A systematic stochastic efficiency analysis model and application to international supplier performance evaluation

The selection of suppliers and the evaluation of their performance are challenging complex task faced by manufacturing managers in a global market. This is mainly due to three hurdles: (1) various criteria that characterize the supplier performance, (2) risk and uncertainty associated with supplier performance on multiple measures and (3) intangible attributes in cross- countries such as the political, legal, economic, socio-cultural and technological features. The paper develops a stochastic efficiency analysis model to deal with these three hurdles. The model is a new methodological extension to data envelopment analysis (DEA) and applicable to efficiency analysis for entities from different systems with imbedded uncertainty. The application of the proposed model to the international supplier evaluation is the first attempt to model suppler performance from different sub-systems with different environment factors and uncertainty using Stochastic DEA.

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