Supply Chain and Logistics Management Notes

AHP stands for Analytic Hierarchy Process, a decision-making method developed by Thomas Saaty in the 1970s. In supply chain management, AHP is used to prioritize and make decisions when faced with multiple criteria and alternatives. Here’s how it typically works:

• Hierarchy Formation: The decision problem is broken down into a hierarchical structure, consisting of a goal, criteria, and alternatives. For example, in supply chain management, the goal might be to select the best supplier. Criteria could include cost, quality, reliability, and lead time, while alternatives could be different supplier options.
• Pairwise Comparisons: Decision-makers systematically compare criteria and alternatives against each other in pairs. These comparisons are typically done using a scale that reflects the relative importance or preference of one over the other.
• Weighting and Prioritization: AHP employs mathematical techniques to derive weights for each criterion based on the pairwise comparisons. These weights reflect the relative importance of each criterion in achieving the overall goal. Then, the alternatives are evaluated against each criterion, and their performance is scored.
• Aggregation: The scores for each alternative are aggregated using the weights derived from the pairwise comparisons to obtain an overall ranking or prioritization of the alternatives.

AHP helps in structuring complex decision problems, making preferences explicit, and providing a systematic and rational approach to decision-making. In supply chain management, it can be used for various decisions such as supplier selection, location selection, inventory management, and logistics planning.