An Evaluation of Cross-Efficiency Methods: With an Application to Warehouse Performance

Bert Balk, Rene De Koster, C Kaps, Jose Zofio Prieto

Research output: Contribution to journalArticleAcademicpeer-review

4 Citations (Scopus)

Abstract

Cross-efficiency measurement is an extension of Data Envelopment Analysis that allows for tie-breaking ranking of the Decision Making Units (DMUs) using all the peer evaluations. In this article we examine the theory of cross-efficiency measurement by comparing a selection of methods popular in the literature. These methods are applied to performance measurement of European warehouses. We develop a cross-efficiency method based on a rank-order DEA model to accommodate the ordinal nature of some key variables characterizing warehouse performance. This is one of the first comparisons of methods on a real-life dataset and the first time that a model allowing for qualitative variables is included in such a comparison. Our results show that the choice of model matters, as one obtains statistically different rankings from each one of them. This holds in particular for the multiplicative and game-theoretic methods whose results diverge from the classic method. From a managerial perspective, focused on the applicability of the methods, we evaluate them through a multidimensional metric which considers their capability to rank DMUs, their ease of implementation, and their robustness to sensitivity analyses. We conclude that standard weight-restriction methods, as initiated by Sexton et al. [48], perform as well as recently introduced, more sophisticated alternatives.

Original languageEnglish
Article number126261
Pages (from-to)126261
JournalApplied Mathematics and Computation
Volume406
DOIs
Publication statusPublished - 1 Oct 2021

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