Measuring and benchmarking

the performance of coffee stores

for retail operations
Seong-Jong Joo
School of Business, Clayton State University, Morrow, Georgia, USA
Philipp A. Stoeberl
Department of Management, John Cook School of Business,
Saint Louis University, St Louis, Missouri, USA, and
Kristin Fitzer
College of Business, Central Washington University,
Ellensburg, Washington, USA
Abstract
Purpose The purpose of this paper is to measure and benchmark the retail operations of selected
coffee stores owned by a specialty coffee company.
Design/methodology/approach Data envelopment analysis is used for benchmarking the
performance of eight coffee stores for two years using internal annual reports.
Findings Major ndings are that the inefcient stores need to improve occupancy related expenses
and revenues from non-coffee items. In addition, the coffee stores locate in an afuent residential area
outperform the stores in the business district.
Research limitations/implications The limitation of this paper is in the use of nancial data.
To overcome this issue, non-nancial data should be included.
Originality/value The contributions of this paper are twofold: providing a framework for
performance measures within a benchmarking perspective and evaluating the comparative efciency
of coffee stores using internal data, which is not accessible to the general public.
Keywords Coffee, Retailing, Performance measures, Benchmarking, Data analysis
Paper type Research paper
1. Introduction
Coffee has been around since the fteenth century and is the second most traded
commodity next to oil (Hoover, 2007). The coffee shop industry domestically includes
20,000 stores with a combined annual revenue of about 11 billion dollars (IMCR Case
Studies and Management Resources, 2007). The coffee industry is not only interesting
but also offers many challenges as it has become increasingly competitive, demanding
efciency in all areas of operations for success. Measuring and benchmarking the
performance or efciency of coffee stores using various factors, which is an important
part of the managerial process, may not be simple and consequently requires a very
high level of effort. The use of conventional efciency measures and nancial ratios
will provide simple and straightforward results. The advantages of these measures
are that they are readily available and easy to use and understand. However, they
The current issue and full text archive of this journal is available at
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The authors would like to thank the reviewer(s) for their valuable comments and suggestions.
The performance
of coffee stores
741
Benchmarking: An International
Journal
Vol. 16 No. 6, 2009
pp. 741-753
qEmerald Group Publishing Limited
1463-5771
DOI 10.1108/14635770911000088
provide only a partial picture of performance and are unable to incorporate
multivariate aspects of performance measures. In fact, when we measure and
benchmark the performance of organizations, we need to include multiple factors such
as purchasing, labor, building and markets for their individual effects and, at the same
time, for their overall effects. Managers will want to know the comparative
performance of the stores determining which factors are more inuential for
the protability of a store and/or which factors should be improved to increase
protability. We demonstrate an approach for measuring and benchmarking
multivariate aspects of performance using actual data from a coffee company.
Particularly, we analyze the operating efciency of the coffee stores using data
envelopment analysis (DEA), which is a well-known approach used in models for the
comparative efciency measures of organizations or organizational units. Measuring
that part of performance is an essential process for management. Without information
or feedback on the performance of organizations, it will be difcult to manage them
efciently and effectively.
We failed to nd a scholarly study about performance measures and benchmarking
for coffee stores at the time of this study. Accordingly, this study will be a rst attempt in
this area. In addition, the use of internal data, which is not accessible by the public, is
unique to this study. Because internal data is used, the anonymity of the company will be
maintained throughout the study. The contributions of this study include providing a
practical framework for performance measures within a benchmarking perspective in
general, and analyzing comparative efciency for the retail operations of selected coffee
stores using pertinent internal data along with market or location information in
particular. This study is applicable to similar businesses for measuring and
benchmarking performance. The rest of this study consists of reviewing related
studies within a benchmarking perspective, exploring DEA for a methodology,
describing the choice of data and variables and presenting and discussing results
followed by conclusions that include the summary of ndings and the limits and future
direction of the study.
