Frontier analysis of supply chain management: A game-theoretic perspective

Supply chains can be seen as an empirically well represented case of decentralized decision making systems with co-existence of common (system) objectives and private (firm-specific) interests. A non-trivial supply chain consists of several stages (tiers) where each tier consists of several firms or plants delivering products and services to downstream tiers. The analysis is further complicated by intertemporal heterogeneity (demand changes) as well as task heterogeneity (product differentiation). Not surprisingly, non-parametric approaches have been attempted to supply chain performance assessment with various success. In this paper, we present a general model for supply chain performance assessment where we highlight the (i) the strategic behavioral perspective (decentralization), (ii) the intertemporal perspective (inventory building) and (iii) the competition-cooperative perspective (system limits). We show that DEA is indeed a useful approach for both system-wide and unit-specific evaluation, including the decomposition of productive efficiency in DMU vs chain level effects. Drawing analogies from the merger analysis framework in Bogetoft and Wang (2005), the analysis of supply chain performance can be seen as an exercise in rational decision making under a set of temporal common constraints.