Proceedings of the 35th Hawaii International Conference on System Sciences - 2002
Integrating GSS and AHP: Experiences from Benchmarking of Buyer-Supplier Relationships Satu Peltolaa , Marko Torkkelia , and Jarno Tuimala b Lappeenranta University of Technology, P.O.Box 20, FIN-53851 Lappeenranta, Finland. E-mails:
[email protected],
[email protected] b Polytechnic of Häme, Faculty of technology/Logistics, FIN-30100 Forssa, Finland. E-mail:
[email protected] a
Abstract The increasing overall global competition forces requirements for companies to improve their business performance continuously in every sector. The utilization of external resources, including a supplier network, has become one of the most critical development areas of business, needing a lot of attention. In this paper, the performance of buyer-supplier relatio nships will be enhanced by using a benchmarking method in aiding the identification and implementation of development actions required for reaching the world-class level. The benchmarking process will be led by two decision support systems: AHP and GSS, to ensure valuable outcomes of the benchmarking with less resources.
1. Introduction Buyer-supplier relationships have been considered as one of the most important areas of purchasing in the last decade. The role of the purchasing function has altered fro m transactional buying to strategic means of continuous competitiveness, partially due to the fact that suppliers, in an optimal case, are capable to join their assets with their customers in a superior competency network. By continuously providing with the end users better products at reduced costs, improved quality and customer service, the company can gain increased market share and/or satisfied customers. Benchmarking applications in the context of buyer-supplier relationships have been scarce, although both methods applied in many other areas of business more or less successfully. One reason for only a few applications in the context of supplier relations is the difficulty to put them into practice. Since the benchmarking study requires much effort and knowledge from its implementers, the benchmarking group might receive better outcomes if aided by a decision support system (DSS). The overall suitability ratings of alternative suppliers or partners can be evaluated by using an integrated GSS/AHP- method supported benchmarking process. However, this classification alone is not enough, and the
reasons for successful relationships should also be recognized. Additionally, the companies should find a balance between the high benefits and the risks included in the goals achieved through buyer-supplier relationships. We could say that a company should know when to have just a short fling or when to be engaged, but especially it should be sure about with whom and when to get married. The aim of this study is to provide a framework for the integrated utilization of the Group Support System (GSS) and Analytic Hierarchy Process (AHP) methods in the benchmarking of buyer-supplier relationships, with the focus on practitioners' experiences. In this study, the buyer-supplier relationships are classified into three categories according to two main elements, where they have specific needs and requirements. This study begins with a literature review of DSS and buyer-supplier relationships. Second, the buyer-supplier relationships are classified to make them easier to compare in the benchmarking study. Third, a framework for the benchmarking of buyer-supplier relationships is formed, containing three main phases. Fourth, the established framework is set into a process model produced by using the AHP and/or GSS methods in implementing the steps. Fifth, the users’ experiences of the use of the DSS in implementing a benchmarking study in a case of buyer-supplier relationships is analyzed.
2. Analytic hierarchy process and group support systems In this study, the Analytic Hierarchy Process and Group Support Systems are used to form a process that will enhance ability of benchmarking to improve a company's collaboration with its suppliers. To give a short description of the general background of the used DSS, a literature review is provided. The Analytic Hierarchy Process (AHP) was developed in the 1970s by Thomas L. Saaty, and it has since been applied in a variety of areas. AHP is a practical and flexible decision making technique dealing with complex, multi-criteria problems where both qualitative and
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quantitative aspects of a problem need to be incorporated [1]. AHP helps decision makers structure the important elements of a complex multi-factor problem into a hierarchical structure, in which each level of the hierarchy is composed of specific elements. The goal or objective of the decision lies at the top of the hierarchy, and the criteria, subcriteria and decision alternatives are on each descending level of this hierarchy. Once the hierarchical model has been structured for the problem, the decision maker provides pairwise comparisons for each level of the hierarchy in order to obtain that level's weight factor with respect to one element on the next higher level. This weight factor provides a measure of the relative importance of this element for the decision maker. Then, by reducing complex decisions to a series of simple comparisons and rankings, and synthesizing the results, the AHP not only helps in arriving at the best decision, but also provides a clear rationale for the choice to be made. The process of the AHP comprises the following steps: 1) A decision hierarchy is created by decomposing the problem into a hierarchy of decision elements; 2) Pairwise comparisons are made between the decision elements; 3) The consistency of the pairwise comparisons is checked. If the test is not passed, then the pairwise comparisons are redone; 4) The relative weights of the decision elements are calculated; 5) The decision alternatives are ranked by aggregating relative weights [1]. Steps 1 and 2 are made on the basis of the decision maker’s knowledge and understanding of the problem, and steps 3 to 5 are executed using appropriate software, such as the Expert Choice used in this study. The AHP can be used successfully also with a group, but there are usually severe problems. In order to use the AHP in groups, the members should structure the problem, provide the judgments, debate the judgments, and make a case for their values until consensus or compromise is reached. Ideally, the group is patient enough to reconsider the subject so that the remaining differences are debated and an agreement is reached or at least the range of differences is narrowed. Group usually faces many problems in working with AHP, such as: • in groups, there are a large number of complex and varied issues, some individuals may be much more interest in particular questions than others, and • sometimes people are not willing to reveal their true preferences and the strength of their attachment to these preferences [2]. A GSS, according to DeSanctis and Gallupe [3], is an interactive computer-based system that facilitates the solving of unstructured problems by a group of decisionmakers. The GSS supports group decision making by eliminating the barriers of communication, by offering different tools for the group and by leading the use of time and handling of items systematically. The components of a GSS include hardware, software, people and procedures.