2. Related studies
For benchmarking the efciency of coffee stores for retail operations, we employ DEA,
which is widely used for measuring and benchmarking the relative efciency of
various entities. Selected recent DEA studies for benchmarking involve measuring the
performance of nancial institutes (McEachern and Paradi, 2007), healthcare
organizations (Duffy et al., 2006; Ferrier and Valdmanis, 2004), railway zones
(George and Rangaraj, 2008), seaports (Cullinane et al., 2005), airports (Graham, 2005),
third party logistics providers (Min and Joo, 2006), schools (Johnes, 2006), a charity
organization (Joo et al., 2007), telecommunication service providers (Debnath and
Shankar, 2008; Kwon et al., 2008) and utility companies (Goncharuk, 2008).
Because this study focuses on the comparative efciency measures of coffee stores
as retail operations, we investigate the related literature but fail to nd one at the time
of this study. Coffee stores increasingly carry light meals and can be part of the
restaurant industry in a broad sense (the fast casual market). Accordingly, we expand
our literature review to the restaurant industry and note a handful of studies
measuring operating efciency using DEA.
BIJ
16,6
742
Donthu and Yoo (1998) argue that there is no uniform, broadly accepted denition of
productivity measurement methodology for retailing and summarize four major
problems related to retail productivity measures. First, salesperson productivity has
been used comparably for retail productivity due to the labor-intensive nature of
retailing. Second, existing studies do not measure productivity among individual
stores. Instead, they focus on two extreme levels such as salespersons (an excessive
micro level) and retail industries or aggregation of stores (a broad macro level). Third,
most existing productivity measures are simple and absolute ones such as
conventional productivity measures and ratios. Comparative productivity measures
among peer retail stores are necessary for benchmarking and managerial processes.
Last, the problems of existing productivity measures such as productivity indexes and
regression analyses sometimes hinder the understanding of retail productivity.
To overcome these problems, Donthu and Yoo (1998) suggest DEA for retail
productivity measures and demonstrate the application of DEA for measuring the
relative efciency of 24 fast-food chain restaurants in a major metropolitan city. They
include two output variables: sales in dollars and the results of customer satisfaction
surveys and four input variables: store sizes in serving area, the experience of
managers in years, promotion/give-away expenses in dollars, and location such as in a
shopping mall or free-standing, in a basic DEA model. However, they do not provide
sources of efciency or inefciency, which are identied by employing different types
of returns-to-scale, such as constant returns-to-scale and variable returns-to-scale.
Lan et al. (2006) use DEA for developing an efciency-based recruitment plan for
fast food chain restaurants in Taiwan. They select 27 fast food chain restaurants in
South Taiwan and include three output variables: prot after control, cash ow and
total number of customers served and four input variables: salary for employees,
salary for managers, benets and utility expenses. Except for one output variable, total
number of customers served, all variables are measured nancially. They identify
sources of efciency (or inefciency) such as pure technical or managerial efciency
and scale efciency (SE) by employing different types of returns-to-scale. Pure
technical efciency (PTE) represents efciency due to management. Meanwhile, SE
denotes efciency because of the different scales used for computing efciency in DEA
models. Accordingly, PTE is useful for managers to improve the efciency of
organizations. After computing efciency scores, they perform a series of what-if
analyses to determine recruitment requirements. Unlike Donthu and Yoo (1998) and
Lan et al. (2006) do not include a location variable.
Reynolds (2003) points out the problems of methodologies for evaluating
productivity for restaurant operations and suggests the use of DEA to include a
wide range of factors, which inuence restaurants sustainability. He lists three
popular productivity measures with their shortcomings: partial factor productivity
measures that lack comprehensive measures of operating efciency; total factor
productivity measures that are unable to provide comparative efciency for multiple
operations and regression analysis that fails to generate benchmark information.
To illustrate the benets of DEA, he explains the results of two studies: one that
analyzes 83 midscale, corporate owned and operated restaurants (Reynolds and Gu,
2004) and the other that evaluates a chain of 62 full service restaurants (Reynolds and
Thomson, 2007). For measuring the operating efciency of the restaurants, both
The performance
of coffee stores
743
studies include controllable and uncontrollable variables in their models. In addition,
Reynolds and Thomson (2007) incorporate the effect of location into their model.
