ging ng a pa part rtne nerr in a su supp pply ly ch chai ain n co coul uld d be la larg rge, e, th the e pu purc rcha hasi sing ng fi firm rm co coul uld d become confined by its suppliers [37 [37]. ]. Since a supplier of an airline does not solely serve that airline, and the supplier base of the airline industry is not large, changing a supplier in the airline industry is even more costly. Therefore, security of a company’s confidential information becomes a critical consideration in running a business, especially in the e-business era via internet technologies. Therefore, good suppliers should be able to protect their customers’ confidential information Quality requirements in the airline industry are much high ghe er than in the consumer   market. This is because a failure in the airline industry may result in the death of  hundreds or thousands of people. The perceived loss to society by such failure is pronounced [11]. As a matter of fact, an aircraft is a very complex product. Undoubtedly, it requires great efforts in maintaining its reliability from different parties, including high quality of all components involved This criterion refers to the availability, content, and format of the workshop report. Airline companies rely on such detailed reports to check against the quality and specifications of  parts. Well-kept documentation of parts specifications can eliminate the waste of having  both the customer and the supplier inspect parts for quality assurance. The availability of  correct and accur accurate ate reports is thus important important to ensure smooth operations operations of airli airline ne companies The reliability reliability of a compo component nent could be expre expressed ssed as the probability probability that it will perform well according to certain specifications for a defined length of time under prescribed conditions [11 11]. ]. Mean time between unscheduled repair (MTBUR) and mean time between unscheduled failure (MTBUF) are two indicators that have been widely used in the industry by  manufacturers

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Table 1   (Continued) Crit Cr iteri eria a an and d su subc bcri rite teri ria a

Expl Ex plan anat atio ions ns an and d ju just stif ific icat atio ions ns

C3

Warr Wa rra ant nty y

A warr warran anty ty is a co cont ntra ract ct be betw twe een a buy uyer er and a ma manu nufa fact ctu ure rerr th that at bec ecom omes es ef efffec ecttiv ive e up upon on the sale of an item. The purpose of a warranty is basically to establish liability in case of a  premature failure of an item, where ‘failure’ is meant as the inability of the item to perform its intended function [40 [ 40]. ]. The contract specifies the required performance of an item, and also specifies the buyer’s responsibilities with regards to due care and operation of the purchased item. This criterion refers to the degree to which suppliers fulfil or exceed the  warranty credit terms as per the contract or guarantee

C4

Preven Prev enti tive ve ma main inte tena nanc nce e plan/maintenance effort

C5

Applic Appl icat atio ion n of ad adva vanc nced ed quality technique

C6

Workfo Work forc rce e pa part rtic icip ipat atio ion n in quality improvement

C7

Correc Cor rectiv tive e act action ion resp respond ond

D

Assu As sura ranc nce e of su supp pply ly

D1

Shipme Ship ment nt ac accu cura racy cy (o (on n time) Ship Sh ipme ment nt ac accu cura racy cy (o (on n quantity) Accuracy of   paperwork/delivery  notes/invoices, etc.

Performance of facilities and equipment is critical to a manufacturer’s ability to produce lowcost, high-quality products. Therefore, effective equipment maintenance has become increasingly important in producing high-quality products. Djamaludin et Djamaludin  et al. [ al.  [40 40]] defined preventive maintenance (PM) and corrective maintenance (CM) as the actions to control the deterioration process leading to failure of a system and to restore the system to its operational state through corrective actions after a failure has occurred. PM can prevent those failures from happening at a bad time, can sense when a failure is about to occur and fix it befor before e it causes damage, and can ofte often n preser preserve ve capital investments investments by ensuri ensuring ng that equipment is operating in good conditions This criterion refers to the application of advanced quality techniques in production. Examples of such techniques include, but are not limited to, quality function deployment (QFD), failure mode and effect analysis (FMEA), value analysis (VA), Taguchi, and cause and effect diagrams (fishbone diagrams) [15 [15]. ]. The applications of these techniques aid the early  discovery of failure parts and helps to find the cause of failure and to improve product quality. Since the airline industry values reliable parts highly, these techniques help the companies in ensuring the supply of high-quality components This criterion refers to the proportion of the workforce participating in quality improvement and/or the degree of empowerment of the workforce in the quality improvement process. For good suppliers that serve the airline industry, the workforce participation approach provides the option to collaborate actively in various quality improvement processes, and helps the companies to consolidate and enhance mutual support and knowledge sharing between them and their customers. Knowledge sharing would lead to improvement of production process and product quality, which could be beneficial to both the airline companies and the suppliers Thiss cri Thi criter terion ion ref refers ers to the sup suppli plier’ er’ss resp respons onse e in imp implem lement enting ing the cor correct rective ive act action ionss as required by its customers, and the supplier’s effort in undertaking procedures regarding the corrective actions. The time in responding to the request and the time to be taken in completing the request may be the measures for this criterion ‘Ass ‘A ssur uran ance ce of su supp pply ly’’ re refe fers rs to th the e ab abil ilit ity y of a su supp ppli lier er to of offe ferr wh what at it itss cu cust stom omer erss ne need ed at th the e right time, with the right quantity, with right documentation, and within its guaranteed turnaround time. This is highly related to the distinctive nature of the airline industry – 24 h operations operations every day [4, [4,  6  6]]. The assurance of supply of maintenance services and components becomes critical since it could affect not only the business by delaying the flight schedules but also the effectiveness of airline companies in maximizing the employees’ performanc performance e The criterion refers to the supplier’s compliance with the predetermined order due date and time within the allowable limits, which are set by individual airline companies The criterion refers to the supplier’s compliance with the predetermined order quantity   within the allowable limits, which are set by individual airline companies This criterion refers to the accuracy of documentations, including invoices, delivery notes, etc. Some airline companies companies may have their specified specified format of the paperwork, paperwork, and it is the responsibility of the supplier to provide accurate paperwork that is consistent with the airline companies’ specified format Lead time refers to the time taken from receipt of an order to its delivery. It is not surprising  that this is included in the criterion hierarchy as the airline industry is a time-sensitive industry and any delays would possibly cause problems that may eventually affect the freight scheduling and hence affect the on-time performance of flights. In fact, many firms are actively searching for suppliers with shorter lead times, and many potential customers consider lead time a very important criterion for vendor selection on account of a number of  benefits that could be generated from lead time reduction [41 [ 41]] It is difficult for the airline companies at the end of the supply chain to manage or  monitor the whole chain solely. In this connection, aviation suppliers should help in managing their respective supply chains. Such a view is shared by Mccollum [14] who stated that ‘if industries are to remain competitive into the twenty-first century, they  must look outward to their respective supply chains and integrate vertically to facilitate smooth information and material flows in both directions’. The effectiveness of supply  chain management also affects the suppliers themselves because a large portion of their  inventory may be reduced, and hence their customers may gain benefits from the consequent saving 