The GSS can affect group productivity and effectiveness in several ways, and it offers many possibilities to support a group in promoting co-operation and effectiveness (see e.g. [4], [5], [6]). The support that the GSS offers to decision making on managerial level is to help the involved group in identifying quickly the aspects in which the participants' opinions differ the most and the ones in which a consensus has been found. This allows concentrating on essential aspects, accelerating the work of the group as the system supports parallel and simultaneous processing in several ways: there is no need to wait for "air time", it facilitates the handling of delicate issues and "crazy ideas": all comments and ideas are handled anonymously, and it offers full and immediate record keeping: all input from participants is automatically recorded and available for printing at the end of the meeting. As the success of the benchmarking depends on the commitment and equal contribution of each benchmarking team member, purchasing benchma rking will gain much from the use of the GSS. The Department of Industrial Engineering and Management at Lappeenranta University Technology has a GSS-laboratory for the research of group decision support processes and systems. The laboratory was used to carry out the framework developed in this paper. One of the main software programs to support the whole group decision process is GroupSystems (GS). GS was used in this paper as the GSS software. GS has been developed at the University of Arizona and Ventana Corporation. GS is a suite of team-based decision software tools that aids and supports a group in decision making. GS can support all phases in the decision making process from problem definition to final selection. It includes half a dozen different analyzing, categorizing, idea generating and evaluating tools. Data transfer between the different tools is simple [7].
3. Buyer-supplier relationships In recent years, alliances combining the unique resources of partners have been the primary focus of the business environment. While interest in such arrangements remains strong, it is also well accepted that traditional spot marketing or more informal, but collaborative supplier relationships are needed. The hectic and turbulent world requires flexible suppliers with high competence in a specific, narrow field. To respond to this challenge, the suppliers need to be managed with different ways, like for instance the “fit-for-the-purpose”-method, because the classification of supplier relationships, contributes to the selection and evaluation of buyer's supplier base. It is generally recognized that creating, developing and maintaining a successful buyer-supplier relationship is a very demanding task. Therefore, the
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suppliers should be classified. There exist several names for different types of relationships as well as various selection criteria and requirements for supplier classification. The requirements range from operational criteria such as logistic integration, quality, technical competence or even price to more strategic aspects like the strategic integration of partners and potential future
business opportunities. It should also be noticed that environmental issues affect the development of a relationship. In this paper suppliers are classified into three categories (see Figure 1) using the supplier’s technical competence and the balance between the risks and benefits as the critical evaluation and developing criteria.
•St ra te gi c Comp ati bi li ty: Corp ora te Le ve l •I nfo rma ti on Sha ri ng •Sh ared Ri sks & Be ne fi ts •Bu si n ess Opp ortu ni ti es •Te chno l ogy, Sh are d I PRs •I mp roved Prod uct L if e •Add In tel li ge nce •C ommitme nt, Trust •Ope rat. Co mpat ib il it y
•Tech ni ca l Kn ow le dg e Expe rie nce •Improve d Pe rf orman ce •IPRs, Qu al it y •E Eco no my, Comp eti to r Rel at io ns
•Service De ve lo pme nt Comp ete nce •Person ne l Comp ati bi li ty •Pri ce, Re li ab il i ty •Enviro nme nt Po li cy
Figure 1. Facilitating supplier/partner selection: Classification of buyer-supplier relationships.
