DEA-Based PROMETHEE II Distribution-Center Productivity Model: Evaluation and Location Strategies Formulation

Abstract

The current era of industrial economics necessitates warehouse and logistic distribution centers (DCs) to contribute productively toward an organization’s success. Playing such a critical productive role implies that logistics activities must be practiced effectively and efficiently. However, the indistinguishability between effectiveness and efficiency leads to a somewhat shallow interpretation, and consequently, a diluted evaluation. Hence, this paper aims to develop a productivity evaluation model for nine DCs belonging to an international automotive vehicles and spare parts company. The developed model was set up based on two multi-criteria decision making (MCDM) approaches: the Preference Ranking Organization Method for Enrichment of Evaluations II (PROMETHEE II) and data envelopment analysis (DEA). PROMETHEE II was employed to evaluate the effectiveness, while the DEA was utilized in order to measure the efficiency of the investigated DCs. The resulting hybrid model collectively creates what can conceptually and practically be considered a productivity evaluation model. The results also provide six different strategies through which distribution center locations can be evaluated in order to implement potential future initiatives.