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International Journal of Production Research

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A model for performance monitoring of suppliers

Srinivas Talluri & Joseph Sarkis Published online: 14 Nov 2010.

To cite this article: Srinivas Talluri & Joseph Sarkis (2002) A model for performance monitoring of suppliers, International Journal of Production Research, 40:16, 4257-4269, DOI: 10.1080/00207540210152894 To link to this article: http://dx.doi.org/10.1080/00207540210152894

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int. j. prod. res., 2002, vol. 40, no. 16, 42574269

A model for performance monitoring of suppliers

SRINIVAS TALLURIy* and JOSEPH SARKISz
The purchasing function is central to the strategic operations of e ective supply chain management. This centrality is mainly due to the signicant impact of material costs on prots, increased investments in inter-organizational advanced manufacturing and information technologies, and a growing emphasis on the just-in-time operations philosophy. The critical business processes of the purchasing function include supplier selection, negotiation of supply contracts, monitoring supplier performance, and acting as an interface between an organization and its suppliers. Within these core processes of purchasing, this paper narrows its scope to focus upon the supplier performance evaluation and monitoring process, which assists in maintaining e ective customersupplier linkages. While price has been traditionally considered as the single most important factor in evaluating suppliers, it has been agreed upon that value performance emphasis needs to include other important factors such as quality, delivery and exibility. Given this evolving business competitiveness environment, the contribution of this research is threefold. First, it applies a new multi-criteria evaluation model for supplier performance evaluation by considering various performance criteria. Second, a proposed application extension of this model serves as a monitoring and control mechanism for the performance of suppliers, thus supporting continuous process improvement to achieve e cient customersupplier relationships. Third, the paper presents this technique as a new methodological extension to data envelopment analysis research by improving the discriminatory power of an existing variable returns to scale model. The model and its application are demonstrated through a previously published illustrative case example.

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1.

Introduction One of the critical responsibilities faced by purchasing managers of rms is the performance evaluation and monitoring of suppliers that will supply the rms with the necessary raw materials, components, and services for the production of enditems. Commodity partnerships that are exclusively based on price are no longer acceptable for suppliers of critical inputs and resources or for organizations introducing and practising the latest innovations in supply chain management. Recent emphasis in managing these inter-organizationa l relationships has expanded to include other important factors such as quality, delivery and exibility. Thus, there continues to be a need for robust evaluation models that e ectively incorporate several supplier criteria.
Revision received February 2002. { Department of Marketing and Supply Chain Management, Eli Broad College of Business, Michigan State University, N370 North Business Complex, East Lansing, MI48824, USA. { Graduate School of Management, Clark University, 950 Main Street, Worcester, MA 01610, USA. * To whom correspondence should be addressed. e-mail: talluri@msu.edu
International Journal of Production Research ISSN 00207543 print/ISSN 1366588X online # 2002 Taylor & Francis Ltd http://www.tandf.co.uk/journals DOI: 10.1080/00207540210152894

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With a growing emphasis on the just-in-time (JIT), lean manufacturing , integrated supply chain, and electronic commerce operations management philosophies, managing an e ective long-term customersupplier relationship has become more evident as a business practice that enhances organizational competitiveness (Schonberger 1986, Bailes and Kleinsorge 1992, Bensaou 1999, Mirani et al. 2001). Monitoring supplier performance by customers and providing continuous feedback for improvement can assist in achieving and maintaining an e ective linkage between customers and suppliers. To this end, this paper presents a methodology that focuses on supplier performance evaluation and process monitoring for maintaining e ective customersupplier linkages. Given the papers emphasis in this area, the contribution of our research is threefold. First, it applies a new multi-criteria evaluation model for supplier performance evaluation by considering various performance criteria. Second, a proposed application extension of this model serves as a monitoring and control mechanism for the performance of suppliers, thus supporting continuous process improvement to achieve e cient customersupplier relationships. Third, the paper presents this technique as a new methodological extension to data envelopment analysis (DEA) research by improving the discriminatory power of an existing variable returns to scale model proposed by Banker et al. (1984).

