Supplier Evaluation in Book Retail Industry using Analytical Hierarchy Process (AHP)

Since the introduction of E-commerce in book retail in India, it has become important for the vendors and store owners in book retail industry to source their products from the correct suppliers, in order to compete with E-commerce giants. This paper focuses on proposing a structured model for evaluating suppliers in Book retail industry in India, using Analytic Hierarchy Process (AHP). This proposed model is evolved using evidence from an observed study in Tier 2 city of India. The model takes into account the various factors which are considered by the vendors in Book Retail Industry while placing their orders of books with different suppliers. The criteria considered for this model includes, Discount Offered (Cost), credit terms, return policy, delivery time, Genuineness (Quality) of product. However, Discount Offered and Genuineness of product are two important factors out of all. This proposed model can be used by the vendors to further select the best supplier for sourcing their product.


Introduction
India's book retail Industry which proves to be sixth largest in the world and second largest of the English language has an estimated worth of INR 231 billion and expected to grow up to INR 739 billion by 2020. The "compound annual growth rate (CAGR)" of 19.3 percent for the book retail industry in the next 5 years was estimated in Nielsen India Book Report 2015. (The Economic Times, 2015) Till 2013, the book retail industry usually incorporated unorganized sector and the organized retail sector accounted only seven percent out of the total. (Business Standard, 2013) The industry was more driven through small retail shops with a strong supply chain around the country. However, the scenario changed after E-commerce giants like Flipkart, Amazon stepped into the market and the businesses of small vendors was impacted to core. The book retail industry has also faced tough competition after the introduction of E-books and readily available online reading content on various apps like Kindle. The concept of E-books enabled the customer to have virtual reading experience at cheaper rates, in comparison to physical books. But, for the vendors it proved to be a nightmare, as this industry operates with a model of carrying high inventory as per the customer's demand and for which they require more and more space along with incurring high inventory carrying costs. According to the vendors, they have seen a steep decline of approximately 20 percent in their sales over a period of 3 years. The only solution in order to compete with Ecommerce giants and E-book market, which these vendors of retail book shops anticipated was to have better sourcing strategies and offer the books at best prices in order to serve and retain their customers. The book retail industry has also been struggling hard due to the counterfeiting of the books in order to have higher margins for the suppliers, but on the contrary leaving the customers in dark. So, the audacity of having genuine products for their customers comes as an additional challenge for the vendors.
Literature Review The main goal of "supplier selection" is to distinguish amongst the various suppliers with the most elevated potential for addressing a vendor's need "consistently and at an acceptable cost". "Selection" is a broad analogy of suppliers utilizing a typical arrangement of standards and measures. In any case, the degree of detail utilized for looking at capable suppliers may change contingent upon a vendor's needs. The general objective of selection is to single out "high potential suppliers". ( Multiple work in terms of research has been done in the field of supplier selections and has been discussed in literature. (Weber, Current , & Benton, 1991) has reconsidered various researches on supplier selection in JIT environment (Just in Time), he also quoted that supplier selection process recognizes multiple parameters. (Timmerman, 1987), (Sharma & Yadav, 2016), (Agarwal, Sahai, Mishra, Bag, & Singh, 2011) have also quoted that "vendor(supplier) selection problem is a type of multi criteria decision making problem". Usually, "supplier selection problem" exploits more than one parameter as an explanation for the "selection of the preferred supplier". ( Book industry has been hit hard due to cloning or illegal printing of duplicate books in the market in order to have unlawful increase in the profits. As per the reports, the vendors are offered twice discounted rates for selling duplicate books into the market but to maintain the goodwill in the market some vendors prefer to source and sell only genuine products. (News18, 2020) To make sure the genuineness of the product, they prefer the trusted and reliable suppliers only. The trustworthiness, reputation of the supplier, Probability of receiving faulty products, Past experience with suppliers are some of the factors which are available in the previous researches too and will hold good in this industry as well.   Figure 1. The primary objective of this research was to evaluate and select the best supplier for a vendor in book retail industry. The criteria defined for conducting the research were Discount offered, Delivery, Return Policy, Payment Terms, Genuineness (Quality). The alternatives considered in this research were three suppliers, namely, Supplier 1, Supplier 2, Supplier 3. The AHP is used to solve "Multi-Criteria Decision-Making" problems in supplier selection. (2020)   to different criteria while placing their orders with their suppliers. The relative significance between two parameters(criteria) is computed on a numerical scale of 1 to 9, as shown in the table 1, where it was presumed that m th criterion is equally or more significant than n th criterion. m and n are equally significant 3 m is slightly more significant than n 5 m is more significant than n 7 m is strongly more significant than n 9 m is absolutely more significant than n 2, 4, 6, 8