Technology vendors – Free market a company may use suppliers for different needs and occasions. The first category, technology vendors, refers to traditional vendors, which Bensaou [8] calls market exchange and Dyer [9] arms' length relationships. There is a wide range of vendors that have one very high specific competence, e.g. a service capability like technical information technology support, or it could be knowledge like specific software or new innovation related to the mobile or internet environment, or just a more traditional technical competence e.g. machines of a big coal factory. The replacement of the current supplier is easy without high costs. Thus, a technology vendor is selected due to its specific competence, and this usually means that this supplier has higher technology competence than the competitors or it fits better to the buyer's goals and needs. Technology Partners – Collaboration with high technological competence Technology partner refers to a flexible supplier that is capable to adapt to the company's rapidly changing requirements [10], and at the same time the partner is committed to longer-term development such as R&D projects. On the other hand, this kind of suppliers will
often seek to ensure that they make less dedicated investments in the relationship than the buyers [11], which means asymmetric partnerships, where complementary strengths, skills and knowledge are needed. This could lead to problems, if one partner has dominance over the other. According to Bensaou [8] these relationships refer to captive buyer or supplier circumstances, in which one partner may be seen as a hostage by the other. In these circumstances mutual development of partnering is just a dream without possibilities of achieving a higher level of relationship. However, if both partners accept this asymmetry and will still collaborate to achieve mutual goals (usually related to the specific technology), the state of an asymmetric partnership could also be successful and lasting. Technology and Business Partners – Optimization of high risks and potential benefits In the third category, called technology and business partners, or strategic partnership / alliance, the risks are extremely high, but so are the potential benefits. In highly intensive R&D -industries the role of technological knowhow is crucial for company-specific advantages [12], and so are the supplier's current but especially future
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competencies for R&D development. Therefore, strategic partners must be characterized by trust, norms of reciprocity, mutual investments, joint visions and organizational interdependence (e.g. [13], [14], [15]). Strategic alliances are more and more common in the corporate world, but our understanding and management of these relationships is still evolving. On the other hand, we should also recognize the other relationships, as well as the circumstances they need. It should always be kept in mind that in some cases a strategic partner may become the technology supplier or vice versa, even if the latter opportunity is nowadays relatively rare, because a strategic alliance usually takes time to evolve and today companies just do not want to wait long enough to see the potential possibilities of a relationship. Additionally, companies should find a balance between the high benefits and risks involved in the goals achieved through buyer-supplier relationships. However, it should be kept in mind that if particular a risk is very critical to the customer or to the success of the relationship, the risk should always be avoided, even if its benefits were very high ones. In today's hectic business environment a company can overlook the important social and organizational factors that make collaborative supplier relationships possible, and thus interaction and communication between partners is especially crucial for any development. Therefore, significant opportunities for the improvement of an existing supplier base are shared risks, benefits and potential business opportunities, communication and performance evaluation. Focusing on the developing and management of these different buyersupplier relationships, the potential of such arrangements as well as their technology competencies can readily be enhanced.