D2 D3

D4

Fulfil lead time/turnaround time guarantee

E

Proac Pro acttiv ive e in me meas asu uri rin ng  supply chain/own suppliers

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Table 1   (Continued)

F

Crit Cr iter eria ia an and d su subc bcri rite teri ria a

Expl Ex plan anat atio ions ns an and d ju just stif ific icat atio ions ns

E-busi E-b usines nesss ini initia tiativ tives es

E-busines E-busi nesss enc encomp ompass asses es the str strate ategic gic use of inf infor ormat matio ion n and com commun munica icatio tion n tec techn hnolo ologie giess in order to interact with customers, employees, suppliers, and partners through multiple communication and distribution channels. McIvor   et al.  [39] analysed the impact of  internet technologies on four airline operators at the customer interface and on the airline industry itself. It was found that transaction efficiency is a fundamental value driver of the electronic business activities of the airline industry. They further pointed out that airline companies had been using the internet to enhance their competitive position,

G

CI pr prog ogra ramm mme/ e/si sixx-si sigm gma  a  programme/TQM programme, etc.

H

Research and development (R&D)

I

Organ Orga niz iza atio ion nal cu culltu turre and strategic issue

I1

Management attitude/commitment and outlook for future

I2

Compan Comp any y or orga gani niza zati tion onal al structure and personnel

I3

Company past record/reputation in the field

J

Compatibility   (buyer–supplier  partnership)

to control the cost, and to enhance the relationship with the customer. For example, online ticketing is a significant way of reducing transaction cost. In addition, Taneja [4] found that airlines could leverage their e-business initiatives to improve the relationship among their value-chain partners, suppliers, and vendors. The value of  e-business could be justified in the improvement in productivity of both suppliers and airline companies, which in turn leads to higher profit Continuous improvement (CI) refers to the ability of a supplier in encouraging new ideas, creating the ideas positively, praising and rewarding successful ideas, and developing any  other programmes with similar purpose. In a study of supplier evaluation, Simpson   et al. [16] examined and analysed 84 formal supplier evaluation instruments currently  employed by companies across a broad spectrum of industries. It was found that CI ranks the second. On the other hand, the ‘six-sigma’ concept itself refers to a performance target to achieve only 3.4 defects for every million activities or opportunities. Six-sigma  has been viewed as one of the most potent strategies to accelerate improvements in processes, products, quality, and services, and radically to reduce manufacturing and/or  administrative costs. This could be achieved by relentlessly focusing on elimination of   waste and reduction of defects and variations Research and development (R&D) is placed in the criterion hierarchy because it is a way  to satisfy the passengers’ needs and also the airline companies’ needs. It is noted that advances in technology could boost demand if they lead to safer and more efficient aircraft, to congestion-free airspace and airports, and to customer-friendly distribution systems. Some practitioners have argued that R&D should be a factor in selection of  suppliers so that buyers will not suddenly be faced with technological obsolescence [42]. In light of this, R&D should still be carried out, and, undoubtedly, suppliers could play a   vital role in this field to sustain the growth of the airline industry, where technological advancement always helps in reducing cost, improving productivity, and leading to a  better environme environment nt This criterion refers to different aspects in relation to an organization’s structural and cultural issues. They are important because the responsibility for safety, and thus prevention of accidents, rests on top management, which controls the allocation of  resources through the proper channels in the organization structure Management commitment reflects the actions and values of key decision-makers of a  supplier regarding the relationship, acceptance of joint goals, values of partnerships, and  willingness to invest resources in the relationship between its customers. Commitment also implies an importance of relationship into the future, leading to a positive effect on profitability [43 [43]. ]. Airline companies may view the supplier commitment on three facets as described by Anderson and Weitz [44 [44], ], namely ‘a desire to develop a stable relationship’, ‘a willingness to make short-term sacrifices to maintain the relationship’, and ‘a confidence in the stability of the relationship’ Organizational structure refers to the clarity of employees’ job definitions within the organization [15 [15]. ]. It may also refer to the formal framework by which jobs are divided, grouped, and coordinated [45 [45]. ]. Examining the structure allows the airline companies to know  how the suppl suppliers’ iers’ works are divid divided, ed, and gives an insig insight ht into the relative importance importance of  each component of the organization. A clear organizational structure could allow employees to accomplish their tasks effectively and efficiently since a clear chain of command and communication channels is visible to all staff. Kamata [46 [ 46]] used three airline/aerospacerelated cases to illustrate the problems of formalized bureaucratic structures associated with technical problem solving. The author highlighted the critical importance of a system structure in which the professionalism of workers is involved by saying that ‘they (the problems) occurred in work environments that place great emphasis on quality. Yet they  occurred because quality consciousness was overshadowed by a system that does not help people solve such issues’ This criterion basically refers to the performance history of a supplier’s products, and the position of the supplier in the industry (including product leadership and reputation). If the supplier’s past record/reputation is not that good, the perception is that services and products of the supplier might not be as good as specified, and hence more resources may  need to be allocated for further examination Suppliers and airline companies can be viewed as partners in the sense that they rely on each other for survival and they could collaborate with each other to gain marketing benefits and reduce overall cost. This is supported by the findings of Simpson  et al.  [16] concerning  the importance of channel relationships in the supplier evaluation context. In addition, Min [36] also put ‘buyer–supplier partnerships’ as a criterion in selecting a supplier 

