Computers & Industrial Engineering 57 (2009) 880895

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Computers & Industrial Engineering

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Horizontal collaboration in semiconductor manufacturing industry supply chain:

An evaluation of collaboration intensity index
Bikram K. Bahinipati *, Arun Kanda, S.G. Deshmukh
Department of Mechanical Engineering, Indian Institute of Technology Delhi, New Delhi 110 016, India

a r t i c l e

i n f o

Article history:
Received 5 June 2008
Received in revised form 14 November 2008
Accepted 4 March 2009
Available online 12 March 2009
Keywords:
Horizontal collaboration
Semiconductor industry supply chain
AHPFLM
Compatibility test

a b s t r a c t
This paper aims to provide a generic quantitative model to comprehensively assess the degree of collaboration with individual horizontal collaboration initiatives with a view to check feasibility for satisfying
the customer requirements. The analytic hierarchy processfuzzy logic model (AHPFLM) approach is
chosen for developing the model, a method that is often used to tackle complex strategic decision making
that calls for subjective judgment based on well-established logical reasoning, rather than on simple feeling and intuition. In the process, the complex and unstructured problem for compatibility test is broken
down into elements, and then a customized hierarchy structure is set up to demonstrate the relationship
between different hierarchy levels and among these elements. Each element may have a different level of
importance for the horizontal collaboration. A fuzzy rule based collaboration intensity index (CII) is
developed to build up the relationships among these evaluation attributes. Synthesizing the generic relative importance and the forecasted degree of collaboration, the proposed approach can determine the
success of the collaboration initiative. An illustrative example of a semiconductor industry supply chain
(SSC) member that intends to partner with a potential and competing candidate enterprise is developed
to demonstrate the applicability of the proposed fuzzy strategic alliance selection framework and to measure the effectiveness of a horizontal collaboration initiative.
2009 Elsevier Ltd. All rights reserved.

1. Introduction
Collaborations in supply network mean long-term relationships
among members through reductions in transaction costs, and increase in resource sharing, learning, and sharing of knowledge
(Cousins, 2002). Horizontal collaboration occurs between partners
at the same level in the manufacturing process, where the benets
of collaborative manufacturing/purchasing include lower prices
due to aggregated manufacturing/purchasing quantities, reduced
supply risk, reduced administration cost due to centralized purchasing activities, and networking benets as group members
communicate and interact with each other (Tella & Virolainen,
2005). However, such an initiative may be subjected to a number
of disadvantages, such as (a) loss of exibility, as products purchased must have a high similarity among group members, (b) loss
of control by individual SC members, (c) high coordination costs, as
group members are competitors, (d) anti-trust problems, and (e)
potential consolidation of the supply market in the long run. Further, the success of such an initiative depends on quality of leadership or coordination in the group, as the ability to negotiate
contracts and coordinate members interests is critical.

* Corresponding author. Tel.: +91 9818183281.

E-mail address: bikrambahinipati@yahoo.co.in (B.K. Bahinipati).
0360-8352/$ - see front matter 2009 Elsevier Ltd. All rights reserved.
doi:10.1016/j.cie.2009.03.003

We dene horizontal collaboration as a business agreement between two or more companies at the same level in the supply
chain (SC) or network in order to allow greater ease of work and
cooperation towards achieving a common objective. This may be
achieved through proper manipulation, utilization and sharing of
appropriate resources, such as machinery, technology and manpower. Such initiative is highly desirable for the semiconductor
industries to ensure global business opportunity (Cruijssen, Cools,
& Dullaert, 2007). In their drive to be more efcient and competitive, the semiconductor industries have focused on the internal
organization and processes. Due to more competitive pressure,
these companies are now looking externally beyond the boundaries of their own organizations and value chains for horizontal
and vertical collaboration with supply chain partners to achieve
the benets in long run.
Horizontal collaboration completely exploits the conceptualization of SCs as supply networks (Mason, Lalwani, & Boughton,
2007). One of the key ways to value creations is the effective
deployment and sharing of resources. As the semiconductor industries are involved in these concepts of multi-relations in a network,
these are often managed not as a cohesive whole, but as self evolving systems. This introduces the ideas behind reducing the number
of contact points so that they can be better managed, and the segmentation of relationships to determine different levels of collaborative actions. However, if they can be conceptualized as a

B.K. Bahinipati et al. / Computers & Industrial Engineering 57 (2009) 880895

complete network and a single point of control, there is considerable scope for holistic gains in the collaborative manufacturing/
purchasing operations.
The emphasis on horizontal collaboration becomes more prominent, as technology infrastructure, collaborative potential, supplier sourcing, and information sharing potential are essential for
partnership evaluation criteria. Two mechanisms/initiatives that
are essential in the integration and coordination of the network
are collaboration and information technology (Lee & Whang,
2000). Collaboration is necessary to share information and horizontally integrate the operations of the network. This is a challenging management task as collaboration is largely a social process
while information sharing is largely a technological process (Shore
& Venkatachalam, 2003). So, the horizontal integration spans over
two very different management domains.
The semiconductor industry sector is characterized by a number of key and unique characteristics from the perspective of product features and the sectors structure, where collaboration
practices developed in response to the economic pressures are
driving the evolution of the chain and encourage greater horizontal
and vertical coordination (Kapur, Peters, & Berman, 2003). With
the objective of supplying a specic product or component, or
locating new enterprises, all enterprises in the semiconductor
manufacturing cooperate as synergetic unit to pursue for success
(Zhang, Xu, & Wang, 2004). To maintain and improve the competitive power of these industries, it is a critical step to select agile,
competent and compatible partners quickly and rationally during
its formation phase. Hence, an adaptable and reasonable mathematical model is necessary for the core enterprise to select the best
partner(s) (Saen, 2007). Based on the model for compatibility test,
the evaluation system can be developed. After the assessment of all
the critical factors by the experts, the system will provide the
information regarding the degree of collaboration feasible with
the partnering organization(s) to facilitate decision making. The
outcome of this work can help semiconductor industry practitioners to explore the degree of collaboration associated with joint
ventures, and to identify strategies to manage collaboration in
the operation of joint ventures. Although the SC members are eager
to identify the compatibility of the partners for horizontal collaboration, nding a quantitative approach to evaluate the comprehensive level of the degree of collaboration (dened as collaboration
intensity Index, CII in this work) to support rational and objective
decision making seems to be more signicant at the formative
stage of the joint venture.

2. Horizontal collaboration
It has been suggested in literature that supply chain collaboration is technology dependent (McCarthy & Golocic, 2002), and has
proved difcult to implement (Sabath & Fontanella, 2002). Typically, the supply network fails to differentiate between whom to
collaborate with, i.e., a segmentation of potential buyers or suppliers (Sabath & Fontanella, 2002), and this occurs, fundamentally,
due to a lack of trust between the business partners (Ireland &
Bruce, 2000). However, the semiconductor industries have recognized the need for collaboration, emphasizing the establishment
of closer and long-term working relationships or partnerships with
competing suppliers/buyers at various levels in the supply chain,
so as to develop more efcient and responsive supply chains.
The technology collaborations through horizontal relationships
are continuing agreements, where partners extend their expertise
through sharing of skills and human resources. The objectives of
such collaborations may include increased knowledge of technological threats and opportunities, and improved capabilities in
product development and efciency in manufacturing (Cruijssen

881

et al., 2007). The aims of technological collaboration include

improvement in the innovation process and the various technological objectives of corporate business and manufacturing strategy,
and public policy. They encompass the following:
1. Improving the development process, such as sharing the development of new knowledge, products, and processes.
2. Enhancing efciency in manufacturing chain and manifesting
itself in subcontracting relationships between large and small
rms.
3. Merging previously discrete technologies and disciplines, such
as between mechanical and electronics engineering in the creation of mechatronics.
4. Learning through information exchange about the potentials of
horizontal collaboration and of particular partners, which may
be facilitated by the use of networks and databases designed
to improve awareness of and access to technological
knowledge.
5. Corporate strategies, such as to improve innovation, and may be
concerned with reducing the cost, risk and uncertainty of technological innovation, merging the resource advantage of one
member with the behavioural advantage of the other, future
scope for mergers or acquisitions, globalization of activities,
and improving manufacturing capability.
6. Public policies aimed at improving the comparative technological performance, and to enhance information ows between
rms.

