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Title: Supplier's total cost of ownership evaluation: a data envelopment analysis approach
Authors: Visani, Franco
Barbieri, Paolo
Di Lascio, F. Marta L.
Raffoni, Anna
Vigo, Daniele
Keywords: Total cost of ownership
Data envelopment analysis
Supply chain management
Issue Date: 2016
Publisher: © Elsevier Ltd
Citation: VISANI, F. ...et al., 2016. Supplier's total cost of ownership evaluation: a data envelopment analysis approach. Omega, 61, pp.141-154.
Abstract: Supplier Total Cost of Ownership (TCO) is a widely-known approach for determining the overall cost generated by a supplier relationship, but its adoption is still limited. The complex calculations involved - and in particular the activity-based costing procedure for computing the cost of managing the relationship - pose a major obstacle to widespread TCO implementation. The purpose of this work is to formulate a Data Envelopment Analysis application (denoted 'TCO-based DEA') that can act as a proxy for TCO, and to test its ability to approximate the results of TCO with less effort. The study is based on the analysis of two categories of suppliers (74 in total) of a medium-sized Italian mechanical engineering company. The results show that TCO-based DEA is able to significantly approximate the outcomes of TCO, for both the efficiency indexes and rankings of suppliers, whilst requiring substantially less effort to perform the analysis. To our knowledge, this is the first study to develop a DEA-based tool for approximating TCO and to test it in a real-world setting. The research shows significant potential within the supply chain management field. In particular, TCO-based DEA can be used for analysing suppliers' performance, rationalising and reducing the supplier base, assisting the negotiation process.
Description: This paper was accepted for publication in the journal Omega and the definitive published version is available at http://dx.doi.org/10.1016/j.omega.2015.08.001
Version: Accepted for publication
DOI: 10.1016/j.omega.2015.08.001
URI: https://dspace.lboro.ac.uk/2134/19412
Publisher Link: http://dx.doi.org/10.1016/j.omega.2015.08.001
ISSN: 0305-0483
Appears in Collections:Published Articles (Business)

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