Internal resource waste and centralization degree in two-stage systems: An efficiency analysis

• Building models for measuring the IRW in different kinds of supply chains.
• Investigating the relationship between centralization degree and IRW.
• More centralization brings less internal resource waste and more outputs.
• Centralized supply chain with only one intermediate measure could eliminate IRW.
• Conducting manager to determine centralization degree for waste reducing.

Internal resource waste refers to the waste in the intermediate resources between the upstream stage and downstream stage in a production or service system. This study examines a system with a two-stage structure, in which the outputs from the first stage are taken as the inputs for the second stage. Two-stage systems can exist in centralized, decentralized, or mixed organizational modes. In this paper, we propose two-stage DEA models considering a degree of centralization that makes it possible to measure internal resource waste in different system modes. Some managerial insights are tested and verified from the perspective of efficiency analysis. We find that: 1) when there is only one intermediate measure in a centralized two-stage system, internal resource waste can be eliminated completely, and 2) a higher degree of centralization in a two-stage system can lead to less internal resource waste and more expected outputs. Finally, we present a numerical example and two practical real-world examples that illustrate our approach and findings.