Using data envelopment analysis to compare suppliers for supplier selection and performance improvement

Abstract

Data envelopment analysis (DEA) has been widely applied to address various decision analysis problems due to its usefulness in evaluating multi-criterion systems and providing improvement targets for such systems. A supplier selection problem is inherently a multi-criterion decision problem, and DEA has been applied to evaluate suppliers for an individual product. This paper proposes and demonstrates the application of DEA in evaluating the overall performances of suppliers in a manufacturing firm. A simplified DEA model for supplier selection is first presented to evaluate the overall performances of suppliers with a strategic orientation of being able to reduce the number of suppliers. A case study is then presented to demonstrate supplier performance evaluation using DEA for supplier selection and performance improvement considerations.