2.1. Types of horizontal collaboration

Typically, the semiconductor industry supply chain encourages
three forms of horizontal collaboration:
 Infrastructural collaboration may provide collective industrial
research, with considerably more cooperation, where knowledge is jointly created and shared. For example, Microelectronics
and Computer Technology Corporation (MCC) in USA is a collaborative research group of companies sponsoring research of
common interest.
 Contractual form of collaboration may take the shape of a joint
venture, formed by two or more SC partners with shared equity
investments. It could be a partnership linking rms on the basis
of continued commitment to shared objectives without equity
sharing, commonly known as strategic alliance. For example,
IBM and Siemens are collaborating to develop next generation
chips.
 R&D collaborations are the agreements that occur between rms
sharing R&D efforts and rms may agree to exchange technologies. R&D contracts can be considered as a form of horizontal
collaboration, if contract is exible and alters with what is
discovered.
The full range and scope of horizontal collaboration is too broad
to allow full consideration in this paper. Instead a more restrictive
denition is used which includes any activity where two or more
SC partners contribute differential resources and know-how to
agreed complementary objectives. This may include: (1) Collaborative research programmes and consortia, (2) Joint ventures and
strategic alliances, and (3) Shared R&D and manufacturing
contracts.
2.2. Focus of horizontal collaboration
Collaboration is a feature of the high-technology industry. Studies of horizontal collaboration across semiconductor industry show

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that a large numbers of enterprises are devoted to technological issues (Barratt, 2004), and a few of them involve in joint R&D effort.
A large number of agreements are in the area of information and
communication technology. Studies of various semiconductor electronics industries and technologies, such as information technology, telecommunications, integrated circuits, computer systems,
and semiconductors show a high level of collaborative initiatives
among enterprises (Lin & Chen, 2004).
If the focus of horizontal collaboration is pre-competitive, or is
concerned with building capabilities for the development of new
products, then this form of strategic collaboration in core areas appears to make more sense (Kapur et al., 2003). Further, the aims of
joint development of individual products in which a market already
exists are described as tactical. But, if the industry, through one or
more tactical collaborations, manages to develop its capability for
future with new product development, then these can be described
as strategic.
The focuses of horizontal collaboration changes over time, i.e.,
these vary along with the industrial and technological development. The reasons can be suggested for technological collaboration
from within an innovation, corporate, public policy and globalization perspective. New technologies are extremely expensive to
develop. A new semiconductor wafer fabrication plant can cost
$500$700 million. Collaboration can help share these high costs,
although returns from them will also be shared (Caraynnis & Alexander, 2004). Cooperation can reduce the unnecessary duplication
of R&D efforts. Many new technologies may involve the diffusion of
previously discrete areas of knowledge, such as mechatronics and
development of high temperature super conductors. So, horizontal
collaboration may be chosen by the large rm as a means of accessing depth of knowledge. This will enable the scope of potential
products, both in the sense of improved technical capabilities
and market applications. Collaboration provides an effective mechanism for the joint creation and promotion of new technical standards. In summary, horizontal collaboration in semiconductor
industry SC is a strategic tool, which may be used to minimize
the effect of competition (Lau, 2002), either by raising the scale
of resources developed to a project to deter other rms from
attempting to compete, or by trying in a partner with specic skills
so that competitors cannot gain access to them.

3. Motivation and objectives

Joining a global SC for semiconductor industries is a critical
strategy to stay competitive for todays business. While choosing
the best partner, the purchasing manager might be uncertain
whether the selection will satisfy completely the demands of their
organizations (Bevilacqua & Petroni, 2002). The overall objective of
the potential partner evaluation process is to reduce risk and maximize overall value to the organization (Wang and Che, 2007).
Thus, a methodology that can capture both the subjective and
objective evaluation measures is needed. The analytic hierarchy
process (AHP) approach was suggested in the literature for supplier
selection problems (Benyoucef & Canbolat, 2007). The application
of AHP in more than 25 diverse areas to rank, select, evaluate,
and benchmark decision alternatives are demonstrated by Vaidya
(2006).
The strength of the AHP lies in its ability to structure a complex,
and multi-attribute problem hierarchically, and then to investigate
each level of hierarchy separately, combining the results (Liu & Hai,
2005). In the traditional formulation of the AHP, the human judgments are represented with crisp numbers. However, in many
practical cases, the human preference model is uncertain and decision makers might be reluctant or unable to assign exact numerical
values to the comparison judgment. For example, when evaluating

different partners, the decision makers are usually unsure about

their level of preference due to incomplete and uncertain information about potential partners and their performances. Since some
of the evaluation criteria are subjective and qualitative, it is very
difcult for the decision maker to express the strength of his preferences and to provide exact pair-wise comparison judgments
(Tolga, Demircan, & Kahraman, 2005). For this reason, a methodology based on AHP and fuzzy logic can help us to reach an effective
decision. By this, we can deal with uncertainty and vagueness in
the decision process.
There is a very little research done within the framework of horizontal collaboration in SCM literature, i.e., to estimate a collaboration intensity index in the semiconductor industry SC based on the
collaboration attributes. These attributes are selected from different domains, such as industry characteristics, competitive advantages, internal parameters and external parameters, in relation to
collaborative procurement. It may be noted that the importance given to certain attributes may vary depending on the objective and
the process of the supply chain. There may be situations when
decisions regarding the implementation of horizontal collaboration
are to be taken independently. The attributes identied can be
evaluated independently to test the compatibility of the SC members for collaboration. As these attributes are considered to be
independent entities, the relative importance of these attributes
can be determined by using analytic hierarchy process (AHP)
(Saaty, 1990). The collaboration intensity index can be considered
analogous to the alternatives dened in the AHP framework.
The methods mentioned in the contributions to AHP are unable
to adequately represent the uncertainty of human judgment. In
addition, some are too complicated to be operated by programming. Further, dealing with the inconsistency of judgment matrix
is another problem. This method also ignores the effects resulted
from interdependent attributes. Coping with the drawbacks of
the previous researches, this paper aims to meet the following
essential practical requirements for the SC alliance compatibility
test: (1) The decision attributes may include qualitative attributes,
(2) The interdependency among attributes should be considered,
(3) The resources available to obtain the information on the evaluation attributes are limited, and (4) The effectiveness of the collaborative initiative should be measured.
Multi-criteria decision analysis method (Belton & Stewart,
2002; Hwang, 2004) is applied to the scores and weights of multi-level structures of the decision system (Saaty, 1990). Most of
the systems do not seem to be appropriate for modeling the decision problems based on information system. One major issue is
that the multiple objective programming applied to partnership
selections has limitations due to the inclusion of qualitative criteria
that are in fact highly important in this context. The theory of fuzzy
sets has extended traditional mathematical decision theories so
that it can cope well with any vagueness problem, which cannot
adequately be treated by probability distributions (Murphy,
1995). The impact and the relationships among the characteristics
in multi-criteria decision problems can be described only by vague
verbal descriptions. The reasons for increasing popularity of the
application of the fuzzy system in partnership evaluation are (Chan
& Kumar, 2007): (1) Fuzziness must be introduced so as to obtain a
reasonable model to solve this complex problem and (2) There is a
need to formulate human knowledge in a systematic manner and
put it into mathematical model.
Fuzzy sets and fuzzy logic are powerful mathematical tools for
modeling uncertain systems in industry and facilitates commonsense reasoning in decision making in the absence of complete
and precise information. Their role is signicant when applied to
complex phenomena not easily described by traditional mathematical methods, especially when the goal is to nd a good approximate solution. Many real-world applications cannot be described

B.K. Bahinipati et al. / Computers & Industrial Engineering 57 (2009) 880895

and handled by classical set theory (Chen & Pham, 2001). A fuzzy
set is an extension of the crisp set. Crisp sets only allow full membership or non-membership at all, whereas fuzzy sets allow partial
membership. In other words, an element may partially belong to a
fuzzy set. These elements may use values ranging from 0 to 1 for
showing the membership of the objects in a fuzzy set. Complete
non-membership is represented by 0, and complete membership
as 1. Values between 0 and 1 represent intermediate degrees of
membership. So, a fuzzy number is characterized by a given interval of real numbers, each with a grade of membership between 0
and 1 (Nguyen and Walker (2000)).
Uncertainty of the information in the current problem along
with inherent difculties related to human knowledge make the
decision making highly complicated (Fu et al., 2006). The purpose
of crisp measure is to capture the experts knowledge which is not
possible in traditional AHP to reect the human thinking style
(Kahraman, Cebeci, & Ululan, 2003). So, AHP methodology integrated with fuzzy logic can be adopted as an alternative to the conventional methods of weight estimation in AHP.
A semiconductor manufacturing industry can establish a new
paradigm of horizontal collaborative partnership with competing
fellow-buyers or suppliers by carefully applying the concepts of
modularization and standardization to its products (Link & Marxt,
2004), organization and supply chain. In this context, we dene
compatibility as the suitability of potential competing SC member(s) to engage in a collaborative relationship with another member. The partnership assessment process is important and routine,
especially for these similar companies that manufacture products
with short life cycles (Chang, Wang, & Wang, 2006). Our research
focuses on this critical aspect of horizontal collaboration between
competing semiconductor manufacturing industries (suppliers),
i.e., developing a multi-attribute framework for establishing compatibility between partners willing to initiate resources or process
tools sharing for horizontal collaboration. In this paper, we considered a decision method (Prodanovic & Simonovic, 2003) dened as
analytic hierarchy processfuzzy logic model (AHPFLM), which
determines the weighting of subjective judgment for the scientic
evaluation framework of the horizontal collaboration problem
(HCP). To target the specic semiconductor industry of interest, a
customized conguration hierarchy (CCH) is identied with basic
belief acceptability values for all attributes assigned by industry
experts.
As different projects tend to expose the member of semiconductor industry supply chain (SSC) to different degree of collaboration,
and different collaborative initiatives have different levels of impact on the success of shared collaborations, the proposed AHP
FLM approach is one of the most optimal techniques to evaluate
the degree of collaboration and to provide comprehensive information to SC partners to make rational decisions. The proposed model
considers the parameters with different degrees of importance. The
relative importance is very much organization-specic, which depends on the abilities of the organizations to implement horizontal
collaboration. The effective implementation of collaboration depends on the impact of these attributes for the purpose. Some of
these attributes are supported by subjective judgments to ensure
compatibility between industries for collaboration. One approach
to overcome this difculty is to assign uniform linguistic terms
in a fuzzy environment and obtain judgments from semiconductor
industry experts. The judgment regarding these attributes may be
vague and difcult to quantify. Fuzzy logic theory allows the natural description, in linguistic terms, of the compatibility aspect
rather than relying on precise numerical threshold values. Fuzzy
system models are exible enough to accommodate these imprecise and vague data (Ross, 1997). This advantage, dealing with
the complicated systems in a simple way, is the main reason
why fuzzy logic theory is applied in the present context. Its mul-