2.

Literature review In this section we discuss the literature on performance measures and models utilized for supplier evaluation. We also discuss methods used for continuous process monitoring of suppliers for maintaining an e ective customersupplier linkage. 2.1. Supplier performance evaluation factors and models Although choosing the right supplier for a given job is the most fundamental and important decision a buyer makes, it may also be one of the most di cult ones. The decision becomes more complex as the selection evolves and matures along the level of partnerships (e.g. commodity, alliance, or virtual partnerships). Supplier evaluation and motivation plans typically involve the utilization of one or more of the following approaches: (1) formal quantitative rating systems; (2) in-depth performance reviews, and (3) ongoing communications and development of business partnerships (Asmus and Gri n 1993, Schorr 1998). The selection process and its maintenance need to incorporate, at least, these three important dimensions. To be able to complete a comprehensive evaluation of suppliers, a number of criteria can be used. For example, the supplier could be screened technically on a number of variables. Some of these variables have included: (1) an emphasis on quality at the source; (2) design competency; (3) process capability; (4) declining non-conformities; (5) declining WIP, lead-time, space, ow distance; (6) operators being cross-trained, doing preventive maintenance; (7) operators able to present SPC and quick set-up; (8) operators able to chart problems and process issues; (9) hours of operator training in TQC/JIT; (10) concurrent design; (11) equipment and labour exibility; (12) dedicated capacity; and (13) production and process innovation. Buyers must analyse and document the signicance of several of the aforementioned factors, converting instinctive qualitative indicators to concise

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empirical measures (for example, see Ellram 1990, Weber et al. 1991, Choi and Hartley 1996, Barbarosoglu and Yazgac 1997, Christopher et al. 1979). A number of techniques have been used to solve the problem of supplier evaluation, including matrix or weight approaches, mathematical programming, fuzzy set models, and the analytical hierarchy process (for example, see Lamberson et al. 1976, Bu a and Jackson 1983, Narasimhan 1983, Gregory 1986, Weber and Current 1993, Dobler and Burt 1996, Meade et al . 1997, Sarkis and Semple 1999). Although numerous approaches have been proposed for evaluating suppliers, the uniqueness of our selection method lies in incorporating several important features including simultaneous consideration of multiple supplier performance criteria, minimizing subjectivity in the evaluation process, peer evaluation among alternative suppliers, and an evaluation process based on the variable returns to scale (VRS) assumptioninto one methodology. The approach developed and illustrated here is an extension to the family of data envelopment analysis tools. The specic development in this paper is an extension to the model proposed by Banker et al. (1984), which works under the assumption of VRS and is referred to as the BCC (Banker, Charnes, Cooper) model. The proposed extension improves the discriminatory power of the BCC model in the performance ranking and monitoring of a suppliers e ciency over time. VRS is often a legitimate assumption in evaluating suppliers because it is generally not feasible to achieve proportional improvements in various performance criteria as price increases. For example, as price increases, factors such as quality, delivery and exibility improve, but on a VRS basis. Thus, being able to incorporate this important assumption into the decision-making process provides a more accurate portrayal of relative performance for supplier management. 2.2. Supplier performance monitoring Long-term partnerships between buyers and suppliers result in e ective management of the supply chain operations. In order to strengthen this partnership, the buyer will continuously monitor the supplier performance across multiple variables and provide feedback for improvement (Christopher et al. 1979, LaLonde and Cooper 1989, Kleinsorge et al. 1992). According to the above studies, buyers need regularly to measure and monitor the performance of suppliers with respect to both tangible and intangible criteria, and provide timely information for suppliers about their expectations in terms of e ciency. This type of feedback assists suppliers in undertaking remedial actions to improve their performance in order better to meet the demands of the buyer. Kleinsorge et al. (1992) provide the most conceptually related research to the performance monitoring approach used in this paper. In their study, the performance of a selected supplier is monitored across 18 time periods using DEA. They have included both tangible and intangible measures for supplier performance. The study provided some very interesting insights into performance feedback provided by the buyer to the supplier for continuous process improvement. The DEA model inputs included total costs and number of shipments, and outputs encompassed the number of bills received without error, number of shipments to arrive on time, ratings for service quality experience and credence. Experience and credence describe separate dimensions of buyersupplier relationship. While experience involves reliability, responsiveness, access, communication, and understanding the buyer, the credence measure involves the degree of trust in the