PSYCHOLOGY AND EDUCATION
Intermediate values 1/3, 1/5, 1/7, 1/9 Inverted values (Reciprocals) 3.1. Forming Pairwise Comparison Matrix Among criteria The responses collected were later averaged out and a "Pairwise comparison matrix" between the different criteria in place was formed. The sum for each criterion was calculated, as shown in Table  2. (Saaty, 1980)

Checking Consistency of the Criteria Weight
The next stage is to calculate λ, so as to lead to "Consistency Index (CI) and Consistency Ratio (CR)". The calculation of Criteria Weight is done by determining "eigenvector" and "eigenvalue". "Eigenvector is the proportion of the weight of each parameter while eigenvalue denotes the value of the division between matrix multiplication and eigenvector with the eigenvector value." Mathematically, the expression of "eigenvector (w) and eigenvalue (λ)" can be formulated as follows: (Astanti, Mbolla, & Ai, 2020) (Saaty, 1994) A . w = λ . w The "degree of inconsistency" is permissible if the value of "consistency ratio (CR)" is ≤ 0.10. If the "Consistency Ratio" is ≥ 0.10 then the responses from the survey filled by vendors need to be reevaluated. (Saaty, 1994)   For this case, since λavg = 5.3886 and n is equal to 5, therefore, Consistency Index is equal to 0.10. From Table 4, it is known that Random Consistency Index is equal to 1.12, the respective value of n. Therefore, Consistency Ratio is equal to 0.08674. Hence, the "comparison is consistent". It can be seen that weight criteria for Discounts offered and Genuineness (Quality) is maximum, 38.45% and 37.59% respectively. Hence, these 2 are considered as most important factors while considering any supplier. Whereas, Delivery, Credit Terms, Return Policy has weight criteria of 12.34%, 6.28%, 5.34% respectively.
3.4. Formation of Pairwise matrix among suppliers Now, to further select the best supplier, one of the vendors was asked to compare three alternatives (suppliers) based on the criteria on a numerical scale of 1-9, as shown in Table 1.
On a similar basis five (for each criteria) "pair wise comparison matrix" comparing different suppliers were formed for three suppliers represented as S -[1] or S1, S -[2] or S2, S -[3] or S3 respectively. 1/2 1/6 1 S -[3] 1/3 3 1 3.5. Calculating Priority Weights Now, these matrixes were normalized and respective local priorities for alternatives were calculated similar to method followed in calculating criteria weights and shown in Table 6 Figure 1. Out of these five criteria, Discount Offered and Genuineness plays a major role in selection of supplier, which is shown in Table 3. Finally, vendor can calculate the overall priority and rank their "supplier as the basis of their procurement and sourcing process" to select the suppliers from given set of alternatives, which is shown in Table 7.
Future Scope of Improvement This research was conducted among the book retail vendors in Tier 2 city of India, similar researches can be done in the Tier 1 cities and other Tier 2 cities of India as well, which will provide greater number of book retail vendors to participate in the research. Conduction of similar researches with different geographical locations will help in refinement of the proposed model, as geographical location of supplier can change their decisions. Further, researchers can include sub criteria in their research as well, which will facilitate to have better credence of the proposed model.