(a) Explain the methodology of Analytical Hierarchy Process (AHP) and how this constitutes to supplier selection. (6 marks) (b) A company has to make a chose between two suppliers based on the following evaluation criteria. Present which supplier is preferable The rating given is from 1 to 5 with 1 is the worst and 5 is the best. (8 marks) Weighting 20% Sub-weight Supplier A Supplier B 5% 8% 7% 4 4 5 3 3 5 10% 5% 4 4 5 4 5% 10% 5% 3 4 4 4 5% Criteria 1. Quality Systems Process Control Systems Total Quality Commitment Parts per million defect performance 2. Management Capability Management/labour relations Management Capability 3. Financial Conditions Debt Structure Turnover Ratios 4. Cost Structure Costs related to industry Understanding of costs Cost controls/reduction efforts 5. Delivery Performance Performance to promise Lead-time requirements Responsiveness 6. Technical/Process Capabilities Product Innovation Process Innovation Research and development 7. Information System Capability 15% 5% 5% 5% 5 4 5 4 4 4 15% 5% 3 5% 4 4 4 5% 15% 5% 5% 4 5 5 3 3 3 5% 5% 5 3 3% 2% 10% EDI Capability CAD/CAM 8. General Support of minority suppliers Environmental compliance Supplier' supply base management Total 2% 3% 5% 3 5 4 3 3 4 100% (c) The following quotations are obtained from suppliers for same configuration. (Supplier A: HK$12,000, Supplier B: HK$11,500, Supplier C: HK$11,000) Price Breakdown 1. Product Costs 2. 1-year Warranty included? 3. Annual Maintenance/year (for labour and key component) 4. Expected Life All currency is in HKD Supplier A $12,000 Yes $1,000 Supplier B $11,500 No $1,500 Supplier C $11,000 Yes $2,000 4 3 2 By computing TCO for three suppliers, advice the user which supplier should be chosen in the purchase of laptop computer. (6 marks)