Distribution network rationalisation through benchmarking with DEA

Purpose – The purpose of this paper is to discuss the use of data envelopment analysis (DEA) to benchmark store performance for the purpose of rationalising retail distribution network.Design/methodology/approach – As an illustration of the approach, DEA is applied to a sample of front stores of a major retailer in Australia to compare their relative efficiency in distribution. Together with other techniques such as customer segmentation and spatial distribution of demand, this paper shows that DEA can provide an objective basis for distribution network rationalisation and be a suitable analytical tool to facilitate continuous improvement.Findings – Based on the DEA results, it is concluded that overall distribution efficiency of the part of the retail network under study can be improved by either closing the less efficient stores or merging them with the others in the same service areas to streamline the network. Such rationalisation will help aggregate demand and improve vehicle utilisation for distribu...

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