Evaluation of vendors ranking by EATWOS approach

Abstract

Purpose – In order to improve the supply chain performance, organizations need to improve the efficiency of vendors. Although many techniques are used for vendor efficiency measurement, there is a lack of research about defining satisficing level to analyze improvement potential of vendors. The purpose of this paper is to incorporate satisficing level of some outputs to determine efficiency improvement potential of existing vendors. Design/methodology/approach – Method used in this paper is an extension of Data Envelopment Analysis, which has been used frequently for efficiency measurement of Decision Making Units. This method is known as Efficiency Analysis Technique with Output Satisficing (EATWOS), which has been mainly used in the field of economics for efficiency measurement. Findings – A case illustration of a National Capital Region of Delhi, India, based manufacturer and distributor of packaged drinking water is depicted to portray the practical application of EATWOS in vendor efficiency evaluation and their relative ranking. This method has helped in evaluating the improvement potential in performance of given vendors and helping in strategic decision making for the given organization Research limitations/implications – In case of more variables, this method becomes more complex to get the solution. Second, sometimes difference in vendors ranking without and with satisficing concept is very less, as in this case. Therefore, recording and analysis of output data of vendors should be done very carefully. Practical implications – Major implications of this study is that while selecting vendors, organizations should also try to understand improvement potential for given vendors by applying satisficing concept as given in this research. This approach helps in analyzing improvement potentials of suppliers. Originality/value – This paper explores an innovative approach to rank vendors on basis of certain criteria after considering the satisficing concept and improvement potentials of vendors.