Volume 7, Issue 7, July – 2022 International Journal of Innovative Science and Research Technology

ISSN No:-2456-2165

Vendor Selection Analysis using Analytical Hierarchy

Process (AHP) Method in Engineering, Procurement
and Construction (EPC) Business
Pt. Rekadaya Elektrika
Yonatan Bagus Adi Putra Antonius Setyadi
Master of Management, Lecturer of Postgraduate,
Mercu Buana University Mercu Buana University Jakarta, Indonesia

Abstract:- Vendors have an important role in Supply PT RekadayaElektrikahad the experience in the
Chain Management which will have an impact on Engineering, Procurement and Construction (EPC) in
company performance. One of method that can be used Indonesia, and is a member of the PLN Group. There are 4
in vendor selection is the Analytical Hierarchy Process (four) main business lines run by PT RekadayaElektrika
(AHP) method. This research was conducted at the including; EPC for Power Plant, EPC for Transmission and
company PT Rekadaya Elektrika which is engaged in the Distribution, Trading and Services, and Consulting Services.
national electric power EPC. The sample of this research In running its EPC business, PT RekadayaElektrika cannot
wereall employees in the SCM Unit. The sampling run alone so that PT RekadayaElektrika requires cooperation
technique used in this research is judgment and support from vendors to running thebusiness line. This
sampling.Based on the results from thisresearch, it was is because with the planning and development of a solid
found that the most influential criteria in the selection of strategy from the provider of raw material to the role of
transmission tower material fabrication vendors were logistics, it will produce a qualified product or service. This
the priority I is lead time (0.390), priority II is quality statement is supported by Pujawan and Mahendrawati
(0.246), priority III is price (0.169), priority IV is (2010) Explain the importance of all parties from suppliers,
quantity(0.111) and priority V is service (0.084). From manufacturers, distributors, retailers and customers in
the results of the assessment of alternative priority levels, developing affordable, high quality and fast products.
priority I is Vendor D (0.386), priority II is Vendor E
(0.230), priority III is Vendor C (0.195), priority IV is Currently, many projects have been completed by PT
Vendor B (0.105) and priority V is Vendor A RekadayaElektrika spread throughout Indonesia. After the
(0.066).Based on the results of the analysis Vendor D is project is declared complete, the project team is required to
the vendor that has the highest overall value. make a project close out report. This project close out report
serves to problems and the history of a project that can be
Keywords:- Vendor Selection, Analytical Hierarchy Process used as lessons learned for planning and executing new
(AHP), Supply Chain Management, software expert choice. projects. Problems that arise at PT RekadayaElektrika, based
on project close out report data from previous projects, there
I. INTRODUCTION are problems that arise in the selection of vendors for the
procurement of transmission tower materials. There are 5
Vendors are important in Supply Chain Management (five) Vendors as a sample with various Purchase Order
which will have an impact on company performance. issuance times and fabrication delays. In terms of the length
Therefore, the selection of vendors is an important part in of the Purchase Order issuance process, it occurs due to the
sustaining the running of a project, with a supply of determination of the criteria in the process of determining
materials that are in accordance with demand, delivery the bidder list which changes, so that it requires a fairly long
schedules and affordable costs will result in maximum clarification time. Regarding the delay in fabrication, it is
project profits. So companies need to conduct vendor more indicated by the performance of vendors who are less
assessments carefully and precisely. qualified. So the need for the selection of vendors that fit the
Based on this, management is required to be able to needs of the company.
select vendors carefully and precisely. In selecting vendors, The next process is to determine the analytical tools to
the first step that must be done by the company is to solve the problem. Some of the criteria that influence this
determine the criteria as a reference for the assessment vendor selection decision are qualitative and quantitative.
process. This is in accordance with the opinion of Pujawan Therefore, a method is needed to cover both. The Analytical
and Mahendrawati (2017) who argue that the criteria used in Hierarchy Process (AHP) method can be used to solve
the selection of suppliers are important things that can problems in selecting the vendor (Mubarok, 2017). This
reflect the supply chain strategy and the characteristics of method is used to solve complex problems by building a
the goods to be supplied. hierarchy of criteria, prospects and outcomes, using different
considerations as weights or priorities (Mubarok, 2017).