883

ti-attribute decision-making property applied for a range of linguistic terms has motivated to propose this fuzzy model for
compatibility test (Shore & Venkatachalam, 2003). We also present the procedure of constructing a fuzzy inference system using
fuzzy logic to score the compatibility test.

4. The research methodology

The method consists of developing an analytic hierarchy processfuzzy logic model (AHPFLM) to conduct a compatibility test
for horizontal collaboration in the semiconductor industry supply
chain.
4.1. Identication and selection of focus group
The semiconductor industry was chosen for several reasons: (1)
This industry is of economic signicance to many countries and is
one of the largest manufacturing activities in the world. (2) This
industry has experienced the diffusion of innovation like high performance workplace practices along the supply chain, and offers
potential to simultaneously examine different dimensions of collaboration. (3) These are highly capital-intensive enterprises and
deal with short life cycle products.
As the literature on horizontal collaboration is very limited to
give a sound conceptual foundation, focus group research was
used. This study selected focus groups rather than in-depth interview for two reasons: (1) The specic experiences of participants
in focus groups can be more utilized, i.e., the participants can build
on others opinions and come up with new ideas. (2) The results
generated by focus groups could be more reliable and valid. This
study started with selection of participants, as the objective was
too specic and the participants in the focus groups have something in common. As such, potential participants were chosen from
enterprises in electronics industry, which comprises semiconductor manufacturing, consumer electronics, personal computer, and
telecommunication and information technology. The respondents
possessed an average experience of nearly 10 years in purchasing/supply management functions and were employed from eight
different enterprises operating in semiconductor, electronics and
PC assembly. The respondents held a variety of positions, with purchasing manager being the most common.
The respondents have dealt with new product development in
semiconductor and consumer electronics industry for at least 5
years. The respondents are holding management positions and
their knowledge are assumed to be sufcient to share with each
other. Data collection at the management level has been frequently
used in dealing with short life cycle products and new product
development studies. Further, the respondents have experienced
in developing and introducing re-innovative products in the past
5 years. The respondents were also asked about their work experiences immediately prior to the position they are currently holding.
The majority of the respondents had been in a supply position with
their previous employer. Accordingly, the total number of respondents was 20. All respondents were assured anonymity, and to
avoid some participants dominating the process, the respondents
were not encouraged to interact with each other. This has been
achieved by keeping the interaction with the individual respondents from the authors side only.
The assessment portfolio for each attribute was developed as
follows: The practice of compatibility test for horizontal collaboration refers to the extent to which the supply chain members
shared their private information and resources for supply chain
operations over time. The four major attributes and 10 sub-attributes were identied through the review of previous studies and
by panel of experts. The contribution of each attribute was as-

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sessed on a ve-point Likert scale. All responses were ranked from

1 to 5, 1 representing minimum inuence and 5 representing maximum inuence for compatibility towards horizontal collaboration.
The compatibility test was operationalized as the degree to which
the SC members are involved in joint problem solving and resource
sharing at the planning and operational levels.
4.2. Selection of collaboration attributes
The rst step of AHPFLM approach was to identify the evaluation attributes that need to be considered in the strategic SC partnership compatibility, based on brainstorming, expert opinion, and
literature survey. Based on these attributes, a set of customized
evaluation attributes related to the semiconductor industry were
identied by experts or decision makers. Since variations exist
for assuring the exactness of the information of the decision attributes, there may be a basic acceptability index assigned to every
evaluation attribute by the experts/decision makers. Then the optimal evaluation attributes model can be formulated based on the
basic acceptability. This issue has not been considered in this paper
to simplify the research. However, the evaluation attributes were
selected by the semiconductor industry experts from the perspective of their own industrial domain based on consensus.
At the formation stage, most collaboration attributes associated
with the joint venture are not clear to the SC partners. These attributes, as described by the literature, are multifaceted and strongly
project/component/product-related. Judgment of these attributes
is normally vague and imprecise during formation stage. The SC
members need to make a comprehensive assessment with respect
to collaboration condition pertaining to the proposed joint venture.
The prudent selection of evaluation attributes plays a critical role
in establishing the degree of collaboration between the SC members. Further, as the number of evaluation attributes increases,
the chance of having interdependency also tends to increase. The
evaluation attributes in SSC problem inherit two important practical characteristics: uncertainty and ignorance. Uncertainty exists
when the available information for decision making is incomplete,
imprecise or unreliable, whereas ignorance results from lack of
information while making decisions (Beynon, Curry, & Morgan,
2000). For example, if the decision maker is not completely certain
to obtain exact information about the supply network performance
of the candidate SC, a value is assigned by the decision maker to
represent his condence in the information or value of this evaluation attribute based on his past experience.
The brainstorming session with the semiconductor industry experts and academicians, and review of literature and case studies
in semiconductor industry supply chain covered various aspects
of collaborative relationships pertaining to (1) nance, (2) human
resource management, (3) industrial characteristics, (4) knowledge/technology acquiring and management, (5) marketing, (6)
organizational competitiveness, (7) product development, production and logistic management, and (8) relationship building and
coordination (Hajidimitriou & Georgiou, 2002; Harvey & Lusch,
1995; lp, Huang, Yung, & Wang, 2003; Mikhailov, 2002). Evaluation
attributes also include qualitative indices global reputation and
communication openness (lp et al., 2003). The evaluation attributes also include subjective indices, such as business and cultural
coherence and shareholders favourability, and objective indices,
such as corporate image and geographic coverage (Mikhailov,
2002).
The sample of 20 respondents drawn from the semiconductor
industry business databases were directly involved in collaborative
initiatives in their enterprises. A semistructured interview was
conducted for the compatibility test for horizontal collaboration
and to obtain adequate data for generalization of the ndings.
The conceptualization phase identied the key attributes for col-

laboration practices among similar services/goods providers. To

develop a scale, recent literature was used to dene the domains
of an attribute into a set of sub-attributes. Respondents were asked
about their perceptions in deciding partners for actual collaborative practices from the perspective of procurement. They were
asked questions about their relationships with the SC members.
From this perspective, it is believed that the research has captured
the essence of the overall view of each chain member that reects
key attributes of current collaborative practices.
The attributes identied by the authors with the help of respondents from semiconductor manufacturing industries for the compatibility test during horizontal collaboration initiative are
depicted in Table 1. These attributes have been categorized into
four major groups while evaluating the collaborative intensity
function. The attributes for the compatibility test are categorized
as under:
A. Industry characteristics: This attribute was considered critical, as the foremost activity to initiate partnership (in terms
of collaboration) is to assess the industry structure, nancial
stability and global reputation for compatibility. The
resource sharing and revenue sharing ability of the similar
service providers is considered while initiating a collaborative venture. It must consider the aspects of industry structure (IS), which is dependent on the decision-making ability,
level, scope and time horizon, and the previous partnership
history of the SC members. Further, it must also consider
the aspects of nancial stability (FS), which is dependent
on business performance and capital required or available
with the SC members, and the aspects of global reputation
(GR), which depends on the ecofriendliness and the brand
image of the products of the SC members.
B. Competitive advantage: Another important attribute, which
was considered critical while pursuing the compatibility
test, is the competitive advantage of the competing members in the supply network. It is necessary to assess the
product orientation (PO) of the organization in terms of
quality of products and services as well as the life cycle of
the products. Further, the general competitive advantage

Table 1
Collaboration attributes for compatibility test for horizontal collaboration.
A: Industry characteristics (IC)
A1: Industry structure (IS)
A11: Decision-making ability
A12: Level, scope and time horizon.
A13: Previous partnership history
A2: Financial stability (FS)
A21: Business performance
A22: Capital required/available
A3: Global reputation (GR)
A31: Eco friendliness
A32: Brand image

B: Competitive advantage (CA)

B1: Product orientation (PO)
B11: Quality of products and services
B12: Product life cycles
B2: General competitive edge (GCE)
B21: Market share
B22: Customers orientation
B23: Technology standard/level

