Improved efficiency measures through directional distance formulation of data envelopment analysis

• Published in: Annals of operations research Vol. 229; no. 1; pp. 325 - 346
• Main Authors: Diabat, Ali, Shetty, Udaya, Pakkala, T. P. M.
• Format: Journal Article
• Language: English
• Published: New York Springer US 01-06-2015; Springer; Springer Nature B.V
• Subjects: Business and Management; Combinatorics; Data envelopment analysis; Industrial efficiency; Measurement; Methods; Operations research; Operations Research/Decision Theory; Performance evaluation; Studies; Theory of Computation; Directional distance function; Non-radial efficiency; Efficiency; Data envelopment analysis
• ISSN: 0254-5330; 1572-9338
• DOI: 10.1007/s10479-013-1470-9

This paper develops a model for an improved efficiency measure through directional distance formulation of data envelopment analysis. It deals with cases where positive and negative values co-exist as production factors. The developed model has properties such as scalar quantity for measuring efficiency and it identifies all sources of inefficiency. The measure is weakly monotonic; units and translation do not vary with respect to inputs and outputs. The proposed model, under some restrictions, reduces to basic Data Envelopment Analysis (DEA) models such as Charnes-Cooper-Rhodes (CCR), Banker-Charnes-Cooper (BCC), and a slack based model (SBM). In addition to the above, the proposed model includes the closest targets for a given inefficient unit to achieve efficiency with less effort. The proposed model is validated using a case study done on Information Technology firms operating in India.