3. Methodology
DEA is a useful approach for measuring relative efciency among similar
organizations or objects, which are called decision-making units (DMUs) in DEA
analyses. Because DEA can identify relatively efcient organizations or DMUs among
a group of given DMUs, it is a promising tool for benchmarking. DEA is a special
application of linear programming (LP) based on the frontier methodology of Farrell
(1957), advanced by Charnes et al. (1978) and further advanced by Banker et al. (1984).
There are numerous variations of DEA models for different analyses since Charnes
et al. (1978).
To explore the mathematical property of a basic DEA model, let E
0
be an efciency
score for the base DMU 0 then:
Maximize E
0

P
R
r1
u
r0
y
r0
n o
P
I
i1
v
i0
x
i0
n o 1
subject to:
P
R
r1
u
r0
y
rk
n o
P
I
i1
v
i0
x
ik
n o # 1 for all k 2
u
r0
; v
i0
d for all r; i 3
where:
y
rk
is the observed quantity of output r generated by unit k 1,2, . . . ,N.
x
ik
is the observed quantity of input i consumed by unit k 1,2, . . . ,N.
u
r0
is the weight to be computed given to output r by the base unit 0.
v
i0
is the weight to be computed given to input i by the base unit 0.
d is a very small positive number.
The fractional programming model can be converted to a common LP model without
much difculty. Although the LP model can be solved with ordinary LP software, the
use of various DEA solvers can save time and effort for solving the LP model. Sherman
and Ladino (1995) summarize the capability of DEA in the following manner:
.
identies the best practice DMU that uses the least resources to provide its
products or services at or above the quality standard of other DMUs;
.
compares the less efcient DMUs to the best practice DMU;
.
identies the amount of excess resources used by each of the less efcient
DMUs; and
.
identies the amount of excess capacity or ability to increase outputs for less
efcient DMUs, without requiring added resources.
BIJ
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744
Major DEA studies have utilized selected organizations and departments or branches
in organizations as DMUs for measuring their efciency. Moreover, some studies have
demonstrated that DEA can be used for evaluating personal efciency by choosing, for
example, physicians as DMUs (Chilingerian, 1995; Chilingerian and Sherman, 1994;
Chu et al., 2003). Thus, DEA can be employed for measuring the efciency of any
entity, which has inputs and outputs and is homogeneous with peer entities in an
analysis. According to a recent DEA study, there is a remedy for a group of entities
that are not homogeneous (Haas, 2003). Thus, DEA can be applied to the wide variety
of DMUs without much restriction as long as DMUs satisfy the basic requirements of
inputs and outputs. In addition, DEA is applicable to DMUs with categorical and
uncontrollable (or environmental) input data (Athanassopoulos and Thananssoulis,
1995; Mahajan, 1991). Because DEA is solved with LP, it inherits the same limitations
as found in using LP. Especially, degeneracy with LP can be a problem for
benchmarking studies by neglecting an alternative optimal solution (Fumero, 2004).
In this case, a two stage LP method is suggested for detecting degeneracy.
In this study, involving benchmarking operations of coffee stores,
Charnes-Cooper-Rhodes (CCR), Banker-Charnes-Cooper (BCC), and bilateral CCR and
BCC models are employed. A CCR model utilizes constant returns to scale so that all
observed production combinations can be scaled up or down proportionally. A BCC
model, on the other hand, uses variable returns to scale and is solved by a piecewise
linear convex frontier. In addition, both input oriented and output oriented models are
used depending on the selection of variables. To get pure technical efciencies, BCC
efciency scores are compared to the results of the CCR model. For understanding
location differences, bilateral CCR and BCC models are applied.
4. Data and variables
We have data for eight coffee retail stores, associated with a premier coffee retailer, for
two years, current and past year, and maintain 16 DMUs per model. They are located
in two different districts: four stores are located in an afuent residential area and the
remaining four stores are found in a typical business area in Seattle, Washington.
We will test for a location difference in operating efciencies of coffee stores along with
input and output variables.
