Resource allocation for supply chains based on Pareto-optimal two-stage cross-efficiency model

Abstract

The contradiction between the scarcity of common resources and the infinity of human demand for these resources has a significant impact on social development. Therefore, resource allocation can make the best use of limited resources in economic activities. Taking the two-stage supply chain where the outputs from the upstream supplier are taken as the inputs for the downstream manufacturer as an example, this paper applies the cross-efficiency model to comprehensively evaluate the efficiency scores of supply chains in the process of resource allocation and explores the relationship between the cross-efficiency of the supply chain and that of two enterprises within this supply chain. Furthermore, the self-interested behavior of enterprises is taken as the Pareto improvement principle to propose a Pareto-optimal two-stage cross-efficiency model, and this model can be used to optimally allocate the limited resources among two-stage supply chains. A common set of weights is determined to make all supply chains DEA efficient. Finally, the proposed model is illustrated to be feasible and effective through a practical application of 27 Iranian resin production companies.