Supplier Evaluation Using Loss Function and AHP

Process of purchase or supply is one of the most important factors of competitiveness of companies. Therefore, the supply managers of companies are expected to select and evaluate the suppliers, to provide the company needs. Evaluation of suppliers based on only one factor is not possible and it is necessary to adopt a method that several factors simultaneously be evaluated. Suppliers can be evaluated by using different factors such as quality, on time delivery, price, type of service, national and international standards regard. In this paper, we try to use Taguchi loss function for conversion of qualitative factors into quantitative values, and use it to measure and compare suppliers. Then utilizing the loss function as a decision variable in Analytical hierarchy process for evaluation of suppliers in a completely practical method. In addition, a sample case study based on suppliers of a real company, is presented to display the real performance of model.