Revealing differences of supplier performance with DEA cross-efficiency Online publication date: Sun, 30-Jul-2023
by Imre Dobos; Gyöngyi Vörösmarty
International Journal of Procurement Management (IJPM), Vol. 18, No. 1, 2023
Abstract: DEA is a well-known tool for measuring the effectiveness of decision units. It is used to support a wide range of management decisions and is also widely used to support supplier assessment tasks such as selection, performance evaluation, or post-qualification. Ranking can be important when making certain purchasing decisions, e.g., when selecting the best performing supplier(s). However, ranking can hide differences in performance that may have a significant impact on the outcome of the supplier selection. Suppliers can be evaluated by two types of DEA efficiency indicators: self-appraisal and peer-appraisal (cross-efficiency). The aim of this paper is to introduce a new method that maximises cross-efficiency by leaving the self-appraisal indicator. It is shown that the average of cross-efficiencies can be characterised as an optimal cross-efficiency of suppliers. The new method helps to understand differences in supplier performance, which may be hidden in the ranking provided by the basic DEA method.
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