A metafrontier analysis approach for assessing the efficiency of freight service providers

Abstract

This paper presents a DEA approach for a company to assess the efficiency of its shipments and of the haulers that handle them. It is based on the concept of metafrontier, which benchmarks a given shipment, first against all the shipments of the same hauler and then against all the shipments of all the haulers. Thus, the efficiency of each shipment as well as that of the corresponding hauler can be determined. The scale efficiency of the shipments, related to the cost premium paid for shipments whose weight, volume or distance is not large enough, is determined. In addition, the model estimates the functional dependence of the shipment cost on the load weight, volume and distance. An experimental design to validate the proposed efficiency assessment approach and test the factors that influence its accuracy has been carried out. The application of the proposed approach to a large Spanish food company is presented and used to illustrate its usefulness. The proposed approach is able to determine the minimum cost of a shipment as a function of its weight, volume and distance. This tool proved to be useful to assess the price quotes received by the company and bargain better prices.