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Table 1   (Continued)

J1

Crit Cr iter eria ia an and d su subc bcri rite teri ria a

Expl Ex plan anat atio ions ns an and d ju just stif ific icat atio ions ns

Level of trust and understanding 

Trust is an important ingredient in running a business, especially in the advanced information technology era. The internet has provided numerous opportunities for commerce that were unprecedented in the last decade. The new technology breaks down the traditional boundaries between business partners. However, the importance of trust in e-commerce, which is rapidly growing in different industries, cannot be overlooked and deserves special attention. Given the importance of trustworthy relationships and the growing trend of e-business in the airline industry, measuring and understanding the level of 

J2

Flexib Fle xibili ility/ ty/neg negoti otiabi abilit lity y

K

Perc Pe rcei eive ved d ri risk sk

K1

Political stability/governmental policy  Lega Le gall sy syst stem em

K2

K3

Labour Labo ur di disp sput ute/ e/st stab able le  workforce

K4

Natio Nat iona nall cu cult ltu ura rall compatibility 

L

Fina Fi nanc ncia iall is issu sues es

L1

Econom Eco nomic ic per perfor forman mance ce

L2

Fina Fi nanci ncial al st stab abil ilit ity y

M

Tech Te chno nolo logi gica call is issu sues es

M1

Tech Te chni nica call ca capa pabi bili lity ty

M2

Assess Asse ssme ment nt of fu futu ture re manufacturing facilities and equipment capabilities

M3

Respo Resp ons nse e to qu qual aliity  problem Safe Sa fety ty,, env nvir iron onm menta tall and education issues

