A Dynamic Performance Evaluation Model for SMEs Based on Fuzzy DEMATEL and Fuzzy ANP

A Dynamic Performance Evaluation Model for SMEs Based on Fuzzy DEMATEL and Fuzzy ANP

Merve Cengiz Toklu (Sakarya University, Serdivan / Sakarya, Turkey) and Harun Taşkın (Sakarya University, Serdivan / Sakarya, Turkey)
DOI: 10.4018/IJORIS.2019070102

Abstract

Performance evaluation is a systematic way for companies to analyze their current status and progress to reach their goals. Companies constantly evaluate their processes in research and development, purchasing, production, sales and marketing departments in order to determine new ways to improve their capabilities. In this study, the authors proposed an evaluation model to evaluate the performance of small and medium enterprises (SME) which play a major role in country's economy under given high attention to “Production Process.” In the proposed model, Fuzzy Decision Making Trial and Evaluation Laboratory (F-DEMATEL) and Fuzzy Analytic Network Process (F-ANP) methods were used to calculate the weights of performance criteria. A case study has been conducted in a manufacturing SME for empirical evidence. The results from this study indicate that C5.1 (new processes on the current or new products are developed and applied expeditiously), C3.3 (products are delivered on time) and C5.3 (products are appropriate to environment, health, safety and regulatory policies) are the most important criteria for the company to which the model was applied. “C5 Process Management” and “C3 Production Planning” are declared as two important main criteria relevance to others.
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Introduction

Manufacturing industry has an important role for the economic development of countries due to the empirical correlation between the degree of industrialization and income per capita (Herman, 2011). Therefore, manufacturing companies should evaluate their performance periodically thereby to determine their targets and develop appropriate action plans for new ways to increase their capabilities. Performance measurement has a crucial role to sustain, efficient and effective management for manufacturing companies and is a part of continuous improvement (Susilawati, Tan, Bell, & Sarwar, 2013). As typical, large companies have enough resources to measure their performance progress. However, small companies often either do not have sufficient understanding of or access to the resources, technologies, and management practices needed to meet these challenges (Walden, 2007). Therefore, solutions for SMEs diverse from the solutions for large companies.

In the literature, Multi-Criteria Decision Making (MCDM) techniques provide a wide range of solutions including activities such as selection, ranking and grouping. These techniques have been applied in different problems of the practitioners such as supplier selection, ranking of risk factors, renewable energy sources selection, etc. However, there are few studies that prioritize performance criteria with MCDM techniques for performance evaluation models in the literature. The aim of this study is to propose a dynamic, flexible and practicable performance evaluation model for production processes of SMEs. The model consists of several performance criteria and sub criteria for companies to achieve their objectives that range from operational to strategic levels. Moreover, the proposed model allows companies to adjust the set of criteria regards to their objectives. Therefore, the companies can include additional criteria as well as retrieving the redundant ones. In this way, companies can prioritize performance criteria according to their own priorities and they can utilize the model in order to achieve their strategic objectives.

The contribution of the proposed model into the literature can be summarized as follows;

  • The model is flexible to increase the number of criteria in the criteria set respect to the needs of the companies.

  • The model can be synchronously updated while the company’s policy is revised.

  • The model considers the limited resources of small companies and weaknesses of the other models in literature such as; tendency to bureaucracy, same specific performance criteria setting, requirement of more human resources, time and money.

  • More importantly, the model enables decision makers to adjust the weights of the performance criteria respect to their priorities in order to achieve their goals.

In brief, the power of the model is due to its dynamic nature which let companies to adjust their performance criteria regards to their strategic plan. Additionally, criteria weights which are determined by MCDM techniques can also be modified and updated respect to the companies needs to become more competitive in the market. For instance, once the company aims to improve its manufacturing technology in a certain period of time, investing in new technologies or automation systems may be alternative approach for the company. Therefore, the criteria “the degree of automation” should highly be weighted comparing to other criteria.

This study includes six main sections. The first section focuses on the aim and the contribution of the study. Section 2 discusses the performance measurement models in the literature. The proposed model is presented in Section 3. Section 4 articulates the MCDM techniques used in the study. The application of the proposed model for an SME is represented in Section 5 by a case study. The last section concludes with the results of the case study and discusses the possible extensions of the study.

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