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Higher quality 6" x 9” black and white photographic prints are available for any photographs or illustrations appearing in this copy for an additional charge. Contact UMI directly to order. Bell & Howell Information and Leaming 300 North Zeeb Road, Ann Arbor, MI 48106-1346 USA 800-521-0600 UMI ® Benchmarking the Efficiency of Government Warehouse Operations: A Data Envelopment Analysis Approach by Randal Jay Zimmerman Dissertation Submitted in Partial Fulfillment of the Requirement for the Degree of Doctor of Philosophy Applied Management and Decision Sciences Walden University May 2000 UM! Number: 9979214 Copyright 2000 by Zimmerman, Randal Jay All rights reserved. ® UMI UMI Microform9979214 Copyright 2000 by Bell & Howell Information and Learning Company.
All rights reserved. This microform edition is protected against unauthorized copying under Title 17, United States Code. Bell & Howell Information and Leaming Company 300 North Zeeb Road P. Box 1346 Ann Arbor, Ml 48106-1346 Walden University APPLIED MANAGEMENT AND DECISION SCIENCES This is to certify that I have examined the doctoral dissertation by Randal Jay Zimmerman and have found that it is complete and satisfactory in all respects, and that any and all revisions required by the review committee have been made.
Ruth Maurer, Committee Chair Applied Management and Decision Sciences Faculty Walden University APPLIED MANAGEMENT AND DECISION SCIENCES This is to certify that [ have examined the doctoral dissertation bv Randal Jay Zimmerman and have found that it is complete and satisfactory in all respects. Judith Barlow, Committee Member Applied Management and Decision Sciences Faculty ak a Signgture ifs7 |e Dátc Walden University APPLIED MANAGEMENT AND DECISION SCIENCES This ts to certify that [ have examined the doctoral dissertation by Randal Jay Zimmerman and have found that it is complete and satisfactory in all respects. Marilyn Simon, Committee Member Education Faculty Signature 4-17-00 Date Walden University APPLIED MANAGEMENT AND DECISION SCIENCES This is to certify that [ have examined the doctoral dissertation by Randal Jay Zimmerman and have found that it is complete and satisfactory in all respects. William Bowlin, External Member 2⁄2.
c6, Signature 4e Date Walden University APPLIED MANAGEMENT AND DECISION SCIENCES This is to certify that I have examined the doctoral dissertation by Randal Jay Zimmerman and have found that it is complete and satisfactory in all respects. Donald Fausel, Faculty Representative Human Services Faculty Signature DOCTOR OF PHILOSOPHY DISSERTATION OF RANDAL JAY ZIMMERMAN APPROVED: Chistes Boers CAROLE A. BEERE VICE PRESIDENT FOR ACADEMIC AFFAIRS WALDEN UNIVERSITY 2000 ABSTRACT The purpose of this research was to benchmark the performance of 18 Defense Logistics Agency (DLA) supply warehouses located within the contiguous United States using 22 months of historical data. This study used a mathematical programming tool, Data Envelopment Analysis (DEA), to measure the relative overall efficiency of the warehouses and to determine the sources of inefficiency where they exist.
DLA anticipates a reduced workload for each of the warehouses in the future, which translates into excess capacity and increased inefficiency for the system. With this methodology, DLA can intelligently target facilities for closure. The closure of facilities can result in potential savings of millions of tax dollars. This study concluded that less automated warehouses are more efficient than warehouses with higher levels of automation, and that larger warehouses are more efficient than smaller warehouses.
Acknowledgements To Dr. Ruth Maurer, who went well beyond the role of mentor and advisor to become my friend and confidant. I am confident that I would have never had the ability or drive required to complete this demanding program without her friendship, support, and guidance. My hope is that one day + can emulate her ability to inspire students.
Judith Barlow, Marilyn Simon, and Bud Bowlin, who served on my committee. Bowlin’s insight and experience in applying data envelopment analysis were invaluable to me for the study. I am forever thankful to them all for their accessibility, patience and counsel. Additionally, I would like to thank Mr.
Charlie Myers from the Defense Logistics Agency. Without his help, I would not have had access to the data for the study. Finally, I thank my long-time mentor and friend, Dr. Woolsey’s encouragement, I would have never considered pursuing this goal.
To my friends and colleagues at Walden, I have appreciated your enthusiasm and interest in my project and my family. I would especially like to thank Rick Johnson, Nancy Disla, Larry Burt, Janet Pershing, Mary Rydesky, and Christina Melnarik. You all have been my core group of friends and supporters during the program. While we are ii all in different programs, we are united in our common goal of life long learning.
I look forward to many years of Sharing and continued growth together. To Major Jeff Huisingh, Captain Jeff Schavland, and Randy Wendell, who are my friends away from school, I can never thank you enough for listening, your encouragement, and support. To my wonderful children, Tiffany and Bucky, words do not adequately express how proud I am of you and your achievements. You have your Mother’s charm and patience.
Finally, to my best friend, college sweetheart, and partner, my wife, Jackie. Without your love and support, I could have never done the things I have been able to achieve either personally or professionally. You have helped me to maintain focus and balance my life. Thank you for being a wonderful mother for our children and for always providing me with a sounding board.