C: Internal parameters (IP)

C1: Strategic parameters (SP)
C11: Outsourcing strategies
C12: Attitude of top management
C2: Tactical parameters (TP)
C21: Communication
C22: ICT integration
C23: Speed of decision making
C24: Collaborative planning
C3: Operational parameters (OP)
C31: Productivity
C32: Flexibility
C33: Control
C34: Lead time
C35: Reliability
C36: Capacity utilization
C37: Product size
C38: Inventory turnover
D: External parameters (EP)
D1: Product characteristics (PC)
D11: Demand variability
D12: Price elasticity
D13: Competitive pressure
D2: Industry orientation (IO)
D21: Financial performance
D22: Prot potential
D23: Resource utilization

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(GCE) in the global market may be evaluated in terms of

market share, customer orientation and the existing technology level or standard.
C. Internal parameters: Another important attribute, the semiconductor industry experts feel critical, was the internal
parameters of the partnering enterprises. It is necessary to
assess the strategic parameters (SP), such as out sourcing
strategies, and the attitude of the top management of the
organizations for horizontal collaboration. Tactical parameters (TP), such as communication technologies, ICT integration, speed of decision making and collaborative planning
is essential for the partnering organizations to foster the
strategic partnership. Nevertheless, the operational parameters (OP), such as productivity, exibility, control measures,
lead time, reliability, capacity utilization, product size, and
inventory turnover are also true performance indicators to
be assessed during the selection of strategic partner.
D. External parameters: Another important parameter, which
was considered critical while undertaking the compatibility
test, is the external parameters, such as product characteristics as well as industry orientation. It is necessary to assess
the product characteristics (PC) in terms of demand variability, price elasticity and competitive pressure. Further, the
industry orientation (IO) aspect deals with the nancial performance measure, prot potential as well as resource utilization capability.
It is difcult to consider all the attributes and their possible
impact on the degree of collaboration, as these belong to different
domain. Some of these attributes are supported by subjective
judgments to ensure compatibility between industries for horizontal collaboration. One approach to overcome this difculty is
to assign a set of uniform linguistic terms in a fuzzy environment
and obtain judgments from semiconductor industry experts. This
set is unique for all the attributes identied. The judgments
regarding these attributes may be vague in nature and difcult
to quantify. The proposed model considered these attributes with
different degrees of importance. The relative importance may
vary from organization to organization depending on their capabilities to implement horizontal collaboration. The relative importance can be determined by AHP, but effective implementation of
collaboration depends on the impact of these attributes for the
purpose.
It should also be noted that the AHP requires that a problem be
decomposed into levels, each of which is comprised of elements.
The elements of a given level are mutually independent, but comparable to the elements of the same level. This assumption was
fundamental to the proposed AHPFLM approach. Hence, the
way to categorize the collaboration attributes for compatibility
test and the relationship/nature of these attributes at the same level will determine the effectiveness and validity of the method.
These parameters are strongly correlated. An attribute at a particular level may inuence other factors at another level. During categorization, the collaboration attributes may be strongly
connected. As a result, an attribute at one particular level may
inuence other attributes at another level. Hence, the independency among elements cannot be guaranteed. As a reference, when
setting up the hierarchy structure for the proposed fuzzy AHP
method, the categorization method of various factors ensured the
maximum independency among elements at the same level.
4.3. Design of customized conguration hierarchy for compatibility
test
The interrelationships among various objectives are best expressed by the use of a hierarchical structure. Under this type of

885

hierarchical structure, only the performance criteria in the bottom

level are given by the experts; performance of the other criteria not
in the bottom level can be obtained by the use of aggregation (Lee
& Shib, 2001). To produce a generic hierarchy structure, the collaboration attributes were sorted into a number of groups at the criteria level, with a few sub-parameters under each group, as
shown in Fig. 1.
We claim that the customized conguration hierarchy has
advantages of adaptability and exibility. For adaptability, the
optimal evaluation attribute model was customized and adapted
to meet the special needs of the semiconductor industry supply
chain. For exibility, this paper relaxed the attribute dependency,
which is a common phenomenon in the literature of multi-attribute decision-making problems. The major advantages of hierarchical performance structure are:
1. Expressing the interrelationship among all the criteria in a brief
and clear form.
2. Clustering criteria into a category according to their characteristics and to allocate them in a suitable position such that it is
possible to identify and review the criteria performance within
and between each category.
3. Obtaining the performance level by level; the evaluation results
can give the actual achievement for each criterion, which can be
used to improve the system.

4.4. Determination of weight vector by AHP

Analytic hierarchy process has been used for scaling the weights
of the elements in each level of the hierarchy with respect to the
attributes of the next higher level. This was done by means of
pair-wise comparisons of the attributes to indicate the strength
with which one attribute dominates another for the criterion under
which they were compared. The reason lies in that the performance of a system is a result of the interaction of various attributes, but every attribute plays its own role and makes
contribution to the system as a whole. The core of the AHP is the
conformation of judgment matrix by semantic scale and their
according reciprocals (Maggie & Rao, 2001; Wang, Huang, &
Dismukes, 2004). Such judgment often ignores the vagueness of
respondents mind.
In many practical cases the pair-wise judgments of decision
makers will contain some degree of uncertainty (Saaty, 1990).
The decision maker may be certain about the ranking order of
the comparison results but uncertain about the precise numerical
values of his judgments. The classical AHP attempts to overcome
this problem by introducing a discrete linguistic set of comparison
judgment. The pair-wise comparison was established using a ninepoint scale that converts the human preferences between various
attributes, as shown in Table 2. The comparison was based on expert judgment. All the 20 respondents were invited; each experts
opinion was obtained and analyzed individually to determine the
weight vector pertaining to one group of factors.
AHP was used to determine the comparative weights of the various criteria. It decomposed a complicated system into a well-organized structure, based on the hierarchy. By the use of pair-wise
comparison between various criteria, a more credible and more
objective criterion weighting has been obtained. In order to avoid
articial errors and the contradiction of different factors, a consistency check was conducted until a satisfactory condition is obtained. A consistency check is a unique advantage of AHP
compared to other methods. After all 20 experts opinions were
analyzed and the weight vector based on each experts judgment
was worked out, the weight vector was determined by averaging
the sum of individual weight vectors. It should be noted that the

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B.K. Bahinipati et al. / Computers & Industrial Engineering 57 (2009) 880895

Evaluation of Potential Partners for

Horizontal Collaboration

Level 1:
Decision
Prob le m

Level 2:
Attribute

INDUSTRY
CHARACTERSTICS
(A)

PRODUCT
ORIENTATION
(B1)

Level 3:
Subattributes

INDUSTRY
STRUCTURE
(A1)

COMPETITIVE
ADVANTAGE
(B)

FINANCIAL
STABILITY
(A2)

Level 4:
Decision
Parameter

GENERAL
COMPETITIVE
EDGE
(B2)

GLOBAL
REPUTATION
(A3)

EXTERNAL
PARAMETERS
(D)

INTERNAL
PARAMETERS
(C)

OPERATIONAL
PARAMETERS
(C1)

TACTICAL
PARAMETERS
(C2)

STRATEGIC
PARAMETERS
(C3)

PRODUCT
CHARACTERISTICS
(D1)

INDUSTRY
ORIENTATION
(D2)

Collaboration Intensity Index (CII)

Fig. 1. Customized conguration hierarchy for compatibility test.

Table 2
Linguistic measures of importance (adapted from Saaty (1990)).
Scale

Denition

Explanation

Equal importance

Weak importance

Strong importance

Very strong importance

Absolute importance

2, 4, 6, 8

Intermediate values

Two factors are contributing equally to the

objective
There is evidence favouring one factor over
another but it is not conclusive
Good evidence and logical criteria exist to
show one is more important
Conclusive evidence as to the importance of
one factor over another
Evidence in favour of one factor over another
is of the highest possible
When compromise is needed

invited experts possessed different levels of knowledge of the factors associated with the compatibility test for horizontal collaboration. Hence, their opinions were considered to have different
levels of impact on the pair-wise comparison. A weight coefcient
reecting the expert difference can be incorporated while averaging the weights assigned by individual experts for various factors.
However, this issue was not considered in this paper to simplify
the research.
4.5. Defuzzication
Defuzzication is the process by which a solution set is converted into a single crisp value. The fuzzy logic solution set is in
the form of a function, relating the value of the result to the degree
of membership. The entire range of possible solutions may be contained in the fuzzy solution set. So, defuzzication is a process to
extract and easily comprehendible answer from the set. Since fuzzy sets or fuzzy numbers represent many possible real numbers

