Technical Efficiency Analysis of Shippers using DEA

This article reports on the use of data envelopment analysis (DEA) techniques to evaluate the technical efficiency of shippers. The authors analyzed data from 7365 shipping firms in Korea; data originally collected from the 2005 commodity flow survey were used in the analysis. Several DEA models were applied to determine efficiency scores based on both input- and output-orientations. Each of the models include variable returns, constant returns, and non-increasing returns models. Accordingly, the technical and scale efficiency scores of each evaluated shipper in the same industry were measured and the best-practice firms for each industry were identified. Further, in order to handle the number of observed decision units and the diversity of data, the authors performed the cluster-base analysis, including industry-, business-, and spatial-based, to identify the effectiveness of the cluster-based DEA in estimating the efficiency score. They conclude that advanced empirical study techniques, such as DEA, can fulfill the need of measuring the performance of transport logistics, particularly the shipping industry. They also note that these techniques could be broadened to apply to supply chain and logistics components of cost and efficiency determinations.