4. A framework for the benchmarking of buyer-supplier relationships Benchmarking presents a systematic management process that helps managers to improve critical business processes by adopting the peak performance of the bestin-class company [16], [17]. As a method, benchmarking does not mean copying or stealing someone's superiority, but more likely adapting the best practices into one's own circumstances in the way most valuable for the company and its customers. Benchmarking is based on the premise that the outcomes will assist a company to develop their purchasing practices towards an enhanced performance level [18]. Benchmarking enables the company to identify business trends, and it serves as an early detection device for bad news [19]. This powerful tool fits for the purpose of competitive analysis as well as continuous improvement [20], [21]. Although each benchmarking process and the achieved results are unique, the general advantages achieved from a
benchmarking process can be summarized as: analyzing the operation, knowing the best of the best (BOB), incorporating the world class performers, and gaining superiority [22]. The benchmarking process gathers standards for improvement to achieve better performance [23], and this process involves many attributes ranging from technical to cultural viewpoints [24]. A company that is using a benchmarking study in developing critical areas of business should not expect any quick fixes. Development in the benchmarking should follow the thinking is out of the box approach where benchmarking results take the company closer to the world-class performance level (see Figure 2). Functional best practices - world class Functional best practices - any company in Europe Industry best practice - including noncompetitors Competitors’ best practices
The Company
Figure 2. Thinking is “out of the box” (Spendolini, 1992 in [25])
One excellent example of the comprehensive potential of purchasing benchmarking is in the ongoing purchasing benchmarking project of the Technical Research Center of Finland (VTT), where the following areas of purchasing and supply management are considered on both operational and strategic levels: The role and purpose of purchasing for the company; Forecasting management; Purchasing strategies; Organization; Control principles; Order management; Information management; Negotiation and contracting; Technology related aspects; Supply management, and Supplier management [26]. In the benchmarking of buyer-supplier relationships, the potential of benchmarking is in developing the performance of “Technology and Business Partners”. Because the development purposes in collaborative relationships are more or less strategic, benchmarking this category of suppliers requires a lot of financial and human sacrifices. The potential outcomes are huge, but also the existing risks are higher than in the benchmarking of Technology vendors category suppliers. The benchmarking of vendors does not concentrate on improving collaboration, but rather smoothing the cooperation in the buyer-supplier relationships. Thus the
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trivial potential and the existing risks in the benchmarking of vendors are also at minimum. In buyer-supplier relationships, benchmarking may be used to enhance the suppliers’ performance by improving the supplier's individual competencies and compatibility in technology, processes, strategies and operations. The goal of the benchmarking process in buyer-supplier relationships is three -dimensional: To promote (or to degrade) some of the existing suppliers into a higher (or lower) level in the supplier classification (e.g. some of today’s vendors to technology partners), to improve the supplier’s value for the company, and to find new potential suppliers. The framework of the benchmarking of buyer-supplier relationships may be divided into three phases: A) Pre-benchmarking phase: preparing the company for the future benchmarking study B) Implementation of the benchmarking study C) Benchgrafting, i.e. implementation of a radical change resulting from the benchmarking findings A) Getting prepared for a benchmarking study arrangements and requirements In the pre-benchmarking phase, the company forms a successful climate for the forthcoming benchmarking study. Analysis of the requirements of the company's customers', its competitors, and the suppliers' involvement in its business processes will enhance the understanding of the company’s current business conditions and areas where it should look for improvements. Since association of external resources is increasingly important in gaining competitive advantage, the supplier’s role in the business, analysis of customer needs and risks, and opportunities included in the supplier’s value should be clarified. It is very difficult to find areas of improvement that really may have a reasonable value. Different areas of buyer-supplier relationships should be weighed against each other by their influence to total competitiveness in both short and long term. These areas are potential examples for areas that the benchmarking process may consider. Youssef and Zairi [27] have used Smith’s seven dimension model in determining the most appropriate partnership approach in the context of advanced manufacturing technology implementation, including competitive position (climate (hostile or supportive); basis of contract (calculative or collaborative, time span (short term or long term); strategic focus (current products or future possibilities) were the considered areas), organizational structures, role of management, method of project management, financial health of supplier and positioning the technology spectrum, and performance measurement. Performance measurement and identification of valuable performance measures in showing the competitiveness of a buyer-supplier relationship is vital