N N1

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trust could help the companies to recognize their readiness to do business with the suppliers, and the efforts required by them to reach the readiness stage for business interaction with suppliers. Obviously, the higher the level of trust and understanding, the less effort is required It is imp import ortant ant for an air airlin line e com compan pany y to cho choose ose sup suppli pliers ers wit with h fle flexib xibili ility ty sin since ce an air aircra craft ft typically consists of thousand of parts that require a large amount of money to be spent on maintenance. With a higher level of flexibility, both parties could alleviate the losses due to any unexpected situations. Adequate flexibility speeds up conflict resolution, if this exists, and allows both parties to reduce unnecessary interaction costs Owin Ow ing g to a nu numb mber er of ex exog ogen enou ouss fa fact ctor orss th that at in infl flue uenc nce e in inte tern rnat atio ion nal so sour urci cing ng,, international supplier selection is much riskier than its domestic counterpart. Consequently, international supplier selection decisions can be strongly affected by  perceived risks. There are various types of international risk, including the risks of  political instability, contract disputes, or legal claims, etc. Business interactions, be it domestic or cross-country, are affected by governmental policies and political stability. For example, taxation systems, particularly for foreign corporations, can change rapidly for any political reasons A cr cred edib ible le,, in inde depe pend nden ent, t, an and d st stro rong ng ju judi dici cial al sy syst stem em un unde derp rpin inss on one e co coun untr try’ y’ss st stab abil ilit ity y an and d success. A country with a stable and robust legal system increases the confidence of  investors, and hence the scale on which, business is conducted in that country. As mentioned previously, the internet has changed the business modes. Therefore, legal standards relating  to data protection and document authentication could be a concern because they normally  vary from country to count country  ry   As the airline industry depends on the technological support from its suppliers to a larger extent, maintaining a stable, skilled, and professional workforce is crucial for a supplier to deliver products and services with high quality. Therefore, suppliers that keep a stable  workforce should gain rewards as it secures the delivery of high-quality products and services to airline companies. However, in assessing this, airline companies should take into account that automation/technological advancement might replace the workforce requirements National culture is the values and attitudes shared by individuals from a specific country that shape their behaviour and their beliefs [45 [ 45]. ]. It has been indicated that national culture has a  greater effect on employees than does their organization’s culture [47 [47]. ]. Obviously, languages, business customs, ethics, and communication devices vary from country to country, and such differences may affect the effectiveness of communication and hence the suppliers’ cooperation with the airline companies When Wh en an or orga gani niza zati tion on is lo look okin ing g fo forr a lo long ng-t -ter erm m re rela lati tion onsh ship ip wi with th an anot othe herr fi firm rm,, wh whet ethe her  r  or not the firm has a strong financial background, or at least whether or not it is financially stable, is a crucial factor. This is also true for the airline industry. A good supplier therefore is not expected to be financially unstable Econom Eco nomic ic per perfor forman mance ce ref refers ers to the tot total al rev revenu enue e and pro profit fitabi abilit lity, y, or sim simila ilarr ind indica icator tors, s, of a  supplier Fina Fi nanc ncia iall st stab abil ilit ity y is on one e of th the e cri crite teri ria a to eva evalu luat ate e su supp ppli lier ers’ s’ pe perf rfor orma manc nce e be beca caus use, e, regardless of how good the performance of a supplier is, an unstable financial situation will gradually weaken the long-term business relationship with its customer As a ma matt tter er of fa fact ct,, in or orde derr to be qu qual alif ifie ied d as a ma manu nufa fact ctur urer er to su supp pply ly ai airc rcra raft ft co comp mpon onen ents ts,, the manufacturer needs to obtain part manufacturer approvals, which are used to approve the design and manufacturing of replacement parts. Therefore, technological issues are selected as one of the criteria  Qual Qu alif ific icat atio ions ns (e (e.g .g.. th the e IS ISO O qu qual alit ity y sy syst stem em)) ga gain ined ed by a su supp ppli lier er gu guar aran ante tees es te tech chni nica call capabilities in manufacturing qualified aircraft components If a supplier’s future manufacturing facilities and capability is not good enough or is inadequate inade quate to respond well with respect to the indus industry try trend, it may affect the dependence of the airli airline ne companies, companies, and hence affect affect the supplier’s supplier’s business. On the other hand, a  supplier who has strong technical awareness would invest in facilities for continuous improvement This criterion refers to the supplier’s ability and responsiveness to solve the quality problems that are raised by the company during audit, incoming quality control, installation, etc. These issues are more people oriented. The rationale to include this criterion is simply  because any organization needs people. In selecting a supplier, these issues could not be overlooked Maintaining a safe environment routinely can allow the staff to work more effectively and lead to high employee performance [48 [ 48]]

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Table 1   (Continued) Crit Cr iter eria ia an and d su subc bcri rite teri ria a

Expl Ex plan anat atio ions ns an and d ju just stif ific icat atio ions ns

N2

Env nviiro ron nmental management plan/certification

N3

Gene Ge nera rall ed educ ucat atio ion n

 As there is an expected growth in air traffic worldwide in the long run, environmental impacts on the airline industry will also increase. The future growth is likely to depend on, to a certain extent, further reductions in the environmental impact of airline operations. Suppliers with their own environmental management programmes or plans would be seen as a sign of commitment, which demonstrates the willingness to establish long-term stable partnerships, for sustaining the growth of the airline industry  This Th is cri crite teri rion on br broa oadl dly y ref refer erss to th the e av avai aila labi bili lity ty of pr prof ofes essi sion onal al ed educ ucat atio iona nall ac acti tivi viti ties es an and d a 

N4

Education to quality/technical staff 

scheduled yearly training programme. ‘High levels of skill training’ and ‘extensive employee involvement and training’ are two high-performance work practices that could lead to both high individual and high organizational performance [49] This criterion refers to the availability of training aids and educational courses specified for the quality/technical staff. The know-how and skills of people are increasingly being  recognized by business strategists as a key source of competitive advantages

Expert Choice Fig. 2   Normal hierarchy view in Expert

company. These suppliers are responsible for supplyi pl ying ng co compo mpone nent nt or sp spar are e pa part rtss an and d te tech chni nica call repair or mainte maintenance nance services services to the company.  As discussed above, the AHP-based model (decision model or criterion hierarchy) was constructed as show shown n in Fig. 1, inv involv olving ing five lev levels els,, wit with h the top to p as goa goall do down wn to th the e bo bott ttom om as alt alter erna nativ tives es,,  which are the five potential suppliers. The AHPbased model was then input to Expert Choice. Expert Choice provided a model in two styles, which are presented in Figs 2 and 3.

