Intermediate measures consideration for a value chain or multistage system: an efficiency analysis using DEA approach

Abstract

It has been recognized that performance evaluation is extremely important as the old adage says “you can’t improve what you don’t measure”. Companies using performance measurement were more likely to achieve leadership positions in their industry and were almost twice as likely to handle a major change successfully (Wisner et al., 2004). Today, business performance is evaluated not only in terms o f a single business unit but rather the entire value chain. Performance measurement of the entire value chain is a lot more difficult and complex compared to the performance measurement of a single business unit. When managing a value chain, apart from the formidable multiple performance measures problem, assessing the performance of several tiers, e.g., suppliers, manufacturers, retailers and distributors further complicates the matter. Basically, there are two main problems in value chain performance measurement, which are a) existence of multiple measures that characterize the performance of each member, for which the data must be acquired, b) existence of intermediate measures between them, e.g., the output from the upstream ca n become the input to the downstream which further complicates the performance assessment.