An integrated method using AHP, DEA and GP for evaluating supply sources

The paper relates to a study carried out to develop an integrated framework capable of serving as a decision support system to deal with the problem of outsourcing. Initially, a survey was carried out among the Indian industries which revealed that most of the firms followed specific procedures for outsourcing and followed simple qualitative procedures for source selection. However, there was no evidence that they used any quantitative‐based decision making tools for justifying outsourcing, selection of vendors, etc. The framework developed is capable of taking into account both qualitative and quantitative factors in making outsourcing decisions. The framework uses multi stage procedure involving analytic hierarchy process (AHP), data envelopment analysis (DEA) and preemptive goal programming (PGP). At the outset, the framework uses an AHP‐based methodology to arrive at a decision whether to outsource or not and if outsourced, whom to outsource. This is followed by a DEA‐based procedure, wherein the relative efficiencies of the priority sources, identified by AHP are found. Finally, an AHP‐PGP formulation identifies the best source for the given targets of the outsourcer. The details of the framework and how was it used with specific cases are presented in this paper.