A relative efficiency assessment model for logistics systems

We propose a series of methodologies that can evaluate relative efficiency of logistics units (centers) in three categories: managerial, cost, and operational efficiency. Inputs and outputs of logistics systems are first defined. Appropriate quantitative and qualitative measures for the three categories are then selected. Employed also are Analytic Hierarchy Process, Weighted Scoring Method, Stochastic Frontier Model, and Data Envelopment Analysis for the development of a comprehensive assessment scheme. Our scheme not only assesses the degree of relative efficiency of logistics units but also identifies the sources of inefficiency in each unit. The methodologies are applied to a large telecommunications company which operates 12 distribution centers nation wide. Relative efficiencies of the centers are compared using 1995–1997 performance data. Summarized are the level of efficiency of each distribution center for each of the three categories. The degree and sources of inefficiency of each distribution center are also discussed.