Efficiency Evaluation of Two-Stage Supply Chains with Loss Aversion using the Dea-Based Cooperative Approach

Abstract

Most supply chains in reality are composed of multiple enterprises which are independent individuals in terms of organizational structures and operating modes. From the perspective of performance evaluation, optimizing each enterprise’s efficiency independently will probably result in undesired inventory of intermediate products in the supply chain. 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 introduces enterprises’ relative dominance into allocating the responsibility of inventory management between two decentralized enterprises. To motivate these enterprises to adopt the allocation strategy, this paper takes the loss aversion of enterprises into account to reveal the utility subjectively perceived by each decentralized enterprise insisting on independence instead of cooperation. Subsequently, a DEA-based cooperative model is developed to readjust the production processes of two decentralized enterprises. We find that adjusting the relevant parameters is able to explore the relationship between the proposed model and the non-cooperative model and the relationship between the proposed model and the centralized model. Finally, a practical example of coordinating sustainable supply chains is applied to illustrate the effectiveness of the proposed model.