(with different membership degrees), they do not always yield a

totally ordered set. This makes comparison a non-trivial affair. Various approaches have been proposed in the literature. Because of
its simplicity, intuitive appeal, and effectiveness, Chen and
Hwangs crisp score method (Chen & Hwang, 1992) was adopted
to defuzzify the fuzzy sets.
Fuzzy set theory has provided a powerful approach to represent
and manipulate such non-quantitative descriptions through different operations of fuzzy sets and fuzzy numbers. Linguistic expression were captured by appropriate fuzzy numbers and nally
dened by crisp (real) numbers. In fuzzy sets, the linguistic expressions were transformed to triangular fuzzy numbers (TFN). TFN
consists of three parameters, wherein each parameter represents
a quantity of a linguistic value associated with a degree of membership in the interval [0, 1]. Further, these three parameters denote the smallest possible quantity, the most promising quantity,
and the largest possible quantity that describe the linguistic value.
One of the advantages for applying fuzzy rule based approach to
connect evaluation attributes was to relax the following assumptions in the weight-based approach (Mikhailov, 2002): (1) the evaluation attributes were independent and (2) the trade-off rate
between two attributes was a constant. So, the fuzzy rule based
collaboration intensity function developed in this paper has improved the handling of the interdependency among evaluation
attributes.
The degree or intensity of the collaboration is difcult to measure due to the vagueness of the information regarding the parameters identied for the compatibility test. Fuzzy based approaches
are well suited in the cases where the information is not very precise to establish the relationship between collaboration attributes
and the degree of collaboration. In order to deal with the fuzziness
associated with the use of linguistic terms for assessment and convert these fuzzy assessments by the managers into a meaningful

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portfolio, fuzzy sets were used. The fuzzy data were then transformed into crisp values using fuzzy logic methodology. It is a
cumbersome task to assign linguistic terms to all the attributes
of the compatibility test, because these attributes further depend
on various sub-attributes; for example: the global reputation attribute depends on the eco friendliness and brand images of the collaborating SC members. The values for these sub-parameters
depend on the business of the industry, types of products they produce, availability of resources, investments in ICT, life cycle of the
products, willingness of SC members for collaboration and adaptability of new technologies in quick time.
The evaluation of collaboration attributes of the compatibility
test for collaboration was done by dening a set of linguistic
terms, and this set was unique for all the attributes. The uniform
set of linguistic terms for all these attributes provided a standard
scale to each parameter, which otherwise was difcult as these
attributes belong to different domains. The unique set established
the crisp number as was obtained from the same set of linguistic
terms for all these parameters. The linguistic terms used were: extremely low (EL), very low (VL), low (L), marginally low (ML), average (AV), marginally high (MH), high (H), very high (VH), and
extremely high (EH). The 10 attributes as identied earlier in four
broad categories (Table 1) were perceived differently for the evaluation of compatibility for the competing SC members. The linguistic terms were based on the performance improvement achieved
by considering these attributes. So, a study of the semiconductor
industry helped in assigning linguistic terms based on the application as well as for testing compatibility by assessing these attributes. A thorough questionnaire covering the detailed aspects of
these attributes helped in incorporating the degree of agreement
of semiconductor industry experts.
The linguistic values were created to model the crisp threshold
ranges. The linguistic assessment and judgments were vague and it
was not reasonable to represent it in terms of precise numbers. The
respondents were more condent in using interval judgments than
xed value judgments. So, triangular fuzzy numbers were used to
decide the priority of one decision variable over other in AHP combined with fuzzy logic (Chan & Kumar, 2007). It was convenient to
work with triangular fuzzy number because of their computational
simplicity, and they were useful in promoting representation and
information processing in a fuzzy environment. Based on a review
of the data and discussions with the experts, for the fuzzied scoring system of compatibility test, we have determined the membership functions with characteristics of smoothness, symmetry,
and zero on both extremes with a quick rise in the middle. A triangular membership function satised our requirements.
In crisp sets, which are collection of objects with the same properties, the objects either belong to the set or not. In practice, the
characteristics value for an object belonging to the set is coded
as 1 and if it is outside the set then the coding is 0. The key idea
in fuzzy logic is the allowance of partial belongings of any object
to different subsets of the universal set instead of belonging to a
single set completely. It is obvious that there are interferences between the numbers because of fuzzy linguistic word approximations. Likewise in fuzzy logic, values of variables are expressed
by linguistic terms, the relationship is dened in terms of IF-THEN
rules, and the outputs are also fuzzy subsets which can be made
crisp using defuzzication techniques. First, the crisp values of
system variables were fuzzied to express them in linguistic terms.
Fuzzication is a method for determining the degree of membership that a value has to a particular fuzzy set. This was determined
by evaluating the membership function of the fuzzy set for the value (Lee & Shib, 2001). The fuzzy scores provided more sensitive
information regarding the status of physical assessment of collaboration attributes. This soft scoring might act as a mechanism to
start a treatment intervention that will slow the loss of functional-

ity. A fuzzily formatted attribute value was represented through a

linguistic term and an associated membership function (essentially
by dening a fuzzy set).
4.6. Evaluation of collaboration intensity index
The attributes affect the extent of collaboration in semiconductor industry between competing SC members. But these attributes
should not carry equal weightage. The extent of implementation of
these attributes might be different for different pair of competing
suppliers/members. The relative importance of these parameters
was determined by assigning weights with the help of AHP (Liu
& Hai, 2005). Even though the use of AHP has been used in various
types of decision-making processes as depicted in literature, it
seemed to be rst attempt to apply AHP with fuzzy logic in horizontal collaboration problem.
The weights were represented as WIC, WCA, WIP, and WEP for
attributes, such as industry characteristics, competitive advantage,
internal parameters, and external parameters, respectively. A pairwise comparison was conducted to assign relative weights to these
parameters. These weights determined a score for the extent of
collaboration between the competing SC members. These attributes were assessed from various perspectives, as has been given
in Table 1. Assessment of all these attributes was conducted by
using linguistic terms. Each linguistic term has a range of assessment score, which was described by a triangular membership function (Fig. 2) rather than a single estimate. The managers of the
semiconductor and consumer electronics industries were comfortable in describing these attributes in terms of a range rather than a
single estimate (value). For example, the term high (the range is
marginally high to extremely high), was be dened by a triangular membership function with an assessment score of 0.7, assigned
a membership grade of 1, and assessment score 0.6 and 0.8, assigned a membership grade 0. Scores in the range 0.60.7 and
0.70.8 have partial membership grades in the range of 01.
The assessment using a linguistic term or a range of terms was
converted into crisp form, i.e., the process of defuzzication is performed. A crisp number C was estimated by using a trapezoidal
membership fuzzy Number F = (a, b, c, d) as depicted in Fig. 3 (Chen
& Hwang, 1992):



1
d
b

2 1cd ba1

It was observed from Fig. 4 that [b, c] interval represents a membership degree of 1 (one) for the fuzzy number (F). The values less than
a and beyond d represent membership degree of 0 (zero) for F. The
membership degrees vary linearly in the range [a, b] and [c, d].
When a range of terms was used, a trapezoidal equivalent of the triangular membership functions representing the range of linguistic
terms was derived before the use of the conversion formula.

EL VL

ML

AV MH

VH

EH

Degree of
Membership

0.2

0.4

0.6

0.8

1.0

Assessment Score

Fig. 2. Triangular membership for the parameters of the compatibility test.

B.K. Bahinipati et al. / Computers & Industrial Engineering 57 (2009) 880895

Further, the degree of implementation of the collaboration activities may be different for competing organizations. So, a case study
was considered as one of the valid approach to understand the
implications of the fuzzy logic based approach for selecting the
strategic partner for horizontal collaboration. This may form theoretical generalizations with the help of structured interview and
analytical procedure to determine the extent of collaborations
among the competing members of the supply network in the semiconductor industries. However, in the present context, the semistructured interview with the respondents in the focus group
comprised of various aspects of the four critical attributes
identied.
The objective of this section is to demonstrate, step by step, the
applicability of the proposed framework for evaluating the potential candidates of SC partnership for viability of shared collaborative relationships. This study was undertaken on a global
component supplier of a personal computer (PC) manufacturer.
The main reason for selecting this component supplier were: (1)
The supplier deals with high-value component (A-class) nature
and also most expensive supply item within this category and (2)
It has the longest lead time in all supply items for PC manufacturing. The company owns several factories globally with the core
industrial capability in personal computer (PC) manufacturing
and assembly. The company plans to join one strategic SC alliance
(SC#1) in order to expand the companys global market. The characteristics of the SC#1 are as follows:

Degree of
Membership

888

Fig. 3. Trapezoidal membership function.

VH

Degree of
Membership

Fig. 4. Conversion of linguistic term to a crisp number.

The crisp score was computed for all the attributes, i.e., CIC, CCA,
CIP, and CEP. The overall score of the degree of collaboration was
computed as follows:

CII W IC :C IC C IS C FS C GR W CA :C CA C PO C GCE
W IP :C IP C SP C TP C OP W EP :C EP C PC C IO

where CII was the nal score for the degree of collaboration between 0 and 1 for the competing enterprises. The consideration of
relative weights (Wx) and fuzzy logic for crisp score (Cx) for all the
attributes and sub-attributes (x) resulted in a framework for compatibility test. The framework for proposed methodology is depicted in Fig. 5.
The collaboration intensity index (CII) was split into linguistic
terms, such as low, medium and high to represent no collaboration (NC), partial collaboration (PC) and complete collaboration (CC) depending on the availability of data on the above
mentioned linguistic terms and the relative weights. A suitable
fuzzy rule was used to categorize the extent of collaboration under
these three linguistic terms. This will help in evaluating the extent
of horizontal collaboration in the semiconductor industries. Further, the comparison between various semiconductor industries
(similar service providers) can be done for selecting the most ideal
strategic partner for horizontal collaboration, which has the largest
score. The proposed model has focused on the four critical attributes identied for compatibility among SC members during horizontal collaboration. In general, the model can be used to any
number of attributes for the compatibility test.
5. Application of the proposed methodology
The complex SC activities and the diverse competing organizations with varying capabilities of technology, knowledge, information and resources lead to difculty in accomplishing the objective.

