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Centralized resource reduction and target setting under DEA control

Author

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  • HOSSEINZADEH LOTFI, Farhad

    () (Islamic Azad University, Tehran, Iran)

  • HATAMI-MARBINI, Adel

    () (Université catholique de Louvain, CORE and Louvain School of Management, Belgium)

  • AGRELL, Per

    () (Université catholique de Louvain, CORE and Louvain School of Management, Belgium)

  • GHOLAMI, Kobra

    () (Islamic Azad University, Tehran, Iran)

Abstract

Data envelopment analysis (DEA) is a powerful tool for measuring the relative efficiencies of a set of decision making units (DMUs) such as schools and bank branches that transform multiple inputs to multiple outputs. In centralized decision-making systems, management normally imposes common resource constraints such as fixed capital, budgets for operating capital and staff count. In consequence, the profit or net value added of the units subject to resource reductions will decrease. In terms of performance evaluation combined with resource allocation, the interest of central management is to restore the general efficiency value of the DMUs. The paper makes four contributions to the literature: (1) we take into consideration the performance evaluation of the centralized budgeting of hierarchical organizations along with sales and market allocation within manufacturing and distribution organizations; (2) we address the evaluation problems that the central decision maker does not desire to deteriorate the efficiency score of the DMUs after input and/or output reduction; (3) we develop a common set of weights (CSW) method based on the goal program (GP) concept to control the total weight flexibility in the conventional DEA models; (4) we extend a new approach to optimize the inputs and/or outputs contraction such that the efficiency of all DMUs will get bigger than or equal to the efficiency of previous change. We ultimately present a numerical example involving with three inputs and two outputs to illustrate the applicability and efficacy of the proposed approach.

Suggested Citation

  • HOSSEINZADEH LOTFI, Farhad & HATAMI-MARBINI, Adel & AGRELL, Per & GHOLAMI, Kobra, 2013. "Centralized resource reduction and target setting under DEA control," CORE Discussion Papers 2013005, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  • Handle: RePEc:cor:louvco:2013005
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    References listed on IDEAS

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    Keywords

    data envelopment analysis; inputs and outputs deterioration; common set of weights;

    JEL classification:

    • C14 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Semiparametric and Nonparametric Methods: General
    • M11 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Production Management
    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis

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