We have two different sets of variables for two models. Model 1 includes one output
variable: total sales and four input variables: cost of sales, wages and benets, other
expenses and occupancy expenses. Total sales consist of total restaurant and retail
sales. This variable shows the total sales being taken in by each retail location. The rst
input variable used in this model, cost of sales includes purchasing and other costs that
are associated with the goods for sale. Wages and benets, the second input variable,
gives total costs of labor associated to the sales of each store. Some items included are
vacation, bonuses, payroll taxes and salaries. Other expenses, the third input variable,
encompass items such as telephone, building and equipment, maintenance, security,
education and training. The fourth variable used in this model is occupancy expenses,
and it incorporates the cost of rent, utilities, insurance and other costs associated with
the occupancy of the retail location. Model 1 will show the overall efciency of retail
stores major expenses. Occupancy expenses are considered as uncontrollable.
Model 2 contains two output variables: sales-restaurant and sales-retail and three
input variables: cost of sales, wages, and other expenses. The two output variables are
The performance
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745
encompassed in total sales used in Model 1, but it should be noted that in Model 2, total
sales have been separated into restaurant sales and retail sales. Some items included in
restaurant sales are espresso drinks, pastries, and drip coffee. Items in retail sales
include packaged food, brewing equipment, general merchandise, and whole bean
sales. All of the input variables are the same as used in Model 1 with the exception of
occupancy expenses. We exclude this uncontrollable variable and try to measure the
efciency on the major operating characteristics of retail stores. Table I shows
variables and their descriptive statistics for the two models analyzed in this study.
5. Results and discussion
First, we apply CCR and BCC input-oriented models to Model 1 that includes total sales
for an output variable and cost of sales, wages and benets, other expenses, and
occupancy for the four input variables. CCR models employ constant returns-to-scale
and provide technical efciency (TE), which is global optimal. Meanwhile, BCC models
use variable returns-to-scale and measure PTE or operational efciency, which is local
optimal. Accordingly, employing both CCR and BCC models together will provide
meaningful managerial insights for understanding pure operational efciency along
with TE. Because there are one output and four input variables, CCR and BCC
input-oriented models are selected for analyses. Table II exhibits the results of CCR-I
and BCC-I analyses for Model 1.
In the CCR-I analysis, only three DMUs are 100 per cent efcient. Store 2
demonstrates strong efciency such as 100 per cent efciency in both the past and
current year. Stores 1, 3, 4, 5 and 6 tend to maintain decreasing efciency scores. Stores
7 and 8 show a positive trend for their efciency scores. For pure operational efciency,
nine DMUs are 100 per cent efcient in the BCC-I analysis. As shown in Table II, the
efciency scores generated by BCC models are greater than or equal to those of CCR
models. Stores 6, 7 and 8 along with Store 3 in the current year need to improve their
pure operating efciency. The last column in Table II displays ranks for stores
nancial contribution to the companys prots. It is reasonable to expect that the ranks
roughly coincide with the ranks of the CCR-I model. However, the ranks of the BCC-I
model look different from those two ranks. This is because the BCC model focuses on
pure operational efciency without considering market conditions and other external
factors that inuence DMUs efciency, which are measured with SE. SE is computed
Model Variable Minimum Maximum Average SD Variable type
Model 1 Total sales 316,612 3,117,709 1,278,542.81 843,549.48 Output
Cost of sales 114,095 1,161,470 419,118.94 292,557.21 Input
Wages and benets 131,850 1,526,475 521,115.88 380,045.33 Input
Other expenses 16,360 217,328 80,184.56 58,627.72 Input
Occupancy 59,269 1,147,130 247,954.81 266,946.51 Input
Model 2 Sales-restaurant 286,060 2,833,148 1,153,197.56 777,374.03 Output
Sales-retail 22,107 326,610 125,345.13 100,684.39 Output
Cost of sales 114,095 1,161,470 419,118.94 292,557.21 Input
Wages and benets 131,850 1,526,475 521,115.88 380,045.33 Input
Other expenses 16,360 217,328 80,184.56 58,627.72 Input
Note: In US dollars
Table I.
Descriptive statistics
for variables
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746
as follows: SE u
CCR
=u
BCC
, where u
CCR
and u
BCC
represent the CCR and BCC scores of
a DMU, respectively. Thus, we have TE PTE SE. Using this decomposition
of efciency, we can identify the sources of inefciency. SE reveals unfavorable
conditions for DMUs while PTE shows pure operational efciency, as explained before.
