Partial input to output impacts in DEA: Production considerations and resource sharing among business subunits

Abstract

Abstract Data envelopment analysis (DEA) is a methodology for evaluating the relative efficiencies of peer decision‐making units (DMUs), in a multiple input/output setting. Although it is generally assumed that all outputs are impacted by all inputs, there are many situations where this may not be the case. This article extends the conventional DEA methodology to allow for the measurement of technical efficiency in situations where only partial input‐to‐output impacts exist. The new methodology involves viewing the DMU as a business unit, consisting of a set of mutually exclusive subunits, each of which can be treated in the conventional DEA sense. A further consideration involves the imposition of constraints in the form of assurance regions (AR) on pairs of multipliers. These AR constraints often arise at the level of the subunit, and as a result, there can be multiple and often inconsistent AR constraints on any given variable pair. We present a methodology for resolving such inconsistencies. To demonstrate the overall methodology, we apply it to the problem of evaluating the efficiencies of a set of steel fabrication plants. © 2013 Wiley Periodicals, Inc. Naval Research Logistics, 2013

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