Hydraulic supplier selection: An Analytic
1. Introduction
For companies that want to be competitive in an increasingly globalized market, partners in their business operations and in the supply chains become crucial. Supplier selection is one of the most important decisions in the purchasing process of an organization, aiming to increase competitiveness and customer satisfaction (Wang, Nguyen, & Dang, 2021). After all, suppliers impact the entire supply chain and the performance and sustainability of an organization. The supplier selection process must be structured including several criteria, often conflicting criteria. Multi-criteria decision analysis (MCDA) methods may contribute to managers’ decision-making (Ortiz et al., 2021; Depczynski, 2021).
According to Ohta, Salomon, and Silva (2020), the concept of industrial maintenance is not at the top of an organization’s business, however, maintenance costs can represent more than 50% of production costs. The main role of managers in an organization is to keep the operating system always active, adopting appropriate maintenance methods for each type of equipment (Baidya et al., 2018).
Nowadays, industrial assets are extensively equipped with hydraulic systems for various process purposes. However, the operational performance of these systems requires a high level of reliability, which can be achieved through appropriate preventive measures (Pavlov, Polyanin & Kozlov, 2017).
A breakdown of hydraulic equipment in an organization or linked processes to them may result in costs associated with lost production as penalties, lower availability, or increased operational risks. Therefore, the suppliers’ selection for hydraulic systems needs proper treatment, where multi-criteria decision techniques can help with fundamental decisions according to the desired level of service with the lowest possible risk. Our main goal is to propose an evaluation framework that allows optimizing the trade-off between risks and service levels, guaranteeing a business improvement quality of the suppliers’ selection for hydraulic systems, in steel industries. The problem is structured by identifying the criteria and sub-criteria that meet the needs of suitable choices for suppliers, which can be solved by MCDA. MCDA methods have been applied to several problems, where we can highlight the Analytic Hierarchy Process (AHP), developed by Saaty (1974) and Saaty (1980). AHP may be of great value due to its efficiency and flexibility in assisting decision-making. AHP, one of the most popular and widely applied MCDA methods, is easy to understand and apply (Canco, Kruja & Iancu, 2021). Our research question (RQ) is:
RQ) How to use an AHP approach to develop an evaluation framework for supplier selection for hydraulic systems in the steel industry?
This chapter has five more sections: a short literature background, methodology, results, discussions, and conclusion.
2. Literature background
This study consists of four phases. First, the key search terms were selected in the Scopus database from 2018 to 2022 in order to summarize the findings, with the combination of the words: “Suppliers Selection” and “AHP” (291),
“Hydraulic systems” and “AHP” (4), “Maintenance” and “AHP” (532), and
“Steel industry” and “AHP” (23), totaling 850 scientific articles. Table 6.1 shows the evolution of publications from 2018 to 2022.
Table 6.1. Publications from 2018 to 2022
Year Suppliers
Selection + AHP Hydraulic systems
+ AHP Steel industry +
AHP Maintenance +
AHP
2022 * 30 0 1 43
2021 61 1 8 150
2020 64 1 5 126
2019 73 0 3 121
2018 63 2 6 92
Note: (*) Only the first semester.
Source: Scopus (2022).
In the second phase, 50 articles relevant were selected based on the areas of knowledge: engineering, economics, management and accounting, computer science, decision sciences, mathematics, energy, environmental management, material sciences and social sciences. The selection was limited to articles/reviews, conference articles/reviews, and open-access articles, with publications in English. The list of articles by research area is illustrated in Figure 6.1, where Engineering is the dominant area.
In the third phase, the VOSviewer software was used to support the analysis of co-occurrence keywords. Figure 6.3 shows the network of 337 keywords, with at least three occurrences, using the full counting method.
Nodes and larger words reflect their highest occurrence, colors indicate clustering, which in this case are present 3 clusters - supplier selection, AHP, and decision making.
Figure 6.1. Articles distribution by research area
Source: Scopus (2022).
The country distribution is represented in Figure 6.2. Indonesia and China are the leading countries in publications.
Figure 6.2. Country distribution
Source: Scopus (2022).
Figure 6.3. Articles distribution by research area
Source: VOSviewer.
Supplier selection
In search of continuous improvement in their processes and the optimization of the supply chain, the steel industry is seeking to introduce new management concepts with wiser insights to guarantee the quality of their products. The evaluation and selection of suppliers is a process that must supply the customer with quality and services of products at the correct market price, in the right quantities and times. In this context, evaluating and selecting suppliers in an organization takes a fundamental rule, which must be carried out appropriately to obtain the best possible results. To achieve the stipulated production goals in an increasingly competitive market, organizations need to choose their partners and establish strategies that optimize their results (Deshmukh &
Vasudevan, 2018; Ulutas, 2019).
A comparison between qualified suppliers is made by means of criteria and subcriteria, which are stipulated according to the organization’s needs (Kumar, Padhi, & Sarkar, 2019; Depczyński, 2019). According to Depczyński (2019), a supplier does not have optimal qualifications for all criteria. There is no precise method for evaluating a particular supplier: it changes from organization to organization (Kannan, Balamurugan, & Sasikala, 2021).
Supplier selection for hydraulic systems has crucial importance in the steel industry since these systems are associated with equipment that can generate risks for personal safety and the environment, which can compromise the operational reliability significantly of an organization. If the selection process of suppliers is inadequate, equipment without quality may be acquired, which
can cause severe problems in the operational activities of the companies. For instance, Kumar, Padhi and Sarkar (2019) suggest that a subjective evaluation of suppliers depends not only on stipulated criteria but also on how these criteria should be evaluated by experts, as well as the methodology used for this purpose. Therefore, the qualification of suppliers for hydraulic systems in the steel industry needs proper treatment. Multi-criteria decision techniques may substantiate the decisions according to the desired level of service with the best possible assertiveness.
3. Methodology
3.1. Research subject
This study was carried out by a specialist’s judgment using questionnaires and interviews in a steel industry located in the southeast region of Brazil with over 10,000 employees, which operates large equipment, such as hot strip mills, sintering processes, picking lines, blast furnaces, among others. A group consisting of three experts was selected as follows; a production engineer with 44 years of experience in the industrial area; a marine engineer with 24 years of experience in the maritime and industrial area; and a mechanical engineer with 15 years of experience in the industrial area. Though they performed different functions, their opinions were equally considered since all the experts are directly involved in maintenance management.
3.2. Method
Analytic Hierarchy Process (AHP), developed by Saaty (1974, 1980, and 2013), is one of the most applied MCDA methods for decision-making problems in several fields such as engineering, computer science, mathematics, logistics, health, industry, and education (Martino et al., 2022).
The AHP can be applied in a few steps, such as hierarchy building, criteria comparison, consistency checking, and analysis of results (Tramarico et al., 2019; Martino Neto et al., 2022). The adopted flow chart is presented in Figure 6.4.
According to Saaty (1977), AHP has a hierarchy structure where criteria, subcriteria, and alternatives are selected. In this model, the elements are presented in levels where the lower level needs to be evaluated at the higher level. Table 6.2 presents the Saaty Scale, a linear scale for pairwise comparisons by experts (Kannan et al., 2021; Martino Neto et al., 2022; Özcana, Yumusak,
& Eren, 2021).
Figure 6.4. Flowchart of the methodological approach
Source: Tramarico et al. (2019).
Each expert uses Table 6.2 to establish a comparison matrix. The weights for the attributes, usually referred to as criteria priorities, are obtained by normalizing the direct eigenvector w of A, according to Equation 1, where lmax is the maximum eigenvalue of A.
A w = λmax