1ii TABLE OF CONTENTS LIST OF TABLES 2. ccc ee cc ee eee ee tte nn eee een neces vil LIST OF FIGURES. ¬ cence ne eee eevee Vill CHAPTER 1: INTRODUCTION TO THE STUDY. ee ec kE1]1]1Ả1]ẦĂAdẲAĂdẲdẪĂH eee 1 Focus of the Study.
cee ec ee ew eee eae 3 Statement of the Problem .000- cee ete ee ees 4 Current Performance Evaluation Methodology .5 Purpose of the Study. ea mewn eer e nea eeeees -. cece eee ce ee eee ee ee wee ee wee eee we eae 7 DEA Background. cece cee ew wee ete eee ¬ eee ees.
cece ee ee eee ee ee ee wee eens 9 Study Significance. ec ce ee en eee ees 10 Warehouse Operations Overview 2. cc ce ee ee ee eee 11 Organization of the Remainder of the Study. 13 CHAPTER 2: LITERATURE REVIEW.
eee eee ce eee ee eee 14 Introduction. cee e eens 14 Literature Search Methodology. Cee eer cette mee nme mene ee nee cern sece 14 Efficiency Measurement Concepts .00 cc cee enna eees 16 Data Envelopment AnalySiS. ccc ce ec cee et eee twee ee ene eee nee 21 Basic CCR Formulation.
ence eer eee wee cece eens eee ee 23 iv CCR Output Maximization. ee ee ee ne te neces 28 CCR Input Minimization. ee ee ee eee eee 31 BCC Model. seme eee meee we en wae ¬ da.
32 BCC Output Maximization. cee ewe eee ene cease 34 BCC Input Minimization 2. ee eee ee eee eens 36 Other DEA Warehousing Applications. ccc eee en.
ween 37 Scope and Limitations. Ce ce we eee ew en ee een eee 40 SUMMALY 2 eee eee ee eee eee eee eee we eee eee eet eee eae 41 CHAPTER 3: RESEARCH METHODOLOGY .00cc ccc cceccccaae 43 Introduction. *FỪtaẮ 43 Description of the Methodology .0 cee ees cee eee 43 DEA Model Specification. 0c cc ee eee eee 44 DMU Selection Criteria.
¬ 45 Selection of DMUs. Oe eee wee ee ee tere ewan 46 Variable Selection Criteria. c cc ee eee 46 Selection of Variables ot me me ee ee ew ee eee weno eae 47 DEA ModelS. 50 CCR Input Minimization.
Ce etre cee care ene we reas 51 BCC Input Minimization. ee ee we ee eee nee 51 Data Collection and Analysis. cee eee cee ee eee BS Summary. a BH 1 cee eee een eee es OS CHAPTER 4: RESULTS.
cw ee eee wees 54 INC KOGUCtion wo. ec cee eee ee ee eee eee ee la. cc ee cee ee eee eens 59 Model Sensitivity 6<. 69 Returns to Scale wwe cee we ew ce eee wee teat ee eee 72 SUMMALY 2.
enc ences seem em eee newer eens eee eee ee eae ID CHAPTER 3S: CONCLUSION. ec eee eee ee ee ee eee eee 77 SUMMALY 2 cee cc eee cee eee ee ee eee ee eee ee eee ee eeees 77 Social Impact. oe eter eae oe ee ae rrr 80 Conclusions and Recommendations. eee ccc ee cee nee eee ee ee ween e ne eee anees 83 Appendix A: Efficiency Graphs 0.
we ee ew we. 87 Appendix B: CCR Detailed Results. ce we en. cee cn ees 91 Appendix C: BCC Detailed Results.
ewes 111 CURRICULUM VITAE 2. ce ec ce ee wee we ew eee een aes 130 vì LIST OF TABLES TABLE 1 WAREHOUSE INPUT AND OUTPUT VALUES s - 93 TABLE 2 WAREHOUSE INEFFICIENCY. 64 TABLE 3 MANN-WHITNEY U TEST RESULTS. TABLE 4 WAREHOUSE EFFICIENCY 8Y SIZE.
- 70 TABLE S RETURNS TO SCALE RESULTS. Vil LIST OF FIGURES Figure 1 DEA output maximization graphical representation. 27 Figure 2 DEA input minimization graphical representation. 29 Figure 3 BCC output maximization graphical representation.
35 Figure 4 EFrazelle and Hackman storage formula. 38 Figure 5 Line items shipped. 55 Figure 6 Line items shipped in ascending order .0 eee eae 56 Figure 7 Efficiency results. i er 61 Figure 8 Line items shipped vs.
62 Figure Al Total labor costs vs. 87 Figure A2 Total non-labor costs vs. 88 Figure A3 Depreciation vs. 89 Figure A4 Receipt processing time vs.
90 viili CHAPTER 1: INTRODUCTION TO THE STUDY Introduction Performance measurement has become an integral part of most business operations. Firms can choose to measure their performance either internally using historical data or externally with data collected from their industry peers. The literature refers to this practice as benchmarking. Camp (1989) defined benchmarking as the search for the best practices in the industry that lead to improved performance.
Heizer and Render (1995) summarized benchmarking as a process that involves the selection of a demonstrated standard of performance that represents the absolute best performance of processes that are similar to one’s own. According to Camp, benchmarking forces a firm to evaluate and compare its performance in various functions to similar functions in other firms. To be effective, the comparison must be of similar functions, but it is not necessary for the firms to be in exactly the same business. Camp (1989) reported that the critical self- examination performed during the benchmarking process should aid companies in discovering their own inefficiencies and to establish realistic goals for improvement.
Camp suggested a framework for the benchmarking process, which consists of five basic components: Planning, Analysis, Integration, Action, and Maturity.