Fig. 3   Side view of the model model with clear and complete complete structure shown

are compared in a nine-point scale. In the figure it

Pairwise comparisons were based on the preference of the case study company. That is, the weightings of the objectives and criteria were completed with suppor sup portt from the com compan pany y via con consult sultati ative ve vis visits its and email correspondence. For most of the judgement or assessment processes, the types of comparison ris on wer were e chos chosen en by fol followi lowing ng the suggestio suggestion n or

is that the ‘performance assessment’ is shown two points andcriterion four points more important than the criteria ‘continuous improvement and innovation’ and ‘comp ‘company any backg backgroun round/bus d/busines inesss stru structur cture’ e’ respectivel pect ively, y, whil while e the crit criterio erion n ‘cont ‘continuo inuous us impr improveovement and innovation’ is three points more important than tha n the cri criter terion ion ‘co ‘compa mpany ny bac backgr kgroun ound/b d/busi usine ness ss structure’. This comparison means that the criterion ‘performance assessment’ is the most important factor to be considered among the three factors listed above. Howeve How ever, r, the re relat lative ive imp import ortanc ance e of thi thiss fac factor tor ove overr the other two is only ‘slightly more important than’. It is possible that there is no single dominating criterion among the factors under consideration. That is why  pairwise comparisons work well in prioritizing these intangible factors.

commen comm entt as sta state ted d in Ta Tabl ble e 2. Fi Figu gure re 4 gi give vess an example to show how the three assessment areas

In addition, Tables 3 to 5 present the overall global  weighting information of each AHP model element.

4.2 Evaluati Evaluation on of factor factorss in the model model by  making pairwise relative comparisons

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 At the same time, the consistency ratio of each  judgement was checked to ensure that it is lower than or equal to 10 per cent in order to help the decision-makers reduce inconsistencies in pairwise comparisons, as suggested by Saaty [23 [23]. ]. It is noted that, during the judgem judgement ent process, it is imprac impractical tical to pursue zero inconsistent ratios, i.e. perfect consistency. One of the local priorities derived is presented in Fig. 5. Local priority refers to the priority of a node relative to its parent node. It represents the percentage of the parent node priority that is inherited by the child (the local priorities of the children of a parent node add up to 1). Global priority refers to the priority of each node relative to the goal. It represents

Pairwi wise se co comp mpar aris ison on:: ty type pess an and d mo mode dess of  Tabl Ta ble e 2   Pair comparison offered in Expert Choice

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the portion of the goal node priority that the node possesses (the global priorities of the children of a  node no de add up to th the e gl glob obal al pr prio iorit rity y of th the e pa pare rent nt node).

4.3 Synt Synthesis hesis to to identify identify the the ‘best’ ‘best’ alternat alternative ive  After pairwise relative comparisons had been performed,, the local priori formed priorities ties were synth synthesize esized d from the goal, and the overall priorities were calculated. The overall priorities of each of the five suppliers are presented in Fig. 6. The distributive mode was selected since the rankings of other suppliers were of interest to the decision-maker. Supplier 4 received the highest rating of 0.222. Therefore, it is recognized as the best supplier. Next came supplier 1, with a  score of 0.207, followed by supplier 3 with a score of 0.203, then supplier 2 with a score of 0.189, and last was supplier 5 with the lowest score of 0.179.

Comment from Expert Choice manuals Types of comparison Import rta ance Preference Likelihood

Modes of comparison  Verbal Graphical Numerical

4.4 Exam Examinati ination on and verif verificat ication ion of the the decision decision Appropri ria ate when comparing one criterion (objective) with another Used when comparing the alternatives Used when comparing the probability of outcomes. It may  be used with either criteria or alternatives Compare elements (nodes) using  English language terms Compare elements (nodes) using a   graphical gauge Compare elements (nodes) using   numbers in a matrix or a  questionnaire format

 After the overall priorities prio rities had been derived, analysis  was performed to investigate the sensitivity of the ranking of the alternatives to changes in the importance tan ce of the cri criter teria. ia. Sen Sensit sitivi ivity ty ana analys lysis is from the

Priorities of primary assessment assessment objective objective with Table 3   Priorities respect to goal Primary assessment objective

Priority  

Performance assessment Continuous improvement and inn nno ovation Comp Co mpan any y ba back ckgr grou ound nd an and d bu busi sine ness ss st stru ruct ctur ure e

0.531 0.242 0.22 0. 227 7

Fig. 4   Example of pairwise comparison JEM629

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Table 4   Global priorities of criteria (under each primary  primary  assessment objective)

Tabl Ta ble e 5   Global Global pri priori oritie tiess of sub subcri criter teria ia (un (under der eac each h criterion)

Criterion

Priority  

Subcriteria

Performance assessment  Cost Satisfaction of supplier service Quality  Assurance of supply

0.196 0.049 0.167 0.119

 A1  A2  A3

improvement Proactive inContinuous measuring supply chain/ and innovation own suppliers E-business initiatives CI programme/six-sigma programme/ TQM programme Research and development Company background and business structure  Organi Orga niza zati tio ona nall cu cult ltu ure and st stra ratteg egiic iss ssu ues Comp Co mpa ati tibi bili lity ty (b (bu uye yer– r–su supp ppllie ierr par artn tner ersh shiip) Perceived risk Financial issues Technological issues Safe Sa fety ty,, en envi viro ronm nmen enta tal, l, an and d ed educ ucat atio ion n is issu sues es