for any development purpose. An efficient performance measurement always requires a performance measurement system that is an appraisal and feedback system determining and shaping organizational and individual behavior in the context of strategic purchasing related issues [28]. Furthermore, the performance measurement system encourages a company to attain valuable benchmarks presenting the true gap between the current and the peak performance in buyer-supplier relationships. Continuous measurement of risks and observance of the measurement system are important in identifying the current level of performance, its trends and the influence of any implemented improvement action. The performance level of the buyer-supplier relationship is measured by using both qualitative and quantitative key performance indicators (KPIs), including: 1) Factors disclosing the supplier's value (KPIs: reputation, references, products, services, processes, financial stability, etc.) 2) Factors disclosing the relationship's value add (KPIs: compatibility, supplementation and uniqueness of human and/or technology based resources, capabilities and competencies) 3) Factors disclosing the relationship's reliability (KPIs: trust, commitment, joint investments, organizational aspects, etc) 4) Factors disclosing the supplier's operational capability (KPIs: operational reliability, responsiveness, quality, costs, lead times, etc) 5) Factors disclosing risks included in buyer-supplier relationship (KPIs: hold-up risks, inefficiency risks, spill over- or appropriability risks, or timing risks, [29]. B) Benchmarking study for finding performance gaps in buyer-supplier relationships The role of benchmarking is to find out the critical areas of development, to compare the current practices with leading edge performers and to find the best expedients for re-engineering the current buyer-supplier relationships. Since the suppliers' involvement in business is varied, achieving better overall results in the benchmarking of buyer-supplier relationships, a company is proposed to form a multidisciplinary benchmarking group [16]. In practice, that benchmarking team should focus on the following three areas: finding an appropriate benchmarking partner, determining the current performance gap, and finding divergences between their own company's and the peak performer's practices. Many companies have found competitive benchmarking awkward, because it is difficult to admit to a competitor the need to improve one’s current business performance. Fortunately, the best possible results are rarely achieved by competitive benchmarking, but more likely valuable partners will be found among non-
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competitors, including other companies within a consolidated corporation, customers or suppliers [30]. Due to more open information sharing, trust, and mutual benefits, such as better quality and cost reduction in joint operations, benchmarking to non-competitors will generate more useful outcomes. Furthermore, many companies have utilized the services of external consultants with worldwide benchmarking databases. Thus, just a comparison based on performance numbers does not generate such a potential as a comparison based on activities and processes. The benchmarking literature gives many reasons why companies do not implement benchmarking studies. Perhaps the most common arguments are that purchasing benchmarking is time consuming, it requires much resource, and it is uncertain whether any valuable outcomes will appear. Furthermore, the outcomes are difficult to implement as improvements that could enhance the company's competitive position in long term. Purchasing benchmarking has failed owing to a lack of valuable benchmarks, misunderstanding of the drivers for process performance gaps, lack of planning, lack of identifying benchmarking needs and lack of implementation of benchmarking outputs to business processes [31]. One reason for the unprosperity is the note that only a few well-tested implementation guidelines exist in the literature [18]. C) Post benchmarking actions – benchgrafting and continuous improvement The concept of benchgrafting is used to illustrate the vital role of the implementation of radical changes emerging from the benchmarking findings [32]. Benchgrafting usually concerns process -(outsourcing, insourcing, integration, synchronization), technology (equipment, IT solutions such as EDI, intranet/extranet, ERP) or human resource -(education, hiring) related aspects. Benchgrafting should focus on all these three areas in order to achieve the best possible results. To ensure continuous improvement, the company is invited to generate new benchmarking studies over and over again, because it is the only way to reach a world-class status and superior supplier performance one day.
5. DSS in benchmarking of buyer-supplier relationships
Since the benchmarking study is suggested to be produced by a complicated multidisciplinary benchmarking group, and any valuable benchmarking outcomes are more than unsure, the aid of a decision support system is needed. Integration of the AHP/GSS methods in benchmarking processes has already been applied in earlier studies (see e.g. [33]), but applications in the context of buyer-supplier relationships are still needed urgently. This study provides a process model where each step of the benchmarking of buyer-supplier relationships is produced by using either or both of the GSS/AHP methods (see Figure 3). An integrated use of these two gives the benchmarking group a decision aid that helps the company in enhancing their supplier relations towards a world -class level. 1) Applying DSS in the pre-benchmarking phase In the pre-benchmarking phase, the benchmarking group must decide whether they really need benchmarking of buyer-supplier relationships. A benchmarking process requires much resource, and it also contains some other risks, such as the risk of revealing business secrets to competitors. If the potential of increased profits or market share overcome the potential risk of failures, the benchmarking process should be implemented. The GSS aids this step by facilitating the identification and analysis of potential gains and risks in all functional areas. Supporting data for the decision making can be collected speedily, after which the benchmarking process may be started without wasting too much time at the first steps. The next step is to perform extensive self-assessment, including identification of customer requirements, competitors, and supplier involvement in the company’s business. Identification of the areas of purchasing that are critical for competitiveness and/or development should also be done. By using the GSS, information and knowledge can be collected from experts in a parallel way, which accelerates the accomplishment of the selfassessment phase. In a GSS meeting, participants can contribute ideas simultaneously and anonymously, which eliminates too big domination of an individual participant in the meeting. With the help of the GSS the analysis is more objective, which decreases controversies between the multidisciplinary participants. When executing selfassessment, the GSS provides the possibility to quickly identify coherent and diverging opinions. This way the divergent opinions can be focused on directly, without losing time for instance by discussing issues that are already agreed on.
