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IME 421 DEA Project
Transcript of IME 421 DEA Project
5. Future of DEA
Data Envelopment Analysis
DEA is most valuable in complex situations where there are multiple inputs and outputs which cannot be readily analyzed with other techniques, such as ratios, and where the number of DMUs being evaluated is so numerous that management cannot afford to evaluate each unit in depth.
For example, when comparing banks, each bank
has a certain number of tellers, a certain square
footage of space, and a certain number of
managers. These would be the DMU inputs. The
outputs for each bank may include the
number of personal transactions or business transactions processed in a given business day.
A management tool that compares RELATIVE efficiencies between similar producers from a homogenous group.
Utilizes linear programming- based methodology
All DMUs have the potential to operate as efficiently as the most capable DMU.
DMUs can be combined to form composite "virtual" producers
What could DEA be used for in industry?
Advantages of DEA
Data Envelopment Analysis
Before diving deeper into DEA, we must first define efficiency
Efficiency = Outputs / Inputs
In DEA, the subjects of
interest being compared
are referred to as Decision
Making Units (DMUs)
- Management tool to measure and identify employee performance
- To identify ways to improve efficiency of non-top performers
Time for Lunch Break
DEA in the Electricity Sector
Inputs: Man-hours, goods, capital, services, losses
Outputs: Energy delivered, customers, length of lines
DEA in Hospitals
Used to determine electricity rates
Inputs:Total salaries for doctors, total salaries for nurses
Outputs: In/outpatients, bed productivity, average turnover interval
Origins of DEA
Introduced in its present form in 1978, DEA was first used as a microeconomic tool to establish empirical relationships between inputs and outputs in the production industry. Since its conception, DEA is now commonly used to evaluate relative efficiencies for a broad range of industries including the service and entertainment industries.