Priority   Cost 

0.043 0.047 0.069 0.082 0.021 0.02 1 0.04 0. 046 6 0.039 0.061 0.046 0.01 0. 014 4

node e sho showed wed the sen sensit sitivi ivity ty of the sup suppli pliers ers wit with h goal nod respect to the three assessment objectives, i.e. performanc form ance e ass assessm essmen ent, t, con contin tinuou uouss imp improve rovemen mentt and innovation, and company background and business structure. These sensitivity analyses are presented graphically in the next section. In addition, if  supplier information is available and time is sufficient, the airline company should check the decision against agai nst int intuit uition ion to avo avoid id any pos possib sible le mis mistak takes. es. Furthermore, if any discrepancies exist or are found, continuous investigation is recommended and the iter it erat ation ion sh shoul ould d be re repe peate ated d as re requ quir ired ed.. Mo More re discussion can be found in section 5.

0.079 0.079 0.039 Satisfaction of supplier service 

B1 B2 B3 B4

0.012 0.009 0.011 0.017 Quality 

C1 C2 C3 C4 C5 C6 C7

0.041 0.044 0.020 0.016 0.016 0.011 0.019  Assurance of supply 

D1 D2 D3 D4

0.032 0.028 0.030 0.029 Organizational culture and strategic issues 

I1 I2 I3

0.015 0.004 0.002 Compatibility (buyer–supplier partnership)

J1 J2

0.024 0.021 Perceived risk 

K1 K2 K3 K4

0.010 0.012 0.013 0.004 Financial issues 

L1 L2

0.028 0.033 Technological issues 

M1 M2 M3

0.022 0.009 0.014 Safety, environmental, and education issues 

5

N1 N2 N3 N4

DISC DI SCUS USSI SION ON

5.1 Inc Incons onsist istenc ency y rat ratio io  As mentioned previously, AHP and Expert Choice do not force the airline to be perfectly consistent, and instead a consistency test is provided to investigate the degree of consistency along with each judgement proces pro cesss onc once e the loca locall pri priorit orities ies wer were e der derive ived. d. In general, an acceptance inconsistency ratio is 10 per cent or below, although 20 per cent might still be thou th ough ghtt to be co comf mfort ortab ably ly ac acce cept ptab able le [29 29]]. It is seld se ldom om th that at th the e ju judg dgem emen entt pr proc oces esss ai aims ms to be perfectly consistent, i.e. with an inconsistency ratio of zero.

0.004 0.002 0.003 0.006

Sensitivity analysis was performed in this study for

the response to the overall utility of alternatives to changes in the relative importance (weight) of each attribute. Second, it demonstrates the way to complete ple te the sen sensit sitivit ivity y ana analys lysis is (us (using ing the grad gradien ienttsensitive sensi tive graph graph). ). Withou Withoutt this part, decision-makers decision-makers  would find difficulties in visualizing and understanding the process and hence ignore the importance of  the analysis.  After the initial solution was obtained with the given weightings on alternatives as well as other elements men ts in the AHP mod model, el, sen sensit sitivit ivity y ana analys lysis is was performed at the goal level for all criteria, but only  one selected case at node level is presented for simplicity. At the goal level, it identified the impact of 

two ma two major jor re reaso asons ns.. Fi Firs rst, t, it se serv rves es as an in inte tegra grall part of the whole evaluation process by exploring 

changes in perfo changes performance rmance assessment assessment object objectives ives on alternatives. At node level (below the goal and above

5.2 Sens Sensitiv itivity ity analy analysis sis

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Derived local priorities priorities with respect respect to pare parent, nt, performance performance assessment assessment (note that the sum of  Fig. 5   Derived the priorities of cost (A), satisfaction of supplier surface (B), quality (C), and assurance of supply  (D) is equal to 1 since these are local priorities with respect to the parent node, performance assessment)

Fig. 6   Overall priorities of alternatives in distributive mode mode (note that the distributive mode mode is selected (the distributive icon is pressed))

the alternatives), it identified the impact of changes in nodes immediately beneath the selected node on the alternatives. The results of the sensitivity analysis at the goal level are presented in Figs 7 to 9 (in the form of  gradient–sensitivity graphs). They show the sensitivity of three primary assessment objectives, i.e. performanc for mance e ass assess essmen ment, t, con contin tinuou uouss imp improv roveme ement nt and innovation, and company background and business structure. Figure 10 presents a one-node level

In Fig. 7, the solid vertical line shows the original priority of the objective. The gradient (slope) of each of the alternative alternative lines repre represents sents the rate of change in priority for the alternatives as the priority of the objective is changed. The representation of the alternatives is labelled as five tabs on the right-hand side. The priority of each alternative is the intersection between the respective lines and the solid vertical line in Fig. 7. Thus, current ranking is supplier 1   > supplier 4 > supplier 3 > supplier 2 > supplier 5.

sensitive analysis in a different approach by using a  performance sensitivity graph.