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supplier and the anticipation of future buyer requirements by the supplier. The DEA model used in their study is the CCR (Charnes, Cooper and Rhodes) model (Charnes et al . 1978) which, while e ective, has certain problems with exibility of weights and in ranking e cient units. It also works under the assumption of constant returns to scale (CRS). Since increments in supplier inputs may not proportionally improve outputs, our approach includes the VRS assumption with the added ability of e ectively ranking e cient units. We also compare our approach to the model results presented in Kleinsorge et al .s (1992) work. We now discuss the methodological tools developed and utilized in this paper.

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3.

A multi-factor productivity model Productivity measurement models assist rms in evaluating the e ciencies of their operations and practices. While traditional productivity methods are based on simple ratios, more recent approaches have incorporated multiple measures into the evaluation process. As with any area of study, the development of new models and methods has improved the productivity evaluation process. DEA is one such method proposed by Charnes et al . (1978) for evaluating the e ciencies of a homogenous set of decision making units (DMUs) by utilizing several input and output factors. Over the past few years, the application of DEA as a tool for productivity evaluation and benchmarking in manufacturin g and service industries has greatly increased (e.g. see Talluri and Sarkis 1997, Post and Spronk 1999, Soteriou and Zenios 1999, Sarkis 2000, Forker and Mendez, 2001, Homburg 2001). Several extensions and new models have been proposed to improve the e ectiveness of DEA-based e ciency evaluation. These extensions have primarily targeted some key limitations of DEA that included: unrestricted weight exibility problems (Thompson et al. 1986, 1995, Dyson and Thannassoulis 1988, Charnes et al. 1990, Wong and Beasley 1990); inability to rank or discriminate among e cient units (Andersen and Petersen 1994, Doyle and Green 1994, Sarkis and Talluri 1999); and inappropriate benchmarks (Doyle and Green 1994, Talluri and Sarkis 1997). This paper concentrates on the limitation of ranking e cient units in the BCC model (Banker et al. 1984), which works under the assumption of VRS. Although such extensions have been undertaken for the standard CCR model proposed by Charnes et al. (1978) (Sexton et al. 1986, Andersen and Petersen 1994, Doyle and Green 1994, Talluri 2000), little, if any, of this type of work has been developed specically for the BCC model case. Since VRS is a critical assumption made in several manufacturing and service applications, it is important to develop such extensions that improve the discriminatory power of the BCC model.

3.1. The BCC model The BCC model proposed by Banker et al . (1984), shown as expression (1), works under the assumption of VRS, which implies that as inputs increase (decrease) the outputs may not increase (decrease) proportionally. This development was performed by appending the i 1 constraint to the CCR model.

