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Supplier Rationalization: A Sourcing Decision Model
Author(s) -
Talluri Srinivas,
DeCampos Hugo A.,
Hult G. Tomas M.
Publication year - 2013
Publication title -
decision sciences
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.238
H-Index - 108
eISSN - 1540-5915
pISSN - 0011-7315
DOI - 10.1111/j.1540-5915.2012.00390.x
Subject(s) - rationalization (economics) , data envelopment analysis , extant taxon , multinational corporation , supply chain , industrial organization , business , supply chain management , computer science , strategic sourcing , diversity (politics) , operations research , microeconomics , process management , economics , marketing , strategic planning , mathematics , mathematical optimization , strategic financial management , finance , evolutionary biology , sociology , anthropology , biology
ABSTRACT We draw on extant literature on strategic sourcing and supply base rationalization to anchor our argument that measuring supplier performance diversity is germane to executing an effective supply base rationalization strategy. We explicate how a novel approach to data envelopment analysis (DEA) efficiency assessment can be utilized to measure this performance diversity. More specifically, our methods are anchored in cross efficiency analysis in DEA that allows for evaluating the efficiency of a supplier with respect to the optimal weights (strengths) of its peers. This methodology is applied to an actual supplier dataset of a large multinational telecommunications company in categorizing their supply base into groups for effective supplier rationalization. We conclude that measuring and analyzing the performance diversity within the framework of DEA provides a mechanism for firms to better balance a rationalized and diversified supply base with unique skills.