The SC#1 contains a number of strongly afliated companies.

The manufacturing companies are located globally. These
industries are responsible for producing PC components including computer mother boards, memories, power suppliers and
monitors. SC#1 purchases key computer components including
CPUs, chipsets, and hard disks from factories located in Asiapacic. To enhance competitiveness and customer responsiveness, the assembly factories are located near the consumer
markets.
Based on the experience and preliminary research with respect
to the factors of the compatibility test for horizontal collaboration,
the current study has focused on 10 attributes as identied earlier,
and categorized them into four groups: industry structure, competitive advantage, internal parameters, and external parameters.
These test attributes groups are in parallel rather than one governing another. The sub-attributes under these categories are less
likely to be inuenced by other factors at the same level. Hence,
this kind of classication method can minimize the correlations
between the test attributes at the same level, which satises the
fundamental prerequisite of the proposed AHP-fuzzy logic approach. The managers responded with their agreements regarding
the importance of the various aspects of the collaborative ventures
among competing members of the supply network. To overcome
the diversity of the views of the different members of semiconductor industry supply network, the average of the weights given by
the managers was considered for analysis. These weights were
used to evaluate the importance of these critical attributes for
the horizontal collaboration and the linguistic terms to evaluate
the extent of collaboration based on these attributes.
The focus group of 20 experts with robust knowledge and experience of the semiconductor industry supply chain were consulted
to carry out the pair-wise comparison of the importance of test
attributes at Level 3 and attribute groups at Level 2. The feedback
was collected and analyzed to obtain the weight vector of each experts judgment matrix. The maximum eigen value, consistency index (CI) and consistency ratio (CR) pertaining to each experts
judgment matrix were calculated as well. It was evident that all
the values of CR were less than 0.1. Therefore, it can be concluded

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B.K. Bahinipati et al. / Computers & Industrial Engineering 57 (2009) 880895

START

Horizontal Collaboration Problem

Generate Evaluation Attributes (Brainstorming and expert opinion)

Industry Characteristics (IC)

1. Industry Structure (IS)
2. Financial Stability (FS)
3. Global Reputation (GR)

Competitive Advantages (CA)

1. Product Orientation (PO)
2. General Competitive
Edge (GCE)

Internal Parameters (IP)

1. Operational Parameters (OP)
2. Tactical Parameters (TP)
3. Strategic Parameters (SP)

External Parameters (EP)

1. Product Characteristics (PC)
2. Industry Orientation (IO)

Developing Customized Configuration Hierarchy

Define evaluation rule

AHP-FLM MODULE
Assign weights to the importance of the attributes (by
experts)

Assign weights to the attributes depending on the impact

on horizontal collaboration (by experts)

Conversion of weights into importance factors

Conversion of weights into linguistic factors

AHP

Fuzzy Logic

Establish and evaluate the pair wise comparison matrices

to determine the relative priority weights of the attributes
and sub-attributes

No

Collect data for collaboration attributes

Defuzzify data for the attributes
Define membership function
Estimate membership value of all linguistic
terms for the attributes
Estimate Crisp numbers

CONSISTENCY TEST
Evaluate if the comparison
matrix conforms with the
consistency ratio

Yes

Relative weights of the collaboration

attributes (Make it the reference for
evaluation)

Crisp Scores of all the collaboration

attributes and sub-attributes

Intensity of Collaboration
Aggregate the weightings and fuzzy ratings of the
attributes to obtain the defuzzified collaboration
intensity index (CII)

Linguistic Terms for CII

Fuzzify CII

NC

PC

CC

STOP
Fig. 5. Flow chart depicting the overall logic of the proposed (AHPFLM) model.

that a reasonable level of consistency has been achieved by using

expert judgment. Then the average weight vectors of test attributes at Level 3 and attribute groups at Level 2 were determined.
Further, based on a thorough investigation of semiconductor

industry supply chain and the proposed project of horizontal collaboration (based on compatibility test), the above 20 experts
were consulted to evaluate the performance or the degree of compatibility among the chosen competitor for viability of this project.

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B.K. Bahinipati et al. / Computers & Industrial Engineering 57 (2009) 880895

The appraisal set of performance included nine grades, such as extremely low, very low, low, marginally low, average, marginally
high, high, very high and extremely high.
5.1. Conversion of degree of agreement into relative importance factors
The managers of the semiconductor industries were asked to
give importance to the attributes in the light of horizontal collaboration among similar service providers. The responses were asked
on the scale ranging from 1 to 5. The weights given by the experts
lie in the range 3.25.0 for all the four critical attributes and subattributes. These values could not be used directly for nding the
relative weights of the mechanisms. These were converted into
the relative importance factors, which were used to weigh each
attribute. The degrees were transformed into AHP subjective scale
for pair-wise comparisons. The difference in weights of any two
attributes helped to know the importance of one attribute over another for horizontal collaboration among competing SC members.
The maximum difference between the degrees (or weights) assigned to all the critical attributes and sub-attributes were 1.8,
the minimum difference being 0.2. The difference between the
maximum and minimum values was divided into nine intervals
(i.e., from 0.2 to 1.8) with an interval difference of 0.2. The minimum difference of 0.2 has been assigned a relative importance of
1 and the maximum difference of 1.8 has been assigned a relative
importance of 9, as per the subjective scale of AHP. Similarly, for all
the values of difference between the degrees of agreement were
assigned the relative importance as shown in Table 3.
The relative importance of the attributes was not unique, as it
was dependent on the nature of business of the similar service provides in the semiconductor industry supply network. The difference between the minimum and the maximum weights were
divided into nine equal intervals. This transformation subjective
scale of AHP into weights helped in the pair-wise comparison of
critical attributes. These weights and hence the difference between
minimum and maximum weights was different for different members in the semiconductor industry supply network.
5.2. Conversion of degree of agreement into linguistic term
The importance of horizontal collaboration can be realized only
when there is some improvement in the performance of the semiconductor industries by utilizing the critical attributes. As the
questions regarding the importance of these parameters and its
impact on horizontal collaboration were asked to the experts using
uniform Likert scale, the impact on horizontal collaboration was
captured by taking the average of the weights for a particular attribute. The degrees of agreement in the form of average weights
were mapped to assign linguistic terms as shown in Table 4. The
importance given by the semiconductor industry experts to different attributes and hence the linguistic terms assigned to these
attributes in the light of horizontal collaboration are given below:

Table 4
Transition the degree of agreement into linguistic terms.
Degree of agreement

Linguistic representation

0.01.0
1.01.5
1.52.0
2.02.5
2.53.0
3.03.5
3.54.0
4.04.5
4.55.0

Extremely low
Very low
Low
Marginally low
Average
Marginally high
High
Very high
Extremely high

The managers were asked to rate the degree of agreement (in a

scale of 15 regarding industry characteristics, competitive
advantage, internal parameters, and external parameters.
The average weight of various attributes as has been evaluated
by the selected experts is depicted in the following Table 5. After
knowing the importance, the degrees of agreement regarding the
compatibility for horizontal collaboration by using these parameters were evaluated by the respondents, which are also depicted
in Table 5. The average weight of the assessment scores by the
managers was estimated and was converted into linguistic terms.
5.3. Estimation of collaboration intensity index
The transformation of degrees of agreement into relative importance and linguistic terms are depicted in Table 5. Pair-wise comparisons were made to estimate the relative weights of all the four
critical attributes and all the sub-attributes of the compatibility
test for horizontal collaboration, an illustration of which is

Table 5
Estimation of average importance of attributes and its impact on horizontal
collaboration.
Collaboration
attributes

Average importance of
the attributes

Impact on horizontal
collaboration

Linguistic
term

Critical attributes (Level 2) and sub-attributes (Level 3)

IC
4.50
4.45
CA
4.10
3.90
IP
4.90
4.85
EP
3.50
4.25

VH
H
EH
VH

IS
FS
GR

4.50
4.90
3.30

4.10
4.75
3.60

VH
EH
H

PO
GCE

3.50
4.70

4.65
4.45

EH
VH

SP
TP
OP

4.70
4.50
3.70

4.70
4.25
3.70

EH
VH
H

PC
IO

3.40
4.80

3.85
4.55

H
EH

Table 3
Conversion of differences in the degree of agreement into AHP weights.
Difference in the degree of agreement

