Supplier selection and evaluation in e-commerce enterprises: a data envelopment analysis approach

Abstract

PurposeE-commerce refers to the facilitation and delivery of goods and services to the customers employing an electronic arrangement. For an e-commerce firm, the customer service level provided by its suppliers can make or break the firm. The purpose of this research is to help e-commerce enterprises in addressing the vast challenge of complex supplier selection and evaluation process that must be performed vigilantly.Design/methodology/approachThe present study utilizes a three-pronged approach that integrates supplier management practices with the operational business practices of an e-commerce enterprise. In the first step, key performance factors for e-commerce capable suppliers are identified through an expert opinion and existing supplier management literature. Further, Data Envelopment Analysis (DEA) is employed to obtain the efficiency score for each supplier that enables their ranking on various performance parameters. Lastly, the suppliers are classified into different categories based on their performance and efficiency.FindingsUnder the proposed classification scheme, top five suppliers, i.e. supplier 1, 7, 9, 11 and 17 are categorized as HE (High Performance and Efficient). It is suggested that e-commerce enterprises must build long-term relationship with the identified top performing suppliers. The study also provides real insights into supplier's performance on a number of objective criteria. Further, the present study enhances the overall performance and productivity of an e-commerce firm by achieving input cost minimization and output quality maximization, simultaneously.Research limitations/implicationsThe results are valid for e-commerce enterprises in general. However, the present DEA model can be further evolved when applied in case of any particular e-commerce enterprise depending upon the internal capabilities of that firm. The nuances related to a firm's own supply capability development can be further explored by practitioners and researchers.Practical implicationsThe proposed approach is expected to motivate decision-makers to consider using more sophisticated approached like DEA in supplier evaluation processes. Also, as a benchmarking technique, the proposed supplier classification approach is expected to be highly useful for practitioners in real-life settings.Originality/valueThe novel contribution of this study includes the supplier evaluation, ranking and classification for e-commerce enterprises based on the real-life data. The insights would help the practitioners to formulate novel strategies for appropriately investing in supplier relationships.