Two-tier Supplier Base Efficiency Evaluation Via Network DEA: A Game Theory Approach

Abstract

In today's competitive markets, firms try to reduce their supply cost by selecting efficient suppliers using different techniques. Several methods can be applied to evaluate the efficiency of supplier base. This paper develops generalized network data envelopment analysis models to examine the efficiency of two-tier supplier bases under cooperative and non-cooperative strategies where each tier has its own inputs/outputs and some outputs of the first tier can be fed back to the second tier. In cases that the proposed models become nonlinear an efficient heuristic method is proposed which can be used instead of existing time consuming methods like parametric linear programming approach. The implementation of the proposed method is demonstrated using a numerical examples and validity of proposed heuristic method is demonstrated via simulated data.