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Volume 7, Issue 7, July – 2022 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
II. RESEARCH METHOD

A. Research Design

DELAY OF FABRICATION
TIME FOR PURCHASE ORDER
RELEASE

I I
N N
P PRIMARY DATA SECONDARY DATA P
U U
T T

VENDOR LIST
FORUM GROUP
QUESTIONNAIRE DATA
DISCUSSION
PERFORMANCE VENDOR

ANALYTICAL HYRARCHY PROCESS

(AHP)
P P
R R
O ALTERNATIVE : O
C VENDOR A, VENDOR B, VENDOR C, VENDOR D, C
DAN VENDOR E
E E
S S
S S
CRITERIA :
PRICE, QUALITY, SERVICE, LEAD TIME AND QUANTITY

O O
U U
T IMPLICATIONS TO
T
CONCLUSION SUGGESTION
P MANAGEMENT P
U U
T T
Fig. 1: Research Flowchart

Source: Personal Processed Data, 2022

B. Research Instrument C. Data Processing

Data used in this study include: In this study the method used is the Analytical Hierarchy
 Primary data, in the form of questionnaires and the Process (AHP) method. The calculation of the AHP method
results of forum group discussion for employees who can be done using the help of expert choice software. Here
provide an assessment of suppliers. are some steps that must be taken in the selection of
 Secondary Data, in the form of data derived from vendors.
historical data or vendor performance records and 1. Develop a hierarchy of problems
vendor lists as well as company tender documents. The hierarchical structure is formed based on the
criteria and subcriteria that will be used in the selection
of the transmission tower material fabrication vendor.
The hierarchical structure in this study can be
described as follows.

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Volume 7, Issue 7, July – 2022 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165

Fig. 2: Research Hierarchy Model

Source: Personal Processed Data, 2022

From the Figure 2.2, it can be seen that level one e. The results in step (d) are then normalized to
is the criteria that will be used including: Price, obtain the eigenvector matrix by averaging the
Quality, Service, Lead Time and Quantity. Level two is number of rows with the criteria used. The
a subcriteria where there are eleven subcriteria used in calculation above shows the eigenvector which is
this study. Next for level three are alternative vendors the priority weight of the criteria used against the
to be selected, including: Vendor A, Vendor B,Vendor goal.
C, Vendor Dand Vendor E. The Formula is :
2. Compile a pairwise comparison matrix that has A.w = λ.w
accommodated the relative influence of each element Description :
on each criterion objective at the level above. w : eigenvector
3. Perform calculations weight or priority on each λ : eigenvalue
criterion variable. The following are the steps in A : square matrix
calculating the weights for each criterion. f. Perform the calculation of the consistency ratio as
a. For each criterion, make of pairwise comparisons follows:
b. Performing the average calculation of the i. Multiply the value of the initial
respondents' assessment results using the comparison matrix by the weight
geometric mean. Averaging these values is ii. Multiply the number of rows by the
mandatory because AHP only knows one answer weight
for the comparison matrix. Mathematically the iii. Calculate max by adding up the product
geometric mean theory can be written with the above divided by n.
followingformula. λmaks=(∑x)/n
1
aij = (Z1, Z2, Z3, … , Zn) ⁄𝑛 iv. Calculating the consistency index can be
Description : measured through CI which is
aij : The average value of pairwise formulated:
comparisons, criteria Ai with Aj for n (λmaks – n)
𝐶𝐼 =
respondents (n – 1)
Z1 : The comparison value between Ai and Aj Description :
for respondent I, with i = 1, 2, 3, .., n CI : consistency index
N : Number of respondents λmaks : maximum eigenvalue
c. The results obtained from pairwise comparisons n : matrix orde
are then displayed in the form of a pairwise v. Calculate the consistency ratio with the
comparison matrix or pairwise comparison following formula:
d. Divide each element in a certain column by the 𝐶𝐼
𝐶𝑅 =
value of the number of that column 𝑅𝐼

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Volume 7, Issue 7, July – 2022 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
Description :
CR : consistency ratio 5. Calculating of weight or priorityfor each alternative
RI : random index vendor that has been determined with the same
4. Calculating of weight or priority on each subcriteria stages in point 3 above.
that has been determined with the same stages in 6. Determine the vendor to be selected by adding up
point 3 above. Next, determine the global priority the whole of the multiplication of vendor weights
by multiplying the local priority for each subcriteria with subcriteria weights. The overall value of each
against the priority criteria. vendor is what will determine which the best
vendor,it is the vendor with the highest value.
D. Operational Variables

VARIABLES DIMENSIONS INDICATORS

Price feasibility versus quality (P1) Bidding Document
Price
Ability to provide discounted prices (P2) Percentage of Discount
Communication (S1) Response and Feedback
Service Responsiveness to consumer requests (S2) Response and Feedback
Ability to solve problems (S3) Response and Feedback
Ability to provide routine fabrication progress (S4) Progress Report
Production of materials without defects (Q1) Inspection Report
Quality
Material conformity with approved specifications (Q2) Drawing and Spesification
Speed of supply raw material (L1) Material Schedule
Lead Time
Ability to complete fabrication in accordance with the agreement (L2) Contractual Documents
Quantity Conformity with order quantity (J1) Order Quantity / Packing list
Table 1: Table of Operational Variables