AHP Subjective scale

0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8

The
The
The
The
The
The
The
The
The

parameter
parameter
parameter
parameter
parameter
parameter
parameter
parameter
parameter

is equally important to other parameter

importance is a compromise between 1 and 3 to other
is weakly more important to other parameter
importance is a compromise between 3 and 5 to other
is strongly more important to other parameter
importance is a compromise between 5 and 7 to other
is very strongly more important to other parameter
importance is a compromise between 7 and 9 to other
is absolutely more important to other parameter

Weight
parameter
parameter
parameter
parameter

1
2
3
4
5
6
7
8
9

B.K. Bahinipati et al. / Computers & Industrial Engineering 57 (2009) 880895

Table 6a
Pair-wise comparison of critical attributes.
Critical
attributes

IC

CA

IP

EP

Alternative
priority weights

Consistency check

IC
CA
IP
EP

1
1/3
3
1/5

3
1
5
1/3

1/3
1/5
1
1/7

5
3
7
1

0.2650
0.1234
0.5606
0.0518

kmax = 4.12
CI = 0.04
CR = 0.0444

depicted in Tables 6a, 6b, 6c, 6d, 6e. These matrices have focused
on the estimation of priority weights of the critical attributes and
sub-attributes, and evaluation of consistency ratios (CR) of the
judgment matrices for the case study. These estimates also helped
in determining the sensitivity of the potential partners with respect to the critical attributes.
Consistency means that the decision maker is exhibiting a
coherent judgment in specifying the pair-wise comparison of the
various attributes. The CR helps to determine the level of consistency in the pair-wise comparison table. As CR < 0.1, the level of
consistency in the judgment of the managers was acceptable
(Saaty, 1990). Otherwise, the pair-wise scores have to be revised.
The sensitivity of potential partner with respect to the attributes and sub-attributes are depicted in Fig. 6a and b. The nal priority weights of different attributes showed that the internal
parameters (IP) of the partnering organization carried the highest
priority for horizontal collaboration, and it was followed by indus-

Table 6b
Pair-wise comparison of sub-attributes of industry characteristics.
Sub-attributes

IS

FS

GR

Alternative
priority weights

Consistency check

IS
FS
GR

1
3
1/6

1/3
1
1/8

6
8
1

0.2895
0.6464
0.0641

kmax = 3.0742
CI = 0.0371
CR = 0.0639

Table 6c
Pair-wise comparison of sub-attributes of competitive advantage.
Sub-attributes

PO

GCE

Alternative priority weights

Consistency check

PO
GCE

1
6

1/6
1

0.1428
0.8571

kmax = 2
CI = 0
CR = 0

Table 6d
Pair-wise comparison of sub-attributes of internal parameters.
Sub-attributes

SP

TP

OP

Alternative
priority weights

Consistency check

SP
TP
OP

1
1/4
1/5

4
1
1/3

5
3
1

0.6652
0.2311
0.1038

kmax = 3.0866
CI = 0.0433
CR = 0.07468

Table 6e
Pair-wise comparison of sub-attributes of external parameters.
Sub-attributes

PC

IO

Alternative priority weights

Consistency check

PC
IO

1
7

1/7
1

0.1250
0.8750

kmax = 2
CI = 0
CR = 0

891

try characteristics (IC), competitive advantage (CA), and external

parameters (EP). Under the internal parameters of the partnering
organization, the impact of strategic parameters (SP) is generally
decided by the outsourcing strategies and the attitude of the top
management. These factors impact most to the internal parameters
compared to tactical and operational parameters (TP and OP),
therefore it has got a higher priority weight. Financial stability
(FS) of the partnering organization depends on the business performance as well as the capital required or available for the collaborative initiative. As nancial stability (FS) has a strong impact on
the industry characteristics (IC), it has been identied as the most
important element under the attribute of industry characteristics
(IC), and carried higher priority weights in this particular study.
Apart from this, general competitive edge (GCE) under the competitive advantage (CA) attribute (which is dependent on market
share, customer orientation and technology standard/level), and
industry orientation (IO) under external parameters (EP) attribute
(which is dependent on nancial performance, prot potential and
resource utilization) carried high priority weight, and it seemed to
be practically very relevant in the current political, economic, and
business environment.
Further, the range of linguistic terms was assigned and the crisp
score for all ranges were estimated according to the Expression (1),
which has been depicted in Table 7.
The values of relative weights and crisp scores of the attributes
as per their linguistic term were substituted in Expression (2) to
estimate the intensity of collaboration, which is depicted in Table
8. For an ideal case of horizontal collaboration, all the attributes
contribute equally to the performance of semiconductor industry
supply chain (SSC). The extent of collaboration for an ideal case
can be estimated by considering all the attributes to be equally
important with relative weights of 0.25 for each attribute and
the linguistic term to be assigned in an ideal case is being 0.864.
So, the extent of collaboration in an ideal case was estimated to
be 4  0.25  0.864 = 0.864. We dened relative CII as the overall
score expressed as the percentage of the most ideal score. For the
industry considered in our case study, the overall score of 0.8207
has a relative CII of (0.8207/0.864) i.e., 0.9499 (approximately
95%), of the ideal case of collaboration.
The collaboration intensity index (CII) of 0.8207 is in the crisp
form, which was based on a scale of 01. The partner evaluation
rule selects a partner whose crisp scores are high (relates to complete collaboration, CC). The selection criteria require comparison
with the linguistic term high. To perform this comparison, the
crisp score was used to compute the membership degree (scale 0
to 1) from fuzzy membership functions for CII for values high.
Fig. 7 shows the membership function for fuzzy classication of
CII criteria into low, medium and high, which relates to no
collaboration (NC), partial collaboration (PC), and complete collaboration (CC), respectively. The membership function for
CII = high has a value 0 starting at CII score of 0.682 and reaches
a maximum value of 1 (one) when CII score is 0.864. For CII score,
the membership degree for the fuzzy function CII = high may be
computed. For any CII score below 0.682, the membership

 degree
, where
may be computed by using membership equation x0:682
0:182
x represents the crisp CII score.
For the
0:82070:682
 case study on hand, the membership degree
0:762. The semiconductor industries were inclined
0:182
for a collaborative partnership with the similar service providers
with a membership degree of more than or equal to 0.5. For a
membership degree of 0.5, the crisp score can be computed as
[0.5  0.182 + 0.682] = 0.773. The relative CII in this case was
estimated as [0.773/0.864] = 0.8946. So, the collaborative relationship with a relative CII value of 89.46% or more have a high
probability of success, i.e., a successful complete collaboration
(CC) relationship may be ensured.

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B.K. Bahinipati et al. / Computers & Industrial Engineering 57 (2009) 880895

0.6

1
0.9
0.8

Priority Weights

Priority Weights

0.5
0.4
0.3
0.2

0.7
0.6
0.5
0.4
0.3
0.2

0.1

0.1
0

0
IC

CA

IP

EP

IS

FS

GR PO GCE SP

TP

OP

PC

IO

Sub-attributes

Attributes

Fig. 6. (a) Sensitivity of the potential partner with respect to major attributes and (b) sensitivity of the potential partner with respect to sub-attributes.

Table 7
Crisp scores of the linguistic terms.
Linguistic terms

Crisp score

Extremely low
Very low
Low
Marginally low
Average
Marginally high
High
Very high
Extremely high

0.136
0.227
0.318
0.409
0.500
0.591
0.682
0.773
0.864

Table 8
Estimation of intensity or degree of horizontal collaboration.
Factors

Weights
by AHP

Degree of
agreement for
horizontal
collaboration

Linguistic
Term

Crisp
score

By considering all the critical attributes and the sub-attributes

IC
0.2650
4.45
VH
0.773

CA
IP
EP

0.1224
0.5606
0.0518

3.90
4.85
4.25

H
EH
VH

0.682
0.864
0.773

IS
FS
GR

0.2895
0.6464
0.0641

4.10
4.75
3.60

VH
EH
H

0.773
0.864
0.682

PO
GCE

0.1428
0.8571

4.65
4.45

EH
VH

0.864
0.773

SP
TP
OP

0.6652
0.2311
0.1038

4.70
4.25
3.70

EH
VH
H

0.864
0.773
0.682

PC
IO

0.1250
0.8750

3.85
4.55

H
EH

0.682
0.864

Degree of
collaboration

Collaboration
intensity index
(CII) = 0.8207

Similarly, the membership function for CII = low has a value of

1 starting at CII score of 0 and reaches a value of 0 when CII score is
0.409. For CII score, the membership degree for the fuzzy function
CII = low may be computed. For any CII score below 0.409, the
membership degree may be computed by using membership equa

, where x represents the crisp CII score. The semicontion 0:409x
0:409
ductor industries were not inclined for a collaborative
partnership with the similar service providers with a membership
degree equal to 0. For a membership degree of 0, the crisp score
was computed as [0.409  0  0.409] = 0.409. The relative CII in
this case was estimated as [0.449/0.864] = 0.4734. So, the collabo-

rative relationship with a relative CII value of 47.34% or less have a

low probability of success, i.e., no collaboration (NC) is possible.
So, the nature of relationship can be predicted depending on the
relative CII values for any two members, as depicted in Table 9.
5.3.1. Signicance of collaboration intensity index
The relative CII has certain implications for the industry under
consideration, which are as follows:
1. This parameter is a determining factor for the positioning of the
industry for long-term survival.
2. It establishes a perfect balance between the rms technological
development and strategic orientation to facilitate acquisition
of competencies for horizontal collaboration.
3. It emphasizes organizational and managerial involvement to be
critical as nancial involvement in the creation of resources.
4. It demonstrates that the strong internal capabilities and strategic coherence with partners business policy tends to favour
resource creation.
5. When new technologies increase in complexity, their development requires that the rms acquire external capabilities to
complement its internal ones used in new product
development.
6. In order to maximize output and resource creation, collaborative initiatives be organized in such a manner that all the SC
members can be both responsible and autonomous, but are at
the same time united by a cohesive structure. The success of
such a structure requires that the managers be focused to partner rms nancial and resource involvement and to their motivation to acquire competencies.