For example, Stores 6 and 7 maintain high SE scores close to 100 per cent. Accordingly,
their low BCC scores are due to inefcient operations. This nding indicates that the
managers of Stores 6 and 7 must put forth additional effort to improve the efciency of
operations. Meanwhile, Stores 4 and 5 are 100 per cent efcient in the BCC model but
they are considerably inefcient for SE. Thus, their low efciency scores (TE) in the
CCR model are due to unfavorable or market conditions. Because BCC models compute
pure operational efciency, it is desirable to review potential improvements indicated
by the BCC models; specically, what inputs to improve and by how much. Table III
displays information for potential improvements suggested by the BCC-I model.
Among the input variables, Occupancy, which includes expenses related to stores
occupancy, requires higher levels of improvement than any other variable in the model.
Potential improvements for Stores 3, 6, 7 and 8 in the current year provide store
managers with managerial insights to increase efciency for their store operations.
Next, we split total sales into two output variables: sales from restaurant and sales
from retail operations. As a part of diversication efforts, coffee retailers tend to
increase their retail operations by adding items other than coffee drinks. Considerable
revenues are generated from non-coffee drinks; for example, music CDs, general
merchandise, coffee utensils, cookies/cakes and non-coffee drinks. Thus, it is important
to divide total sales into two sales categories. For input variables, we drop Occupancy,
which is xed and uncontrollable in the short-term, such as within one year.
Accordingly, we have sales and its directly related expenses in Model 2, which are
controllable within the short-term. For Model 2, we apply CCR and BCC output-oriented
CCR-I BCC-I
Store TE Rank PTE Rank SE Rank by total contribution
1_Current 89.50 5 100.00 1 89.50 3
1_Past 93.58 4 100.00 1 93.58 4
2_Current 100.00 1 100.00 1 100.00 2
2_Past 100.00 1 100.00 1 100.00 1
3_Current 86.07 6 97.24 10 88.51 5
3_Past 100.00 1 100.00 1 100.00 6
4_Current 70.27 9 100.00 1 70.27 8
4_Past 71.38 8 100.00 1 71.38 7
5_Current 64.30 14 100.00 1 64.30 16
5_Past 65.71 13 100.00 1 65.71 15
6_Current 68.99 10 70.22 13 98.25 9
6_Past 75.59 7 76.44 12 98.89 10
7_Current 67.98 11 68.91 14 98.65 11
7_Past 66.48 12 68.61 15 96.90 14
8_Current 64.25 15 67.52 16 95.16 13
8_Past 58.19 16 92.12 11 63.17 12
Notes: TE: technical efciency; PTE: pure technical efciency
Table II.
Efciency scores
in percentages and
ranks for Model 1
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747
models and try to determine efciency for the two types of revenues. Table IV shows
the results of CCR-O and BCC-O analyses for Model 2.
Stores 6, 7 and 8 have low PTE scores while keeping high SE scores. This indicates
that their inefciency is due to operations, not external factors. However, Store 5
retains low SE scores meaning that their source of inefciency is due to unfavorable
conditions. For only operations or PTE, Store 5 is 100 per cent efcient compared to the
other stores in the model. Because the selection of the variables for the results in
Table IV is limited to the ones directly related to operations, the inefciency identied
CCR-O BCC-O
Store TE Rank PTE Rank SE
1_Current 95.98 5 100.00 1 95.98
1_Past 95.69 6 100.00 1 95.69
2_Current 100.00 1 100.00 1 100.00
2_Past 100.00 1 100.00 1 100.00
3_Current 100.00 1 100.00 1 100.00
3_Past 100.00 1 100.00 1 100.00
4_Current 78.20 9 100.00 1 78.20
4_Past 81.49 8 87.06 11 93.60
5_Current 66.60 15 100.00 1 66.60
5_Past 72.67 12 100.00 1 72.67
6_Current 71.27 13 75.42 15 94.50
6_Past 84.33 7 87.13 10 96.79
7_Current 76.95 10 76.98 14 99.96
7_Past 75.82 11 79.04 13 95.93
8_Current 68.45 14 69.83 16 98.02
8_Past 61.43 16 82.24 12 74.70
Table IV.