Source: Personal Processed Data, 2022

III. RESULTS AND DISCUSSION

A. Priority of Criteria

Fig. 3: Vendor Selection Based on Priority of Criteria

Source: AHP Processing Result, 2022

Selection of the transmission tower material fabrication priority is the price with a weight of 0.169, the fourth
vendor from all the criteria used result is, the first priority priority is the quantity with a weight of 0.111 and the last or
criteria used is lead time with a weight of 0.390, then the fifth priority is the service with a weight of 0.084.
second priority is quality with a weight of 0.246 , the third

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Volume 7, Issue 7, July – 2022 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
B. Vendor Selection Based on Criteria
Vendor Selection Based on Price Criteria

Fig. 4: Vendor Selection Based on Price Criteria

Source: AHP Processing Result, 2022

In the price criteria, the first priority is Vendor D with of 0.169, the fourth priority is Vendor B with a weight of
a weight of of 0.462, the second priority is Vendor E with a 0.090 and the fifth priority is Vendor A with a weight of
weight of 0.206, the third priority is Vendor C with a weight 0.073.

C. Vendor Selection Based on Service Criteria

Fig. 5: Vendor Selection Based on Service Criteria

Source: AHP Processing Result, 2022

In the service criteria, the first priority is Vendor D weight of 0.192, the fourth priority is Vendor B with a
with a weight of 0.394, the second priority is Vendor E with weight of 0.115 and the fifth priority is Vendor A with a
a weight of 0.247, the third priority is Vendor C with a weight of 0.052.

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Volume 7, Issue 7, July – 2022 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
D. Vendor Selection Based on Quality Criteria

Fig. 6: Vendor Selection Based on Quality Criteria

Source: AHP Processing Result, 2022

In the quality criteria, the first priority is Vendor D weight of 0.223, the fourth priority is Vendor B with a
with a weight of 0.379, the second priority is Vendor C with weight of 0.106 and the fifth priority is Vendor A with a
a weight of 0.230, the third priority is Vendor E with a weight of 0.063.

E. Vendor Selection Based on Lead Time Criteria

Fig. 7: Vendor Selection Based on Lead Time Criteria

Source: AHP Processing Result, 2022

In the lead time criteria, the first priority is Vendor D weight of 0.211, the fourth priority is Vendor B with a
with a weight of 0.396, the second priority is Vendor C with weight of 0.099 and the fifth priority is Vendor A with a
a weight of 0.235, the third priority is Vendor E with a weight of 0.058.

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Volume 7, Issue 7, July – 2022 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
F. Selection of Vendors Based on Quantity Criteria

Figure 3.6 Selection of Vendors Based on QuantityCriteria

Source : AHP Processing Result, 2022

In the quantity criteria, the first priority is Vendor E with a weight of 0.314, the second priority is Vendor D with a weight of
0.285, the third priority is Vendor C with a weight of 0.177, the fourth priority is Vendor B with a weight of 0.131, and the fifth
priority is Vendor A with a weight of 0.093.

G. Consistency

Pairwise Comparison CR Description

Betweencriteria 0,03 Consistent
Between price subcriteria 0,00 Consistent
Between servicesubcriteria 0,01 Consistent
Between qualitysubcriteria 0,00 Consistent
Between lead timesubcriteria 0,00 Consistent
Between alternatives to subcriteriaP1 0,02 Consistent
Between alternatives to subcriteriaP2 0,02 Consistent
Between alternatives to subcriteriaS1 0,02 Consistent
Between alternatives to subcriteriaS2 0,02 Consistent
Between alternatives to subcriteriaS3 0,04 Consistent
Between alternatives to subcriteriaS4 0,03 Consistent
Between alternatives to subcriteriaQ1 0,01 Consistent
Between alternatives to subcriteriaQ2 0,02 Consistent
Between alternatives to subcriteriaL1 0,02 Consistent
Between alternatives to subcriteriaL2 0,02 Consistent
Between alternatives to criteria quantity 0,03 Consistent
Table 3.1 Consistency Ratio of Respondents' Assessment

Source : AHP Processing Result, 2022

From Table 3.1 can be seen that there is no CR value that exceeds 0.1 so that all respondents' assessments can be declared
consistent and can be used.

