Inter-firm performance for global networks: An optimisation model using DEA .

Abstract

Competitiveness in the global market requires efficiencies to improve the performance across the whole supply chain of inter-connected firms. Competitive and adversarial relationships in uncoordinated supply networks have traditionally impeded the improvement of performance. Hence the adoption of management techniques, that regard inter-connected firms (ICF) as integrated inter-firm networks (IFN), needs to be expanded for improved performance. An optimisation technique for determining performances and metricating their efficiencies on the basis of Pareto optimality is Data Envelopment Analysis (DEA). Despite DEA’s diverse and widespread application, its potential for supply chain networks has not been fully explored. This paper proposes an optimisation model that measures performance in an inter-firm supply chain, in particular the efficiency of inter-firm collaboration. The algorithm requires that ‘decision making units’ (DMUs) are the inter-connected dyads of firms in the network which can be assessed comparatively to one another and ranked against the best performers. This paper therefore makes an original contribution to the study of supply chain management by providing an optimisation model to assess the effectiveness of inter-firm networks.