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A maximum slacks-based measure of efficiency for closed series production systems

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  • Kao, Chiang

Abstract

The conventional slacks-based measure (SBM) model measures efficiency based on the target point that is farthest to the decision making unit (DMU) being assessed. The result is that the efficiencies for inefficient DMUs are relatively low, and more effort is required for the DMUs to become efficient. In this research, a model is developed to calculate the SBM efficiency based on the target that is closest to the assessed DMU for a closed series production system, where the outputs of a division are the only inputs for the succeeding division. The efficiency measured from this model satisfies the monotonicity property. It is greater than that measured from the radial model. Since the target is closest to the assessed DMU, less effort is required for inefficient DMUs to become efficient. Furthermore, the efficiency of the system can be decomposed into the product of the efficiencies of the component divisions. The divisions that cause unsatisfactory system performance can thus be detected. Making improvements to these divisions can effectively increase the efficiency of the system. A case of non-life insurance companies in Taiwan with a two-division series structure is studied for illustrative purposes.

Suggested Citation

  • Kao, Chiang, 2022. "A maximum slacks-based measure of efficiency for closed series production systems," Omega, Elsevier, vol. 106(C).
    • Handle: RePEc:eee:jomega:v:106:y:2022:i:c:s0305048321001341
    DOI: 10.1016/j.omega.2021.102525
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    Cited by:

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    2. Huaqing Wu & Jingyu Yang & Wensheng Wu & Ya Chen, 2023. "Interest rate liberalization and bank efficiency: A DEA analysis of Chinese commercial banks," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 31(2), pages 467-498, June.
    3. Monge, Juan F. & Ruiz, José L., 2023. "Setting closer targets based on non-dominated convex combinations of Pareto-efficient units: A bi-level linear programming approach in Data Envelopment Analysis," European Journal of Operational Research, Elsevier, vol. 311(3), pages 1084-1096.
    4. Sekitani, Kazuyuki & Zhao, Yu, 2023. "Least-distance approach for efficiency analysis: A framework for nonlinear DEA models," European Journal of Operational Research, Elsevier, vol. 306(3), pages 1296-1310.

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