Performance monitoring of suppliers " #9 X X > > > Minimize h " Sih Srh > >
i r

4261

s:t:

n X j 1

n X j 1

xij j Sih

k xik

8i

yrj j Srh yrh n X

8r

> > > > > > > > > > > > > = > > > > > > > > > > > > > > > > > > ;

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Sih 0;

j 1 Srh

j 1 0 and j 0;

where xij and yrj indicate the ith input and rth output of the jth DMU, respectively; j s are the dual variables utilized to construct a composite DMU; Sih and Srh denote the slack and surplus variables, respectively; h represents the e ciency score of DMU h, and " is a small positive scalar. The above model is run n times to obtain the e ciency scores for each of the n DMUs. If a DMU achieves an e ciency score of 1 it is considered to be e cient, and a score of less than 1 means that a DMU is considered to be ine cient. It is well know that for a given data set the BCC model usually identies more units as e cient than the CCR model. This is because of the imposition of the convexity constraint that limits the summation of the values to 1. When there are multiple DMUs that are e cient, the BCC model does not provide a mechanism to di erentiate among them. As discussed earlier, although this is also a problem with the original CCR model, extensions to counter this problem have been developed for the CCR model. In the next section, we propose a model that helps alleviate this problem and allows for a better discrimination among the e cient DMUs for the BCC model case. The subsequent section applies this improved model to the supplier evaluation problem. 3.2. Improving the discriminatory power of the BCC model In DEA, a test DMU (unit whose e ciency is being evaluated) is said to be ine cient if a linear combination of a set of DMUs (composite DMU) can be identied that utilizes less input while maintaining at least the same output levels as the test DMU. If such a linear combination is not identied then the test DMU is considered to be e cient. In order to better discriminate between DMUs and rank e ciencies of DMUs obtained from the BCC model we propose the formulation shown in expression (2), referred to as the DBCC (discriminatory BCC) model, which is used in conjunction with the original BCC model. The concept behind the proposed model is that, in DEA, the composite DMUs constructed in evaluating the test DMUs are the best possible performers. We take advantage of this property to evaluate the performance of each of the other n 1 DMUs using the composite DMU created for a particular unit. A unit that performs well when matched against several composite units is a good performer, and those are the units that are clearly identied by the proposed model. We discuss and present this model by assuming that the initial BCC computations have been performed and the e ciency scores for all DMUs have been obtained.

4262

S. Talluri and J. Sarkis 8k 6 h " # X X Minimize k " Sik S rk

i r

s:t:
n X j 1

n X j 1

xij j Sik

k xik

8i 8r 8i

yrj j S rk Srk yrk xij j Sih * h xih yrj j Srh yrh n X j 1

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n X j 1

> > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > >
=

n X j 1

8r

j 1 and j 0:

S ik 0; Srk 0; Srk 0

Let us consider the case of DMU h, whose e ciency score obtained from the BCC model is * h (* indicates the optimal solution to expression (1)). We now evaluate the performance of the other n 1 DMUs with respect to the optimal weights that have been used against DMU h. This helps to determine how well the other units perform when matched against these optimal weights. In this model, the objective function represents the score obtained by DMU k (the test DMU). We have included Sik and Srk in the objective function because it allows for maximum domination of the composite unit constructed against DMU h over DMU k. We discuss this in more detail later in this section. Constraint sets 1 and 2 compare the input and output levels used by the composite unit constructed against DMU h with DMU k, respectively. Note that we have included both slack and surplus variables in constraint set 2. This is because the selected composite unit may not dominate the test DMUs outputs, but this is not an issue with inputs because the k value is allowed to exceed a value of 1. Constraint sets 3 and 4 are repeated from the BCC model to ensure that the e ciency score of DMU h obtained from (1) is maintained. In addition, note that the slack and surplus variables used in these constraint sets are the optimal values obtained from the BCC model. Finally, constraint 5 is also repeated from (1) to maintain the VRS assumption, which is the basis for the BCC model evaluations. The model is run n 1 times to obtain the e ciency scores for each of the n 1 DMUs when being evaluated by optimal weights that were used against DMU h. This procedure is repeated by changing the target DMU (unit used in constraint sets 3 and 4) and re-running the problem for each of the n DMUs. The scores obtained from these evaluations can be aggregated by using a matrix similar to the crosse ciency matrix proposed by Sexton et al. (1986) as shown in gure 1. We refer to this matrix as the discriminating matrix. The row means (which represent the test DMUs) of this matrix provide a measure for discriminating and ranking the DMUs. Note that the diagonal of the matrix represents the scores obtained from the original BCC model, while the o -diagonal scores are obtained from the discriminating

> > > > > > > > > > > > > > > > > > > > > > > > > > > > > > > >
;

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Figure 1.

