Efficiency and Ranking Measurement of Vendors by Data Envelopment Analysis

One of the key issues in logistics management context is the measurement of the vendors’ efficiency which helps companies to achieve the most appropriate services. In today’s competitive condition, most of the firms have changed from a single vendor to a multi-vendor point of view. A number of conceptual and analytical models have also been developed for identifying the vendor selection problems. It has been recognized that a lot of factors may influence the vendors’ efficiency therefore a suitable approach is required to consider major factors in order to select the most efficient ones. This paper presents a practical approach for evaluating vendors which provide the required services in a procurement situation. This approach uses data envelopment analysis to evaluate the vendors’ efficiency. Anderson and Peterson model is also applied to rank the efficient vendors. The criteria considered in this model are service quality, price, average of late deliveries and rate of rejected parts. A case study is implemented in a pipe manufacturing company to prove the mentioned methods. Findings pinpoint that the vendors which present better services are not necessarily the most efficient one. This research also provides an appropriate framework for organization to examine the vendors’ efficiency and also choose some effective ways to improve vendors’ performance.