Data envelopment analysis (DEA) in operations researchand economics is a non-parametric method for estimating the productionfrontiers. Productive efficiency of decision making units (DMUs) is measured byData Envelopment Analysis. Although DEA has a strong link to production theoryin economics, this tool is used in operations management for benchmarking,where there are a set of measures which is selected to benchmark theperformance of service operations and manufacturing. Data envelopment analysis(DEA), which is sometimes known as frontier analysis, was first put forward byCharnes , Cooper and Rhodes in the year1978. It is a performance measurementtechnique which can be used to evaluate the relative efficiency ofdecision-making units in organizations.
Here a DMU is a distinct unit within anorganization that has the flexibility to make some of the important decisions but not necessarily has complete freedom withrespect to some important decisions. Examplesof such units to which DEA has been applied are: police stations, banks,hospitals, tax offices, defense bases(army, navy, air force), university departments and schools. Note here that oneadvantage of DEA is that it can be applicable to non-profit making organizations.Since the technique was first proposed , much empirical and theoritical work has already been done.
Approacheswhich are non-parametric have the benefit of not assuming a particularfunctional form or shape for the frontier, however they do not provide ageneral relationship (equation) relating to output and input.DEAis commonly used in evaluating the efficiency of a number of producers. DataEnvelopment Analysis (DEA) is a very powerful service management andbenchmarking technique to evaluate non – profit and public sectororganizations. DEA has since been proven to locate ways to improve servicewhichhas not been visible with other techniques. Yet there is anomaly surroundingthis developing methodology. 1.
ABSTRACTData envelopment analysis (DEA) is based on technique named linear programmingfor measuring the relative performance of organisational units where the presenceof multiple outputs and inputs makes comparisons difficult to make. Thisintroduces the technique and uses an example to show how relative efficienciescan be made to be determined and can be targeted for inefficient units set.