Discriminating matrix.

model. A unit with a high mean row score can be considered as a good overall performer. 4. Model application In order to illustrate our model, we utilize the dataset from Kleinsorge et al.s (1992) work. The data set used in their paper represents the performance of a single supplier over 18 periods. 4.1. Supplier performance evaluation We use a total of two inputs and four outputs for evaluation purposes. The inputs included are total cost (per 100 shipments) and number of shipments. The outputs considered are both tangible and intangible measures, which are the number of bills received without error, the number of shipments to arrive on time, and ratings for experience and credence. Experience and credence ratings are intangible supplier performance factors that represent reliability, responsiveness, access, courtesy, communication and trust, as discussed earlier. For more information on these factors refer to Kleinsorge et al. (1992). The data are shown in table 1. Initially, we utilized the BCC model for evaluating the supplier e ciency in each of the 18 periods. The results are shown in table 2 under the heading `BCC. It is evident from the model results that ten periods 1, 2, 3, 4, 6, 12, 13, 14, 15 and 18, are e cient with a relative e ciency score of 1.000. The remaining eight periods are ine cient with scores of less than 1.000. Since we utilized the VRS assumption in computing these scores, a comparative analysis with the scores obtained utilizing the CRS assumption used in Kleinsorge et al .s (1992) work is interesting. In our case, we identied two additional periods 1 and 12 to be e cient, which are ine cient under the CRS model. In general, the scores for almost all ine cient periods showed improvements utilizing the VRS assumption, except period 5, which achieved the same score under both models. These di erences are because we do not assume proportional improvements in outputs for an increase in the input values. The key point is that performance evaluation of suppliers utilizing the BCC model alone may not portray a complete picture. This is because it is possible to achieve an e ciency score of 1.000 by focusing on relatively few input and output

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Outputs Inputs Credence 90 80 70 70 70 80 90 60 70 60 80 100 90 80 90 80 70 80 Total cost 253 268 259 180 257 248 272 330 327 330 321 329 281 309 291 334 249 216 No shipped 197 198 229 169 212 197 209 203 208 203 207 234 173 203 193 177 185 176

DMU 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

No of bills 90 130 200 100 173 170 60 145 150 90 100 200 163 170 185 85 130 160

No on time 187 194 220 160 204 192 194 195 200 171 174 209 165 199 188 168 177 167 Table 1.

Experience 240 210 270 200 160 230 200 170 180 170 200 210 300 250 250 240 210 200

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Supplier inputs and outputs.

DMU 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

BCC 1.000 1.000 1.000 1.000 0.993 1.000 0.988 0.981 0.982 0.878 0.873 1.000 1.000 1.000 1.000 0.992 0.992 1.000

DBCC 1.096 1.054 1.042 1.513 1.066 1.113 1.024 0.960 0.943 0.960 0.951 0.875 1.136 0.976 1.030 1.101 1.132 1.271

Table 2. BCC and mean DBCC scores for supplier performance.

measures. The importance of the DBCC model now becomes more evident since it allows for e ective ranking of both e cient and ine cient periods. The results are shown in table 2 under the heading `DBCC. Based on these scores, period 4 is identied to be the best performer with a mean score of 1.513, followed by period 18 with a mean score of 1.271. For more detailed information on the DBCC results, see table 3.

