2552………………The Sixth Wuhan International Conference on E-Business － Innovation Management Track
Supplier Logistics Capability Evaluation Based on DEA
Wei Li, Limin Cheng
Department of Economics and Management, North China Electric Power University,
Baoding, 071003, China
ncepumindy@yahoo.com.cn
Abstract: Supplier evaluation is increasingly seen as a strategic issue for companies. Unlike the past, an emerging trend is to
select suppliers where a long-term relationship is desired and supplier involvement in product innovation is required and to
sort suppliers into categories based on performance. Based on summarizing the former literature on supply chain
management (SCM) and logistics capability evaluation, a logistics competence measurement framework is constructed to
measure supplier logistics competence. This paper describes a supplier logistic capability evaluation and ranking
methodology, i.e. multi-criteria data envelopment analysis (DEA). However, identification of input and output indices must
be a difficult problem in the whole process. In the paper, an empirical analysis is carried out based on comparing five wheat
suppliers’ logistics competence of a flour plant to illustrate the evaluation process. According to the evaluation result,
purchasing strategies and decisions are proposed.
Keywords: supplier, logistics capability, DEA
1. INTRODUCTION
Supplier selection and evaluation is one of the most vital actions of companies in a supply chain. Selecting
the wrong supplier could be enough to deteriorate the whole supply chain’s financial and operational position.
Logistics and supply chain management (SCM) have become important sources of sustainable competitive
advantage [1-2]. In today’s highly competitive, global operating environment, it is impossible to produce low cost,
high quality products successfully without satisfactory suppliers [3].
Over the past several years, with the recent trend on just-in-time (JIT) manufacturing philosophy, there is
an emphasis on strategic sourcing that establishes long-term mutually beneficial relationship with fewer but
better suppliers [3-5]. As companies are increasingly outsourcing more and more activities to suppliers in order to
focus their core competences, the suppliers are pushed to co-operate [6]. A problem in this process is to evaluate
and select proper suppliers. And one of the issues is supplier logistics capability evaluation, which is
complicated by the fact that various criteria must be considered in the process.
Although the main aim of this paper is to introduce a methodology for evaluating and managing supplier
logistics capability for the strategic partnership, we also focus on the framework construction of logistics
competence evaluation. Our framework can be used for many real-world problems beside supplier logistics
competence evaluation.
The remainder of the paper is organized as follows. A literature review on factors and methods in support
of supplier logistics competence evaluation will be given in the next section. In section 3, a framework of
supplier logistics capability will be constructed for power plant to evaluate coal suppliers. Section 4 introduces
data envelopment analysis (DEA) model in detail, and divides the indices of the framework into input and
output factors. Section 5 is devoted to illustrate the numerical example. Finally, concluding remarks will be
given in Section 6.
2. LITERATURE REVIEW
2.1 Logistics capability elements
The primary step of logistics capability evaluation is to analyze its componential elements.
Traditional logistics measurement systems have been designed to capture information regarding five types
of performance generally regarded as essential to accomplishing the organization’s logistics/distribution
activities. These five categories are: asset management, cost, customer service, productivity, and logistics
quality [7].
Better performance measurement is essential to combing cross-functional agility with functional excellence.
The ever increasing complexity of supply chain systems puts additional pressure on measurement activities to
coordinate and control integrated channels [8].
Logistics capability, such as customer responsiveness and competing on time, can be valuable resources for
corporate strategy. From a customer value perspective, Morash et al. suggest that logistics capabilities should
include delivery reliability, post-sale customer service, responsiveness to the target market, delivery speed,
pre-sale customer service, widespread distribution coverage, selective distribution coverage, and low total cost
distribution [9].
From a strategic planning perspective, Stank and Lackey suggest that logistics competence can be divided
into 4 groups: positioning, integration, agility, and measurement. Positioning is the selected strategic and
structural approach to guide logistical operations. Integration denotes techniques used to achieve internal
logistical operating excellence and development of external supply chain relationships. Agility is a measure of a
firm’s ability to determine and quickly respond to changing requirements. Measurement refers to the degree to
which a firm monitors internal and external operations [10]. This study just generally divides the competence of
logistics capability, however, it isn’t maneuverable.