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Volume 7, Issue 7, July – 2022 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
H. Discussion

Executive Summary AHP Processing

Objectives Selection of the best vendor fabrication tower transmission
Price Subcriteria
1. Ability to provide discounted prices (P2) (0,762)
2. Price feasibility versus quality (P1) (0,238)

ServiceSubcriteria
1. Ability to provide routine fabrication progress (S4)(0,465)
2. Ability to solve problems (S3)(0,275)
3. Communication (S1)(0,161)
Subcriteria
4. Responsiveness to consumer requests (S2)(0,098)
Priority
Quality Subcriteria
1. Material conformity with approved specifications (Q2) (0,751)
2. Production of materials without defects (Q1) (0,249)

Lead Time Subcriteria

1. Ability to complete fabrication in accordance with the agreement (L2) (0,813)
2. Speed of supply raw material (L1) (0,187)
1. Lead Time (0,390)
2. Quality (0,246)
Criteria
3. Price (0,169)
Priority
4. Quantity (0,111)
5. Services (0,084)
1. Vendor D (0,386)
2. Vendor E (0,230)
Alternative
3. Vendor C (0,195)
Priority
4. Vendor B (0,105)
5. Vendor A (0,066)
Table 3.2: Executive Summary AHP Processing

Source: Personal Processed Data, 2022

Based on the results of the AHP processing above, it material on site schedule, thus disrupting field activities. The
can be seen that the most influential criteria in the selection delay of material on site schedule will affect the overall
of transmission tower material fabrication vendors are lead project schedule and the biggest impact is the project cost
time criteria with a weight of 0.390, the next criteria is the (overhead cost) which is still running even though the work
quality criteria on the second priority with a weight of 0.246, on the main material has not yet started. Not to mention if it
the third priorityis the price with a weight of 0.169, the results in a delay in the project completion schedule so that
fourth priority is the quantity with a weight of 0.111 and the PT Rekadaya Elektrika has the potential to get a liquidated
last priority is the service with a weight of 0.084. damages from the owner.

The lead time criteria in this research include 2 (two) Overall result in the selection of transmission material
sub criteria, the speed of supply of raw materials (L1) and fabrication vendors, Vendor D has the first priority with a
the ability to complete the fabrication in accordance with the weight of 0.386, the second priority is occupied by Vendor
agreement (L2). Of the two subcriteria, the subcriteria for E with a weight of 0.230, the third priority is Vendor C with
the ability to complete the fabrication in accordance with the a weight of 0.195, the fourth priority is Vendor B with a
agreement (L2) occupies the first priority with a weight of weight of 0.105 and the last or fifth priority. occupied by
0.813 and the second priority is occupied by the sub criteria Vendor A with a weight of 0.066. Vendor D wins absolutely
for the speed of supply raw materials (L1) with a weight of for the 4 (four) criteria, it is the criteria for price, service,
0.187. quality and lead time. However, for the quantity criteria of
Vendor D is only able to occupy the second priority, where
The most influential of the priority lead time and sub- for the first priority is occupied by Vendor E.
criteria Ability to complete the fabrication in accordance
with the agreement (L2) in the selection of the transmission
tower material fabrication vendor. It can be seen that
PT.RekadayaElektrika prioritizes punctuality in the
fabrication of transmission tower materials. This is not
without reason because the delay in the transmission tower
material fabrication schedule,take effect in a delay the

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Volume 7, Issue 7, July – 2022 International Journal of Innovative Science and Research Technology
ISSN No:-2456-2165
IV. CONCLUSION AND RECOMMENDATION International Journal of Innovative Science And
Research Technology.
A. Conclusion
Based on discussion and results of the research, it can be
concluded several things including the following:
 The most influential criteria in the selection of the
transmission tower material fabrication vendor is lead
time criteria with a weight of 0.390 as the first priority,
then the second priority is quality with a weight of
0.246, the third priority is price with a weight of 0.169,
the fourth priority is the quantity with a weight of
0.111 and the last or fifth priority is service with a
weight of 0.084.
 Based on the criteria and subcriteria used in the
selection of the transmission tower material fabrication
vendor, it can be concluded that Vendor D is the best
vendor in the transmission tower material fabrication
with a weight of 0.386, then for the second priority is
occupied by Vendor E with a weight of 0.230, the third
priority is Vendor C with a weight of 0.195, the fourth
priority is Vendor B with a weight of 0.105 and the last
or fifth priority is occupied by Vendor A with a weight
of 0.066.

B. Recommendation
Based on the results and conclusions of this study, the
authors provide suggestions regarding several things to
the company:
 In the bidder list selection process, it is expected that
the bidder list has been filtered on the financial
capabilities of the bidders and weighted the criteria for
determining the bidder list. So it is hoped that the
selection process will produce the best vendor
according to the company's needs.
 If at another time there are new criteria that are more in
line with the vendor selection process, it is expected to
be able to re-weight each criteria to be used so that the
results of determining the criteria are not more
subjective.

REFERENCES

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