LPI Based Two Stage Network DEA Model to Measure Logistics Efficiency:An Application on OECD Countries

Abstract

Purpose – Measuring logistics efficiency is important to understand the strengths and weaknesses of acountry’s logistics operations and to be able to do necessary improvements. A common practice in theliterature is applying Data Envelopment Analysis (DEA) with World Bank’s logistics performance index(LPI) values for measuring logistics efficiency of countries. While DEA is a powerful methodology forrelative efficiency measurement, a more sophisticated branch of DEA models is Network DEA (NDEA),especially for processes with inner sub-processes. The purpose of this study is to present a novel NDEAmodel for measuring logistics efficiencies and sub-efficiencies of countries.Design/methodology/approach – This study presents a relational two-stage network data envelopmentanalysis model to measure relative efficiency of a country’s logistics process. For the first time in literature,total logistics process of a country is divided into two sub-processes as production and service stages.Findings – Proposed Network DEA model utilizes international LPI scores and macroeconomic indicatorsto measure OECD countries’ logistics efficiencies for bi-yearly periods between 2010 and 2018. Obtainedresults favors 3 countries out of 37 with high logistics efficiencies. Also, by grouping the countries in termsof development level, results show that although developed countries have better logistics outputs interms of LPI index, most logistically efficient countries are developing economies in general. Discussion – This study with proposed NDEA model is open for further research and development. Themodel could be varied with different capital and labor measures, also could be improved by adding somedomestic LPI or other logistics indicators.