A data envelopment analysis approach based on total cost of ownership for supplier selection

Abstract

Purpose-Management accounting contains several techniques such as total cost of ownership (TCO) that provide necessary information related to supply issues for supplier evaluation and selection purposes. However, it is not clear whether these techniques should be applied along with other evaluation approaches. This paper aims to examine such kind of applicability to provide some insight about alternative solutions, which can be considered as well. Design/methodology/approach-This paper proposes and demonstrates the application of data envelopment analysis (DEA) approach in evaluating the overall performances of suppliers on multiple criteria based on TCO concept and simulated data in a hypothetical firm and with a strategic orientation of being able to reduce TCO by identifying benchmark values. Findings-It is shown that management accounting techniques should be used in a holistic and comprehensive way and complemented by other evaluation approach in the supplier selection decision-support framework. Originality/value-The overall value of this study can be said to be a contribution to enhancing knowledge about management accounting and supplier selection. The results offer important theoretical and managerial implications and future research directions for purchasing as well as management accounting.

Selección de proveedores bajo una estrategia de abastecimiento múltiple en una empresa metalmecánica

“…Las técnicas individuales más aplicadas son el proceso analítico de jerarquías, los procesos de red analítica, el análisis de envolvente de datos, la lógica difusa, los algoritmos genéticos, la programación lineal, la programación por metas, la técnica de calificación de atributos múltiples sencillos, el razonamiento basado en casos, entre otros métodos (F. T. Chan y H. K. Chan, 2004;Ding, Benyoucef y Xie, 2005;Talluri y Narasimhan, 2005;Liu y Hai, 2005; K. L. Choy, Lee, Lau y L. C. Choy, 2005;Talluri, Narasimhan y Nair, 2006;Garfamy, 2006;Chen, Lin y Huang, 2006;Huang y Keskar, 2007;Ho, Xu y Dey, 2010;Dalalah, Hayajneh y Batieha, 2011;Ortiz Torres, Oramas Santos, Sanz Pérez, 2015).…”

Construction of capital procurement decision making model to optimize supplier selection using Fuzzy Delphi and AHP-DEMATEL

“…During vendor selection, the TCO factor also plays a vital role (Mohammady Garfamy, 2006; Ramanathan, 2007). A company needs to think about more than the price of a purchase, consideration needs to be given to other-related costs (Mohammady Garfamy, 2006; Ramanathan, 2007; Kanagaraj et al , 2016).…”

“…During vendor selection, the TCO factor also plays a vital role (Mohammady Garfamy, 2006; Ramanathan, 2007). A company needs to think about more than the price of a purchase, consideration needs to be given to other-related costs (Mohammady Garfamy, 2006; Ramanathan, 2007; Kanagaraj et al , 2016). All costs related to acquisition, usage, maintenance, follow-up of purchased goods or services as well as purchasing price are considered in TOC (Mohammady Garfamy, 2006; Ramanathan, 2007; Bubeck et al , 2016).…”

“…A company needs to think about more than the price of a purchase, consideration needs to be given to other-related costs (Mohammady Garfamy, 2006; Ramanathan, 2007; Kanagaraj et al , 2016). All costs related to acquisition, usage, maintenance, follow-up of purchased goods or services as well as purchasing price are considered in TOC (Mohammady Garfamy, 2006; Ramanathan, 2007; Bubeck et al , 2016). TOC is gradually playing a more significant role for a company in understanding their costs and selecting the appropriate vendor (Mohammady Garfamy, 2006).…”

“…All costs related to acquisition, usage, maintenance, follow-up of purchased goods or services as well as purchasing price are considered in TOC (Mohammady Garfamy, 2006; Ramanathan, 2007; Bubeck et al , 2016). TOC is gradually playing a more significant role for a company in understanding their costs and selecting the appropriate vendor (Mohammady Garfamy, 2006). It increases the buyer’s understanding of supplier performance (Mohammady Garfamy, 2006; Zhang and Zhang, 2011).…”