6. Discussions and managerial implications

The research highlights the attributes of collaborative practices
that drive operational performance. Similar services/goods providers differed in the degree of importance to the collaborative attributes. This was due to the differing priorities of the various
members of the supply chain. As collaborative efforts add costs
and brings benets differently to the chain members, the identication of most appropriate attributes would enable the chain
members to understand each others concerns and nd effective
solutions that benet all parties. The research also emphasizes
the importance of collaborative efforts in attaining better performance. As there are different expectations from collaborative practices among the chain members, they need to share concerns in
order to clearly set objectives and devise plans to achieve those

B.K. Bahinipati et al. / Computers & Industrial Engineering 57 (2009) 880895

Degree of
Membership

NC

PC

CC

0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0
Collaboration Intensity Index

Fig. 7. Illustration of intensity of horizontal collaboration.

Table 9
Range of CII for collaborative relationships between SC members.
Range of relative CII

Relationship among SC partners

047.34%
47.3589.45%
More than or equal to 89.46%

No collaboration (NC)
Partial collaboration (PC)
Complete collaboration

objectives. Management from both sides must put together an

integrated strategy in order to initiate improvement in specic collaborative practices.
The analysis of horizontal collaboration in the context of compatibility test in terms of strategic partner selection leads to a
number of managerial insights, which are as follows:
1. The framework will help management of the semiconductor
manufacturing industries to enable a quick analysis regarding
horizontal collaboration with similar industries based on compatibility test. A desirability of a partnership can be evaluated.
2. Currently a few of these parameters are being used by this
industry, which only enables informal collaboration; the proposed framework would be able to establish a strategic compatibility between partners willing to initiate resources or process
tools sharing for horizontal collaboration.
3. This framework is not intended to perform a detailed analysis
pertaining to all the costs and benets due to horizontal collaboration through strategic compatibility test. It would provide an
insight for the strategic partners to determine and allocate costs
and benets to survive in the e-market.
4. It is proposed to use a multi-disciplinary group of decision makers to reduce the subjective bias of one decision maker. The consistency of the judgments should also be checked.
5. The framework is able to track down why a certain element is
preferred above another. This will facilitate in determining the
required improvements in the practices necessary of the industries for a strategic partnership.
Based upon the hybrid approach proposed for horizontal collaboration in this paper, the following guidelines are proposed to help
practitioners to link a managers intuition and judgement with the
hybrid approach:
(a) The hybrid approach focuses on improving the effectiveness
of the horizontal collaboration strategy development process, helping managers in the decision-making process,
and supporting the managerial judgement and intuition. As
experienced managers have good judgement and intuition,
they should always be an integral part of the strategy development process. Managers get support from the system
without the need to understand or develop analysis models.

893

Managers also retain reasonable control over the strategy

development process and the most appropriate critical
attributes.
(b) Generally, managers are exible and creative. However,
managerial judgement and intuition may be limited by
experience, background and social environments. Many of
them lack strategic analysis skills. The proposed system
can provide analysis aids and information processing support. The system is unbiased and consistent, but rigid. Both
the systems consistency and managerial exibility should
be incorporated. A strong and balanced interplay between
the decision makers and the hybrid system should be
attained to produce a total effect for the strategy development process through utilising the powers of both parties.
(c) The group decision-making process is intended to develop
group judgement and consensus. The fuzzication and the
evaluation rules are intended to support and complement
managerial judgement and expertise. So, a combined use
of the proposed systems general knowledge and the managers specic knowledge about their products and markets in
the perspective of collaboration should always be
encouraged.
The practical implication of this study is that AHPFLM approach will be more appropriate for high-value components where
stringent purchasing criteria are required. In contrast, AHP remains
an appropriate approach for relatively lower value components. In
summary, the novelty of this study lies in the application of a hybrid approach to a real semiconductor industries scenario. This
study has considered an important issue of supply chain management, providing a better decision for partnership selection during
horizontal collaboration using appropriate quantitative techniques. In addition to exploring the insights from the perspective
of managers, this research has consulted the academic literature
related to horizontal collaboration. By doing so, we were able to
cross check our research ndings, and make them more persuasive
and precise.

7. Concluding remarks
This paper aims to provide a generic quantitative model to comprehensively assess the degree of collaboration that come with
individual relationships and to evaluate whether such a project is
really viable. This research is signicant because the information
presented provides a comprehensive collaboration assessment tool
to all SC members concerned. It is concluded that while opportunities are great, the compatibility of supply network members for
horizontal collaboration should be properly assessed, and the proposed AHPFLM approach is suitable for such tasks. This approach
for compatibility test for horizontal collaboration enables us to
make decisions based on vague or imprecise data. In this method,
the values from pair-wise comparison of each criterion are expressed with triangular fuzzy numbers. By this way, we can deal
with the uncertainties of decision problem by using the concepts
of fuzzy numbers and linguistic variables to evaluate the factors
in such a manner that the view points of an entire decision-making
body can be expressed without any constraint.
Compared with AHP, the proposed hybrid approach combines
subjective analysis with quantitative analysis more reasonably,
synthesizes group opinions more adequately. The results of the
case study for compatibility among members indicate that the proposed approach results in fair and reasonable conclusions. The outcome of this paper provides an effective method for the
semiconductor industry supply chain members to evaluate the
success of such shared collaborative systems in a structured and

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B.K. Bahinipati et al. / Computers & Industrial Engineering 57 (2009) 880895

simple manner. The case study has demonstrated the thoughtfulness, exibility, and efciency of the proposed model to directly
tap the subjectivity and preferences of the decision makers. The
proposed method presented herewith should be equally useful in
analyzing and assessing the success of any such projects elsewhere
by selecting industry-specic attributes and by involving experts
from those industries.
The present study also explains how SC members are willing to
develop collaborative practices through continuously improving
internal and external processes, competitive advantage and industry characteristics. However, the chain members need to modify
and customize the approaches for collaborative practices that suit
their unique environment under which they operate. The contributions to the literature on supply chain collaboration which resulted
from this study are (1) The study proposed and tested 10 dimensions (attributes) for effective SC collaboration. (2) Collaborative
efforts among chain members should be encouraged in order to
improve operational performance. (3) As the SC members varied
in their perception of the importance of these attributes that differentiate between high and low performing collaborative practices, it
may be recommended that the chain members should create a
negotiation mechanism that encourages the collaborative practices
to achieve better performance. The contribution of this study provides useful managerial insights into the development of horizontal collaborative practices in the supply network. The
operationalization of four critical attributes and sub-attributes
can be expanded based on focus groups or case studies, i.e., new
attributes can be added to the present work to demonstrate more
effective compatibility test.
Our study has certain limitations, which are as follows:
(1) The study did not consider the erce competition from the
similar SC members from a global perspective;
(2) The study did not consider the management structures of
collaborative procurement initiative as a result of cultural
differences from a global perspective;
(3) The study does not discuss whether a decision maker exerts
any inuence on mental cognition and experiential characteristics when rating the linguistic interval scale.
It may be observed that many conicts arise at the point of development of the collaborative initiative. So, understanding the main
dimensions of culture and how they affect conict may assist in creating a common culture for the collaborative initiatives and provides
for managing conicts as they emerge. However, it seems that only
severe circumstances, such as threat from global competition can
motivate the formation of large-scale horizontal collaboration.
Despite the advantages of the proposed hybrid approach (AHP
FLM) for partner evaluation problem, more research is certainly
called for within the context of studying a more complex supply
chain with multiple supply network and nodes as well as investigating other hybrid methods for optimum partner selection. Different alternative methodologies, such as fuzzy extended AHP (Chan
& Kumar, 2007), fuzzy analytic network process (ANP), fuzzy TOPSIS, and fuzzy electre can also be implemented to tackle the complex problem of partner evaluation (Sevkli, Koh, Zaim, Demirbagh,
& Tatoglu, 2008). Further scope of this research is to develop multicriteria optimization models for establishing contributions to be
made by compatible partners in terms of resources sharing for certain joint product development and supply.
Acknowledgement
The authors are grateful to the reviewers and the editor-in-chief
for their valuable comments and suggestions on improving the
manuscript.

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