Applying environmental criteria to supplier assessment: A study in the application of the Analytical Hierarchy Process

This study illustrates the use of the Analytical Hierarchy Process (AHP) as a decision support model to help managers understand the trade-offs between environmental dimensions and examines how AHP can be incorporated into a comprehensive information system supporting Environmentally Conscious Purchasing (ECP).

Abstract

Increasingly, purchasing managers are being asked not only to transform purchasing into a more strategic function but also to integrate environmental issues in their decisions. Introducing the environmental dimension into purchasing decisions embeds a new set of trade-offs in the decision, complicating the decision-making process with both qualitative and quantitative factors. Yet, few companies use any structured analysis to evaluate suppliers along environmental dimensions. In this study, we illustrate the use of the Analytical Hierarchy Process (AHP) as a decision support model to help managers understand the trade-offs between environmental dimensions. We then demonstrate how AHP can be used to evaluate the relative importance of various environmental traits and to assess the relative performance of several suppliers along these traits. Three case studies were carried out to demonstrate the benefits and weaknesses of using AHP in this manner. Finally, we examine how AHP can be incorporated into a comprehensive information system supporting Environmentally Conscious Purchasing (ECP).