Exploring supplier performance risk and the buyer's role using chance-constrained data envelopment analysis

Abstract

Current sourcing paradigms are described by greater complexity in managing suppliers' performance in purchasing cycle execution, product quality and logistics competence. When we combine the stages of the order fulfillment cycle with the buyer's information sharing factors, a more complete view of the buyer-supplier exchange becomes useful for performance evaluation of both the suppliers and the buyers. Using operational data obtained from a large telecommunications firm, which placed strategic importance on measuring the performance in the purchase order fulfillment cycle stages, this study offers a new context for supplier evaluation. This context also conceptualizes several on-time delivery disruption scenarios as supplier delivery performance risk, and investigates the sensitivity of both the buyer's information sharing and the suppliers’ performance capabilities to on-time delivery disruptions. We evaluate supplier performance and segment suppliers through recourse to chance-constrained data envelopment analysis at high and low discriminatory power levels. Our results show that there are statistically significant relationships between the dimensions of information sharing by the buying firm and the classification of supplier firms at varying levels of on-time delivery performance risk. We also identify robust suppliers demonstrating the capability to remain efficient across disruption levels despite poor buyer performance on information sharing factors, and provide managerial insights on buyer-supplier exchange.