Data envelopment analysis (DEA) in operations research
and economics is a non-parametric method for estimating the production
frontiers. Productive efficiency of decision making units (DMUs) is measured by
Data Envelopment Analysis. Although DEA has a strong link to production theory
in economics, this tool is used in operations management for benchmarking,
where there are a set of measures which is selected to benchmark the
performance of service operations and manufacturing. Data envelopment analysis
(DEA), which is sometimes known as frontier analysis, was first put forward by
Charnes , Cooper and Rhodes in the year1978. It is a performance measurement
technique which can be used to evaluate the relative efficiency of
decision-making units in organizations. Here a DMU is a distinct unit within an
organization that has the flexibility to make some of the important decisions but not necessarily has complete freedom with
respect to some important decisions.
of such units to which DEA has been applied are: police stations, banks,
hospitals, tax offices, defense bases
(army, navy, air force), university departments and schools. Note here that one
advantage of DEA is that it can be applicable to non-profit making organizations.
Since the technique was first proposed , much empirical and theoritical work has already been done. Approaches
which are non-parametric have the benefit of not assuming a particular
functional form or shape for the frontier, however they do not provide a
general relationship (equation) relating to output and input.
is commonly used in evaluating the efficiency of a number of producers. Data
Envelopment Analysis (DEA) is a very powerful service management and
benchmarking technique to evaluate non – profit and public sector
organizations. DEA has since been proven to locate ways to improve servicewhich
has not been visible with other techniques. Yet there is anomaly surrounding
this developing methodology.
Data envelopment analysis (DEA) is based on technique named linear programming
for measuring the relative performance of organisational units where the presence
of multiple outputs and inputs makes comparisons difficult to make. This
introduces the technique and uses an example to show how relative efficiencies
can be made to be determined and can be targeted for inefficient units set.