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DMU 1.275 1.204 1.085 1.792 1.255 1.301 1.186 0.981 0.987 0.981 1.005 0.981 1.152 1.044 1.109 1.125 1.296 1.493 1.212 1.144 1.184 1.755 1.193 1.236 1.127 1.006 0.982 1.006 0.987 0.932 1.181 1.039 1.103 1.154 1.231 1.420 1.145 1.079 1.116 1.609 1.127 1.168 1.065 0.878 0.886 0.878 0.902 0.880 1.031 0.936 0.995 1.007 1.161 1.341 1.108 1.046 1.082 1.557 1.091 1.130 1.031 0.890 0.869 0.890 0.873 0.852 1.045 0.907 0.963 1.021 1.126 1.298 1.300 1.228 1.270 1.828 1.280 1.327 1.210 1.153 1.125 1.153 1.130 1.000 1.353 1.153 1.212 1.322 1.321 1.523 1.111 1.049 1.085 1.561 1.093 1.133 1.033 0.852 0.859 0.852 0.875 0.854 1.000 0.909 0.966 0.977 1.129 1.301 1.221 1.153 1.193 1.717 1.202 1.246 1.136 1.000 0.976 1.000 0.981 0.939 1.173 1.000 1.062 1.147 1.241 1.431 1.150 1.086 1.124 1.617 1.132 1.173 1.070 0.951 0.928 0.951 0.932 0.884 1.116 0.951 1.000 1.090 1.169 1.347 1.131 1.064 1.101 1.603 1.109 1.149 1.052 0.865 0.872 0.867 0.899 0.870 1.179 0.923 0.983 0.992 1.145 1.325

10

11

12

13

14

15

16

17 0.976 0.926 0.953 1.372 0.961 0.996 0.908 0.904 0.882 0.904 0.886 0.784 1.060 0.904 0.950 1.036 0.992 1.143

18 0.893 0.889 0.834 1.200 0.840 0.893 0.842 0.867 0.846 0.867 0.850 0.752 1.017 0.867 0.912 0.994 0.951 1.000

Mean

Performance monitoring of suppliers

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18

1.000 0.995 0.977 1.406 0.984 1.020 0.943 0.970 0.947 0.970 0.952 0.842 1.139 0.970 1.021 1.113 1.065 1.171

1.059 1.000 1.035 1.489 1.043 1.081 0.985 0.975 0.952 0.975 0.957 0.846 1.145 0.975 1.026 1.119 1.076 1.241

1.162 1.157 1.000 1.439 1.080 1.162 1.096 1.128 1.101 1.128 1.106 0.979 1.324 1.128 1.187 1.294 1.238 1.301

0.858 0.854 0.738 1.000 0.797 0.858 0.809 0.833 0.812 0.833 0.816 0.722 0.977 0.833 0.876 0.955 0.914 0.960

1.069 1.063 0.985 1.418 0.993 1.069 1.007 1.037 1.012 1.037 1.017 0.900 1.217 1.037 1.091 1.190 1.138 1.196

1.000 0.995 0.958 1.378 0.965 1.000 0.943 0.970 0.947 0.970 0.952 0.842 1.139 0.970 1.021 1.113 1.065 1.148

1.062 1.043 1.037 1.493 1.045 1.083 0.988 1.017 0.993 1.017 0.997 0.882 1.193 1.017 1.070 1.166 1.116 1.244

1.096 1.054 1.042 1.513 1.066 1.113 1.024 0.960 0.943 0.960 0.951 0.875 1.136 0.976 1.030 1.101 1.132 1.271

Table 3.

All pairwise DBCC scores for supplier performance.