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DSS in pre-benchmarking phase
CONTINUOUS IMPROVEMENT
1. Analyzing the actual need, risks, and opportunities of purchasing benchmarking 2. Identification of customer requirements, competitors, and supplier involvement in the purchasing process 3. Identification and categorization of purchasing practices and strategies 4. Prioritization and selection of noteworthy purchasing practices and strategies to be benchmarked 5. Identification and ranking of valuable performance indicators leading to superior purchasing performance
DSS in benchmarking phase 6. Selection of benchmarks 7. Identification and selection of benchmarking partners 8. Setting responsibilities and appointing persons in charge 9. Implementing the benchmarking 10. Evaluation of the performance gap 11. Analyzing the drivers for under-performing performance
DSS in benchgrafting phase 12. Evaluation of potential re-engineering actions for world-class purchasing 13. Ranking of best development actions 14. Planning and implementing re-engineering 15.Analyzing the results and setting new performance targets Figure 3. DSS in benchmarking of buyer-supplier relationships
The lack of a performance measurement system is always one of the biggest restrictions in benchmarking studies. A performance measurement system is an appraisal and feedback system, which determines and shapes organizational and individual behavior in the context of purchasing strategies and programs [28]. If the company does not collect quantitative and qualitative data for the benchmarks, the benchmarking results are not valid. With the support of the GSS, the benchmarking team is able to identify the measurement criteria which ought to be used in the evaluation of the current buyersupplier relationship performance. With the support of the GSS the benchmarking team achieves a huge amount of
propositions as performance indicators, because the ideas can be contributed in a parallel way and all participants can immediately see each proposition. The list of performance indicators can be displayed on a public screen, which accelerates the decision making and selection of critical performance measures. The GSS may be used in the identification and categorization of all areas of buyer-supplier relationships that can be recognized as a potential to enhance the supplier performance. The requirements can be mapped into a single list where they can easily be categorized. The GSS is otherwise outstanding in analyzing critical development areas, but the AHP method fits better in the
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prioritization and selection of buyer-supplier development areas by their importance to the success of the company. The AHP may be used in constructing a decision as a hierarchy, where the goal is a world-class buyer-supplier relationship. The elements in the middle level of the hierarchy are the performance criteria defined above which influence the competitiveness of the buyer-supplier relationship (e.g. supplier’s value, supplier’s value add, supplier’s reliability). In the lower level of the hierarchy will be set the KPIs (e.g. reputation, references, trust, operational reliability) which are used in evaluating each area of buyer-supplier relationships. The AHP shows its efficiency in ranking the variables of the purchasing
Superior Buyer-Supplier Relationship Performance
GOAL
CRITERIA
KPIs
Supplier’s value
Value add
Reliability
Compatibility Reputation Resources References Products Capabilities Service Competencies Processes Financial stability
AREAS
BENCHGRAFTING
Operational capability
Trust Commitment Joint investments Organization
Process related
Risks
Reliability Responsiveness Quality Costs Lead times
….. Contracting Strategy Organization
BENCHMARKING ….. Partner
ACTIONS
performance measurement system by comparing all purchasing performance criteria pairwise to find out which criteria and KPIs are the most essential in performing purchasing superiority. As a conclusion of the AHP analysis of this phase, the benchmarking group will find both the most critical performance measures that should be benchmarked with the BOB, and the most critical performance measures that should be used as benchmarks in the benchmarking study. Furthermore, the areas that ought to benchmarked may be ranked for the decision making by a similar AHP hierarchy, where each potential development area is compared pairwise with regard to the performance measures.
Hold-up Inefficiency Spill-over/ approproability Timing
Technology …..
Relationship A
Relationship B
Technology related
Human resource related
…..
Figure 4. AHP hierarchy used in the self-assessment, benchmarking and benchgrafting phases
2) Applying DSS in the business-to-business benchmarking phase Benchmarking is recommended to be performed between two companies considering performance, process, strategic and organizational differences carefully.
