Inventory-related costs in green supplier selection problems with Data Envelopment Analysis (DEA)

Abstract In today's competitive and dynamic world, the importance of supplier evaluation has become more widely recognized. When considering measurement of supplier performance and supply impact the literature identifies two sets of criteria: management criteria and green criteria. Management criteria can be extended with process cost criteria, which then poses new requirements to be met by the evaluation methodologies. This paper aims to present a methodology that can handle the different characteristics of these criteria. As a solution, a green supplier selection problem is generalized.A Data Envelopment Analysis (DEA)-type supplier selection method was developed, where green factors served as the output variables of a DEA model, and management variables were the inputs. This new methodology examines, in addition to managerial and green criteria, the effect of inventory-related costs, such as the EOQ costs of inventory holding or ordering costs on the selected supplier. The parametrical linear programming of technological coefficients is used in the DEA method. This paper draws attention to a new problem, namely, the literature fails to provide solutions for how to handle the nonlinearity of the cost functions in the most commonly used methodologies.

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