Efciency scores in
percentages and ranks
for Model 2
Store Total sales Cost of sales Wages and benets Other expenses Occupancy
1_Current 0.00 0.00 0.00 0.00 0.00
1_Past 0.00 0.00 0.00 0.00 0.00
2_Current 0.00 0.00 0.00 0.00 0.00
2_Past 0.00 0.00 0.00 0.00 0.00
3_Current 0.00 24.99 22.76 221.54 220.91
3_Past 0.00 0.00 0.00 0.00 0.00
4_Current 0.00 0.00 0.00 0.00 0.00
4_Past 0.00 0.00 0.00 0.00 0.00
5_Current 0.00 0.00 0.00 0.00 0.00
5_Past 0.00 0.00 0.00 0.00 0.00
6_Current 0.00 229.78 243.53 238.34 261.03
6_Past 0.00 226.05 235.72 223.56 263.76
7_Current 0.00 234.40 238.18 231.09 273.82
7_Past 0.00 231.39 231.87 254.58 273.53
8_Current 0.00 232.49 242.58 238.11 262.46
8_Past 10.17 27.88 242.58 27.88 27.88
Note: Positive number indicates increase and negative number means reduction
Table III.
Potential improvement
in percentages for Model 1
by BCC-I
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by the BCC-O model is primarily due to operations. Table V shows potential
improvement for the operations of coffee stores in the BCC-O model.
Inefcient stores show the high levels of improvement needed with respect to their
retail sales, such as non-coffee items. For diversication and efciency, they need to
increase their retail sales in addition to restaurant sales. Among the resources, wages
and benets are major areas for improvement or reduction.
Last, we include a Location variable in Model 1, using one for the stores in an
afuent residential area (Group 1) and two for the stores in a mostly business district
nearby residential areas (Group 2). The two areas are geographically separated and
demographically different. We have an even number of DMUs in the two areas and test
a difference in efciency with bilateral DEA models. Table VI shows the result by the
bilateral CCR-I and BCC-I models.
The efciency scores in Table VI are between zero and one. For computing the
efciency scores of bilateral models, assume that there are two groups of DMUs such
as G
1
and G
2
. We compute efciency scores of DMUs in G
1
against DMUs in group G
2
or vice versa. The DMU n [ G
1
is enveloped by DMUs in G
2
and then the optimal
efciency score is given by u * OA=OB , 1, where OA is the distance between the
origin and the line connecting frontiers in Group G
1
or G
2
, and OB is the distance
between the origin and n. If the DMU n cannot be enveloped by DMUs in G
2
then n
should be expanded radially to B to be enveloped. The optimal efciency score is given
by u * OA=OB . 1. Thus, the optimal efciency score is not bounded by one and
can take a value larger than one. This property, which provides non-overlapping ranks
for DMUs, is useful when we compare rank sums for two groups with a non-parametric
statistical test such as the Wilcoxon-Mann-Whitney test. The rank sum statistics for
both bilateral CCR-I and BCC-I models are identical. Rank sums are 36 for Group 1 and
100 for Group 2. The test statistic is 23.36067 with p-value, 0.00078. The difference
between the rank sums is statistically signicant. Thus, we conclude that the DMUs in
Store Sales-restaurant Sales-retail Cost of sales Wages and benets Other expenses
1_Current 0.00 0.00 0.00 0.00 0.00
1_Past 0.00 0.00 0.00 0.00 0.00
2_Current 0.00 0.00 0.00 0.00 0.00
2_Past 0.00 0.00 0.00 0.00 0.00
3_Current 0.00 0.00 0.00 0.00 0.00
3_Past 0.00 0.00 0.00 0.00 0.00
4_Current 0.00 0.01 0.00 0.00 20.01
4_Past 14.87 20.86 0.00 24.87 220.86
5_Current 0.00 0.00 0.00 0.00 0.00
5_Past 0.00 0.00 0.00 0.00 0.00
6_Current 32.59 93.59 0.00 219.18 29.45
6_Past 14.77 287.29 27.98 215.90 0.00
7_Current 29.91 342.92 216.99 216.31 0.00
7_Past 26.52 999.90 20.06 0.00 230.81
8_Current 43.21 43.21 0.00 214.65 21.58
8_Past 21.60 229.83 0.00 242.88 224.60
Note: Positive number indicates increase and negative number means reduction
Table V.