 As already stated, the gradient (slope) of each of  the alternative lines represents the rate of change in

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assessment Fig. 7   Sensitivity of performance assessment

continuous improvement improvement and innovation innovation Fig. 8   Sensitivity of continuous

priority for the alternatives as the priority of objectives is changed. Taking Fig. 7 as an example again, the pri priorit ority y of sup suppli plier er 4 (su (supp4 pp4)) wou would ld dec decrea rease se  while that of supplier 1 (supp1) would increase if  the priority of performance assessment were increa-

ranking ranki ngss re remai main n un unch chan ange ged d we were re id iden enti tifie fied d (a (ass shown sho wn wit within hin the dot dotted ted ver vertica ticall lin lines) es).. The These se are the areas where the supplier ratings are not sensitive. In Fig. 7 it can be seen that, within the first three areas (i.e. 1 to 3) of performance assessment, the

sed (the vertical line is moved to the right). For each gradient analysis graph, the areas where the supplier

supplier ratings are not sensitive with respect to supplier 4. Hence, when the importance (reflected as the

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Fig. 9   Sensitivity of company background background and business business structure

Fig. 10   Perfor Performa mance nce sen sensit sitivi ivity ty gra graph ph of nod node e und under er obj object ective ive,, con contin tinuou uouss imp improv roveme ement nt and innovation

 weighting) of the performance assessment, which is now 0.531 as per the position of the solid vertical line, lin e, inc increa reases ses to 0.6 0.696 96 or dec decrea reases ses to 0.4 0.457, 57, the current ranking of the suppliers does not change. Regarding the performance assessment, supplier 4 is still the best subject in the sensitivity analysis. By  the same token, sensitive analyses for the other two

In Fig. 8, agai again n the there re are four ins insens ensiti itive ve are areas as identified. The areas are bounded by dotted lines. It is obvious that supplier 4 performs almost the best alll th al the e ti time me un unti till th the e im impo porta rtanc nce e of co cont ntin inuo uous us improvement drops below 4.9 per cent, i.e. area 1. In Fig. 9, only two insensitive areas are identified, but supplier 4 is insensitive in this case. Figures 7

assessment areas were performed and are shown in Figs 8 and 9.

to 9 show that a ranking of alternatives is sensitive to changes in importance of all the other criteria,

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except for company background and business structure tu re.. It is ob obse serv rved ed th that at th the e ra rank nkin ing g of su supp pplie liers rs remai re mains ns mo more re or le less ss th the e sa same me th thro roug ugho hout ut th the e entire range. The overall utility of the alternatives is robust with changes in the importance of company  background and business structure. Figure 10 presents a performance sensitivity graph of supplier performance on nodes under its parent node, continuous improvement and innovation. Performance sensitivity analysis shows how well each alternative performs with respect to each criterion. The importance of criteria is depicted from the vertical bars, and values can be read from the left-hand axis. axi s. Th The e pe perf rfor orman mance ce of ea each ch al alte tern rnati ative ve wi with th resp re spec ectt to ea each ch of th the e cr crit iter eria ia is de depi picte cted d by th the e inters int ersect ection ion of a seq sequen uence ce of lin line e seg segmen ments ts wit with h the vertical line at each of the criteria. The overall perform per formanc ance e of an alt altern ernati ative ve is dep depict icted ed by the inters int ersect ection ion of the alt altern ernati ative ve lin line e seg segmen ments ts wit with h the ‘overall’ vertical line at the right of the graph. Perform Per formanc ance e of the alt altern ernativ atives es can be rea read d from the right-hand axis. Note that alternative line segments between the objectives are drawn for visual clari cl arity ty on only ly an and d do no nott co conv nvey ey an any y in info form rmati ation on.. This is differ different ent from the gradient-sensiti gradient-sensitive ve graph previously discussed.  As shown in Fig. 10, supplier 4 performs the best overall.. However, this does not imply that supp overall supplier lier 4 perfo pe rforms rms th the e be best st on all fo four ur cr crit iter eria ia.. In Inst stead ead,, supp su pplie lierr 4 pe perf rfor orms ms th the e be best st fo forr on only ly tw two o ar area eas, s, namely the ‘cont ‘continuous inuous improvement improvement program program/six/sixsigma/TQM programme’ and ‘research and development’. It ranks the worst in ‘e-business initiatives’ and an d th thir ird d in ‘p ‘pro roact activ ive e ma mana nage gemen mentt in su supp pply  ly  chain/ cha in/its its sup suppli plier’ er’.. Hen Hence, ce, in spi spite te of sup suppli plier er 4 being the overall best supplier, the company could see there is a potential for supplier 4 to improve in those two particular areas. This may be a piece of  particu par ticularl larly y imp importa ortant nt inf inform ormatio ation n to a com compan pany  y  pla planni nning expand exp andplify itsy e-b e-busi ness s tran transac sactio tions nstion to speed spe ed ng up toand simplif sim theusines whole who le adminis admi nistra tration procedure. Similar analysis could be performed on the other four sup suppli pliers ers.. Thi Thiss is a ver very y imp importa ortant nt piece of decision support information to the senior management managem ent of the company.