In this phase, the utilization capability of AHP is important. AHP can be used both in the selection of benchmarks, i.e. the qualitative and quantitative performance measures that are compared with the company and its benchmarking partners, and also in the
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selection of the potential benchmarking partners. From the AHP hierarchy set in the previous phase (prebenchmarking) it is easy to pick up the performance indicators that correlate most strongly with world-class buyer-supplier performance. These performance indicators may be used as criteria in the selection of potential benchmarking partners. Identification of potential benchmarking partners can be done properly by the GSS, but the ranking of different partners by their ability to perform world -class buyer-supplier relationship performance can be set into another AHP hierarchy. A BOB company is not formed by one single performance indicator, but more likely by the company’s capability to generate overall top class performance. The GSS helps the benchmarking decision makers in setting the responsibilities needed to complete the benchmarking study, in setting schedules, appointing and categorizing all tasks to be clarified and finally in appointing the persons in charge needed to complete the study. The actual benchmarking study may be set into an AHP hierarchy, where the goal is set as the “best buyersupplier performance”. The selected buyer-supplier relationship of the benchmarking partner will be compared pairwise against the selected buyer-supplier relations of own company by using the benchmarks selected earlier in the comparison. The AHP results will assist the benchmarking team to identify the real purchasing performance gap between the company’s own buyer-supplier performance against the BOB. The sensitivity analysis of AHP reveals how a change in customer needs or in competitive environment will change the weighting of various buyer-supplier relationship success factors. If the current buyer-supplier relationships are underperforming, the benchmarking team must find the reasons for the poor performance [34]. In the identification and analysis of the drivers which affect the underperformance, the GSS meeting gives support for crossfunctional decision making, where all the participants may find a common solution that will enhance the performance of the buyer-supplier relationships in the whole company. 3) Applying DSS in the benchgrafting phase With the GSS, the benchmarking group is able to evaluate the potential re-engineering actions which may lead to increased performance in their buyer-supplier relationships. The ability of the potential re-engineering actions to reduce the gap of performance between the company and the BOB may be analyzed by forming an AHP hierarchy, where each re-engineering action will be analyzed with regard its their ability to improve the performance of critical performance indicators’ i.e. lead to world-class buyer-supplier performance. Since the AHP results show the most feasible BPR solutions, planning of the implementation of business
process re-engineering must be carried out. The ability of the GSS to organize re-engineering processes is considerable also in this case. The GSS may also be utilized in planning new benchmarking action in buyersupplier relationships in order to ensure continuous improvement.
6. Concluding remarks - users’ experiences and future research The benchmarking group found the implementation of the benchmarking study at least in this context very encouraging. The findings were analyzed regarding the advantages and restrictions of the DSS in producing the benchmarking process, the aid and restrictions of the method and the general opinions about the capability of the formed framework in producing benchmarking of buyer-supplier relationships successfully. First of all, the benchmarking group was surprised how effective the established framework was in ensuring the completion of the benchmarking study. Benchmarking processes end too often with the comparison of results and none of the findings will be put into practice. The DSS helped the benchmarking group to work analytically in all steps of the benchmarking process. In order to ensure results, the process provided the decision makers’ with well structured and well-defined steps, where the previous step had to be completed before the next step could be entered. The AHP method offered the decision makers a tool to set the problem into a well structured hierarchy were both qualitative and quantitative criteria could affect the decision making. The AHP was used in finding the most appropriate benchmarking partners, in analyzing the performance gap between the current and the peak purchasing performance and in analyzing the most valuable re-engineering solutions for the company based on the observed gap. Otherwise, the AHP provided a valuable tool for a sensitivity analysis where the benchmarking group was able to analyze their decisions if the market conditions changed dramatically. The Expert Choice –software had an ability to modify and update priorities of the used input data, which will aid the decision makers to use the same model continuously in the future. The GSS showed its excellence in implementing studies of this kind. The experts were excited for its ability to provide an innovative, effective and equally working environment where multidisciplinary benchmarking studies could be completed efficiently. The experts could simultaneously define different requirements for the benchmarking buyer-supplier relationships and focus on their own expertise areas, while still able to see the requirements stated by other experts in different areas. It enabled data gathering in a short period
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Proceedings of the 35th Hawaii International Conference on System Sciences - 2002
of time and offered effective tools for data analysis. One of the strengths was its ability to provide democratic, impartial participation opportunities for all the participants of the multidisciplinary benchmarking group. The agreeing and disagreeing opinions were clarified rapidly, which made it easier to search for matters for further evaluations. The validity of the study was assessed by using the literature, users’ comments on the framework, and the researchers’ perceptions during the sessions. In future studies, more real world industrial applications will be needed for more precise testing of the framework and the different DSS methods included in it.
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0-7695-1435-9/02 $17.00 (c) 2002 IEEE
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