Potential improvement
in percentages for
Model 2 by BCC-O
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749
Group 1 or in the afuent residential area maintain higher operating efciency than the
DMUs in the business area.
6. Conclusion
Curious and challenged by the coffee industry and specically gourmet coffee shops,
and by the brewing of coffee drinks and serving of light meals, we treat coffee stores
as restaurants and attempt to measure their operating efciency using internal data
along with an external factor, namely, the location variable that reects market
characteristics. We have data for eight coffee retail stores for two years, current and
past year, and maintain 16 DMUs per DEA model. We have two sets of variables with
different combinations of input and output variables and then test the two sets with
various DEA models such as input-oriented CCR and BCC models, output-oriented
CCR and BCC models, and input-oriented bilateral CCR and BCC models. The rst set
of variables includes one output variable: total sales and four input variables: cost
of sales, wages and benets, other expenses and occupancy expenses. The second
set of variables has two output variables: sales-restaurant and sales-retail and three
input variables: cost of sales, wages, and other expenses. By applying CCR and BCC
models together to the two sets of variables, we have identied the sources of
inefciency along with the comparative operating efciency of the selected coffee
stores. For the rst set of variables, we nd that the relatively inefcient stores in the
input-oriented BCC model show higher inefciency with respect to occupancy related
expenses than on other expenses. Regarding the second set of variables, the stores in
the output-oriented BCC model lack a signicant level of efciency for sales from
non-coffee items. An analysis of the make-up of said items is suggested resulting in
additions/reductions/or a different mix of these non-coffee items. In the bilateral
models, the coffee stores located in the afuent residential area outperform the stores
in the business district. Overall, this approach is useful for measuring the
performance of coffee retail stores and provides managerial insights into the
Bilateral CCR-I Bilateral BCC-I
Store Score Rank Score Rank Location
1_Current 1.5640 3 1.9786 4 1
1_Past 1.5482 4 1.8996 5 1
2_Current 2.9625 1 3.1244 1 1
2_Past 2.9023 2 2.9747 2 1
3_Current 1.3390 6 1.7322 8 1
3_Past 1.3710 5 2.0437 3 1
4_Current 1.0421 8 1.7760 7 1
4_Past 1.0659 7 1.8000 6 1
5_Current 0.6430 14 1.0000 9 2
5_Past 0.6571 13 1.0000 9 2
6_Current 0.6899 10 0.7022 13 2
6_Past 0.7559 9 0.7644 12 2
7_Current 0.6798 11 0.6891 14 2
7_Past 0.6648 12 0.6861 15 2
8_Current 0.6425 15 0.6752 16 2
8_Past 0.5819 16 0.9212 11 2
Table VI.
Comparisons of
efciency by location
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company. This study is also useful for benchmarking purposes as it identies
successful operations, which could be modeled by management. The contributions of
this study are twofold: providing a framework for performance measures within a
benchmarking perspective and evaluating the comparative operating efciency of
coffee stores using real data.
Finally, the limitation of this study resides within the use of nancial data.
To overcome this limitation, the company needs to collect and maintain non-nancial
data based on various perspectives. For example, the balanced scorecard approach is
an excellent candidate for selecting variables and evaluating the performance of stores
using DEA.
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About the authors
Seong-Jong Joo is an Associate Professor of Supply Chain Management at the School of Business,
Clayton State University in Atlanta, Georgia. He teaches graduate and undergraduate courses in
Supply Chain Management. His research interests include sourcing/purchasing, supply chain
collaboration, inventory management and performance measures/benchmarking. Seong-Jong Joo
is the corresponding author and can be contacted at: seong-jongjoo@clayton.edu
Philipp A. Stoeberl is the Mary Louis Murray Professor of Management and serves as the
Interim Chair of the Department of Management at the John Cook School of Business, Saint Louis
University. His teaches both graduate and undergraduate courses in Strategy and Current Issues
in Management. His current research interests include performance measures.
Kristin Fitzer is a recent graduate of Central Washington University and works in Seattle,
Washington.
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