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Another interesting insight derived from the DBCC model is that some of the e cient performers based on BCC model evaluations are, in fact, weak overall performers based on the DBCC results. For example, period 14, which is e cient with respect to the BCC results, achieved a DBCC score of only 0.976, placing it as a lower performer than periods 5, 7, 16 and 17, which are ine cient under BCC evaluations but better overall performers according to the DBCC results. This is because period 14 could possibly be a niche performer concentrating on a few measures to gain a high BCC score. However, in the DBCC analysis, period 14 is evaluated with respect to various strategies utilized against several periods, and hence its score drops, identifying it as a weak overall performing period. This insight could only be derived from the DBCC analysis. The managerial implications here are that a supplier could be e cient in a particular period but only because of a niche performance (doing well only with respect to few inputs and outputs) and managers must closely look into such periods for possible reasons for this occurrence and consider appropriate strategies to prevent it. Figure 2 is a graphical representation of the results providing a quick visual summary of the performances for each period. 4.2. Supplier performance monitoring The DBCC scores in gure 2 do not show a specic trend or any other pattern across all 18 time-periods combined, but one could conclude that the performance of the supplier was best in periods 4 and 18. The customer can provide positive feedback to the supplier about the performance in these periods and can use these periods as the benchmark periods for improving future performance. The policies or procedures used by the supplier for achieving a high level of success in these

Figure 2.

A graphical comparison of BCC and mean DBCC scores for supplier performance.

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periods need to be considered as winning strategies and should be used for continuous process improvement. In general, there seems to be a downward trend in performance from periods 4 to 12. The supplier can utilize this feedback information in investigating the causes for this general decline in performance for periods 4 to 12. Similarly, there seems to be an upward trend in performance from periods 14 to 18. Again, this information can be used to identify the possible reasons for improved performance. The supplier needs to identify what was done di erently during the periods of improving and declining performance. This will assist adopting the right methods and avoiding undesirable procedures in order to achieve consistently high levels of performance. It is important to note that the CCR model evaluations (Kleinsorge et al . 1992) and also the BCC model evaluations (shown in gure 2) failed to capture the above insights derived from the DBCC analysis. More specically, they failed to identify the best performing periods (4 and 18), which is clearly valuable information for managers. Based on both Kleinsorge et al .s work and BCC model evaluations, the supplier performance in periods 4 and 14 is e cient with a score of 1.000, but both these models identied several other time periods to be e cient as well. Thus, they were unable to discriminate e ectively the suppliers performance across various time periods. In addition, the declining and improving trends are not clear from Kleinsorge et al.s work and the BCC model scores. Except for periods 10 and 11, the performance in all the other periods was relatively constant according to the BCC scores, which was shown not to be the case in the DBCC analysis. The above cases clearly demonstrate the usefulness of DBCC as an extension to the BCC model and the original Kleinsorge et al . (1992) work in this area. 5. Summary and conclusions In this paper, a new methodology for performance evaluation and monitoring of suppliers in the presence of multiple measures has been proposed. A primary contribution of the paper is the development of an extension to the BCC model for better discrimination of decision making unit performance. The advantages of the proposed model over the standard BCC model are demonstrated in the context of supplier evaluation. In addition, the application of the model provided interesting insights for purchasing managers involved in supplier evaluation and continuous performance monitoring. The practical implications are clear. This information can e ectively be used by companies in providing feedback for suppliers, thereby improving performance. One of the important application issues is the selection of input and output factors. The selection of these measures is critical in the actual application of this methodology. Any resources used by the supplier can be considered as inputs and the outputs usually are some form of performance measures. Although some other multicriteria performance models have limitations in terms of sample sizes (number of DMUs) for achieving better discrimination, the methods proposed in this research can overcome such small sample size issues. In addition, unlike many other multicriteria approaches, e.g. outranking, Analytic Hierarchy Process (AHP), and multi-attribute utility theory, which may require subjective managerial input and evaluation, there is little managerial input necessary in this process to arrive at a solution. This is important if there is considerable subjectivity in the managerial preferences (lots of diverse opinions) or when managerial time resources, expertise and knowledge are limited.

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Although our model does not require any information on managerial preferences, such information can easily be integrated into the evaluation of the model results if needed. Other possible extensions include consideration of ordinal supplier inputs and outputs, and the development of e ective methods for the benchmarking of supplier performance.

References
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