DataEnvelopment Analysis (DEA) has become very important tool for quantitativeanalysis to check and evaluate the performance of one, two or multiple firmsand to understand how the efficiencies of the firm can be improved withreference to the benchmark firms. This approach can be applied to extensivevariety of activities with respect to the current requirement. Gradually DEAutilization is increasing in the current market as it aids in meeting the todaysdemand. DataEnvelopment Analysis (DEA) an extensive and useful technique was originallydeveloped by Rhodes and Charnes_Cooper in 1978 to majorly do the evaluation of publicsector organizations and NGOs. DEA has been utilized to improve the efficiencyto optimize the resources majorly in services which may not be easy tocalculate even based on the experience. Majority of service providers can takeadvantage from this power technique and improve efficiency and productivity. Morepeople start using this it will help the research assistant to identify the”benefits” and “banes” of this tool and may highlight the limitations, if any.
Research on DEA and its fetched result will help to identify the areas wherethis tool may not be effective as desired. DEA approach is not user-friendly orhandy for managers to understand and implement the technique. This is one ofthe bottleneck which is preventing DEA from entering the business. Aim is to focus on how this tool helps inevaluating efficiency, to identify the areas to advance productivity, understandlimitations of DEA, and how to make use of this tool.
This will assist applicatorsto evaluate the importance of using it in services domain.DEAcan be of help in the situations where a comparative performance of dissimilarcomponents is to be linked and assessed. Ø Tocheck for inconsistency or inefficiency in the operations.Ø DEA candeal with intricate relation between multiple inputs and multiple outputs. Ø DEAtechniques are associated to linear programming concepts.
EfficiencyMeasurementTocalculate the efficiency of the various service units and demonstrate the sameis very critical and at the same time biggest concern on which technique to beadopted. E.g. How to optimize the staff in big departmental stores, how toaptly distribute the number of doctors/nurses on daily basis in hospital, howto fix the no. of branches of banks in particular region etc. Efficiency= Output / Input Thisformula though looks simple becomes complicated based on the number of outputsand inputs in the specified problem. If output is higher than the input itsuggests that efficiency is very high. Once the system/ unit reaches itsoptimum efficiency level i.
e. output /input ratio cannot be increased further,it becomes evident that certain new method or technology needs to be adopted toestablish new benchmarks. Technical and Scale Efficiency Forexample, in effectiveness of Portable charger, we might measure it as chargingrate i.e hours per full charge.
We can definethe efficiency of “Charger” with the ideal chargers rate of charge. Let us takethat Full charge of I-phone 5S taken by Charger is 2 hours, however ascommitted is 2.5 hours. We can say that charger is operating at 80% efficiency (2/2.5Hours). To give the optimize results, charger shall perform at 125% (2.5/2Hours) from its current level. This would reduce the time taken.
Further, afterthis efficiency is achieved for higher benchmarks, technology of charger needsto be improved. It is to be ensured that charger of similar kinds are comparedto establish the realistic results. Relative efficiency measurementThemeasurement of relative efficiency is used where there are numerous possible insufficientinputs and outputs. A common measure for relative efficiency is, Efficiency = Weighted sum of Outputs Weighted sum of inputs Whichintroducing the usual notation can be written as Efficiencyof Unit = U1Y1j + U2Y2j +…. V1X1j + V2X2j +….
.. U1 =Weight of Output iY1j=Amount of Output 1 from unit jV1 =Wright given to input 1X1j=Amount of input 1 to unit j (Efficiency usually lie in the range0,1).