A Production Model to Measure Technical Efficiency in the Refrigerated Warehouse Industry

Abstract

Warehouses are a vital link in the global supply chain, and play a critical role in inventory flow by providing points of storage and coordination. While much work has been done on individual parts of the warehousing process, only a handful of studies have analyzed the technical efficiency of the warehouse as a whole. As a subset of this industry, refrigerated warehouses provide a much needed role in the distribution of agricultural, food, and pharmaceutical products. As such, they have unique parameters that set them apart from other warehousing operations. There has been little formal analysis on refrigerated warehousing. Here, a production model for refrigerated warehouses is reported, and firm-specific technical efficiency estimates obtained through stochastic frontier analysis are provided. In addition, factors affecting efficiency were identified. This study found the mean efficiency estimated for the refrigerated warehouse industry in 2012 was 0.72. Additionally, the number of inventory turns was found to correlate with increased efficiency while order error percentage and occupancy of warehouse space were correlated with inefficiency.