5.3 Individual Individual airlin airline e characte characteristi ristics cs and and the changing environment  Another aspect of this discussion is a more fundamental issue, that is, individual airline characteristics. While it is hoped to apply the proposed AHP model mod el to all airlin airlines es,, th the e mo mode dell may not be ab able le to tak take e ac accou count nt of nu nume mero rous us ch chara aract cter eris isti tics cs of  differ dif ferent ent air airlin line e com compan panies ies,, as wel welll as cha changi nging  ng  industr ind ustry y nee needs. ds. The Therefo refore, re, the pro propos posed ed mode model, l,

includ incl udin ing g th the e se sett of cr crit iter eria ia an and d th the e we weig ight htin ings gs,, shou sh ould ld be us used ed as a re refe fere renc nce e fo forr co cons nstr truct uctin ing g a  unique uniqu e AHP model for a partic particular ular airline, or adjustment me nt wo woul uld d be ma made de be befo fore re di dire rect ctly ly ap appl plyi ying  ng  the model. Possible Possible sour sources ces of var variati iation on cou could ld be identified as follows. 1.  Different sizes of the airlines. Large airlines.  Large airlines generally rall y hav have e gre greate aterr pow power er in neg negotia otiation tion on the initial price, contractual terms, etc., with the suppliers. The imbalance in power structure between supplie sup pliers rs and airl airline iness may affe affect ct the sup supplie plier’s r’s attitude on such an evaluation model. 2.   Different Different operational characteristics.   The size of  the th e air aircr craft aft fle fleet et,, or th the e si size ze (f (fre requ quen ency cy an and d length – long haul or short haul) of the routes it operates, partly influences the amount of replacement parts needed and the frequency of maintenance required. required. Moreov Moreover, er, the initia initiall suppl supplier ier set may be different regarding the different aircraft fleet. 3.   Different view of top management.  The top management view is very important in determining  the weightings since the future company direction is determined by them. Forvary example, on the progress of largely e-business, it may from one airl airline ine to ano anothe ther. r. The Theref refore ore,, a com comple pletel tely  y  different set of weightings may be applied in its unique model. 4.   Changing environment.   Because of the changing  exter ex ternal nal en envir viron onmen ment, t, the cr crite iteria ria ne need ed to be reviewed progressively, and adjustment of weightings in gs is ne nece cessa ssary. ry. For exa examp mple, le, en envi viron ronme menta ntall concerns may still largely focus on the operation flee fl eet. t. Ho Howe weve ver, r, th the e tr tren end d of mo more re an and d mo more re govern gov ernmen ments ts an and d org organ aniza izati tion onss rea reali lizin zing g the importan impo rtance ce of envi environ ronmen mental tal sust sustaina ainabili bility ty to wards economic growth may alert airlines of the need ne ed to ad adju just st th the e we weig ight htin ing g on th the e cr crit iter erio ion n ‘supplier environmental management’ so as fully  to integrate and gain benefit from the supply chain effort.

6

CONCLU CON CLUSIO SIONS NS

The purpose of this study has been to develop a DSS by using AHP to solve the supplier selection problem in the airline industry. A hierarchical model has been developed. devel oped. With the use of the AHP-based decisiondecisionmaking software Expert Choice, the result showed that the perfor performance mance assessment assessment objec objective, tive, which compri com prises ses sub subcri criter teria ia inc includi luding ng cos cost, t, sat satisfa isfacti ction on of supplier service, quality, and assurance of supply,  was among the most important areas to be addressed, while the other two objectives, continuouss im ou impr prov ovem emen entt an and d in inno nova vatio tion n an and d co compa mpany  ny 

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background and business structure, were perceived as being of roughly equal importance. One limitation of this study is that the developed model for finding evaluation criteria is mainly based on literature sources or the internet, and on advice given by the case study company. However, it might still be possible to use another approach (e.g. a survey) to augment the list of criteria used within the

problem.  Production and Inventory Mgmt J., 1997,   38 (1), 14–21. 16 Sim Simpso pson, n, P. M., Sigu Siguaw, aw, J. A., and White, S. C. Measuring the performance of suppliers: an analysis of evaluation proce processes. sses.   J. Sup Supply ply Cha Chain in Mgm Mgmt  t , 20 2002 02,,   38(1), 29–41. 17 Weber, C. A., A., Current, Current, J. R., and  Benton, W. C.  Vendor selection criteria and methods.  Eur. J. Opl Res., 1991, 50(1), 2–18.

industry, which is a future line of research of this study. No matter how, airline companies are recommend me nded ed to ma make ke ne nece cess ssar ary y ad adju just stme ment nt of th the e proposed propo sed model prior to applyi applying ng it direc directly. tly.

1 Condom, P.  Airline industry performance: past, presentt and future. sen future. In   Internatio International nal air transp transport: ort: the  challenges chall enges ahead , 199 1993, 3, pp pp.. 21– 21–44 44 (Or (Orga ganiz nizati ation on for Economic Co-Operation and Development, Paris). Boei eing ng Co Comp mpan any y Cu Curr rren entt Ma Mark rket et Ou Outl tloo ook k 20 2004 04.. 2   Bo  Available at http://www http://www.boeing.com/comm .boeing.com/commercial/ ercial/ cmo/pdf/CMO2004.pdf  3 Kangis, P.  and  O’Reilly, D.  Strategic responses to competitive pressures: European Air Transport.  J. Strategic 

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