Opening the "Black Box" of efficiency measurement: Input allocation in multi-output settings

B. Dierynck, L.J.H. Cherchye, J. Sabbe, F. Roodhooft, B. de Rock

Research output: Contribution to journalArticleScientificpeer-review

Abstract

We develop a new data envelopment analysis (DEA)-based methodology for measuring the efficiency of decision-making units (DMUs) characterized by multiple inputs and multiple outputs. The distinguishing feature of our method is that it explicitly includes information about output-specific inputs and joint inputs in the efficiency evaluation. This method contributes to opening the “black box” of efficiency measurement in two different ways. First, including information on the input allocation substantially increases the discriminatory power of the efficiency measurement. Second, it allows us to decompose the efficiency value of a DMU into output-specific efficiency values, which facilitates the identification of the outputs the manager should focus on to remedy the observed inefficiency. We demonstrate the usefulness and managerial implications of our methodology by means of a unique data set collected from the activity-based costing (ABC) system of a large service company with 290 DMUs.
Original languageEnglish
Pages (from-to)1148-1165
JournalOperations Research
Volume61
Issue number5
DOIs
Publication statusPublished - 2013

Fingerprint

Decision making
Data envelopment analysis
Efficiency measurement
Black box
Managers
Decision making units
Methodology
Industry
Remedies
Usefulness
Evaluation
Inefficiency
Activity-based costing

Cite this

@article{0a3d2aad146448e0abfbfbbdb8ad078e,
title = "Opening the {"}Black Box{"} of efficiency measurement: Input allocation in multi-output settings",
abstract = "We develop a new data envelopment analysis (DEA)-based methodology for measuring the efficiency of decision-making units (DMUs) characterized by multiple inputs and multiple outputs. The distinguishing feature of our method is that it explicitly includes information about output-specific inputs and joint inputs in the efficiency evaluation. This method contributes to opening the “black box” of efficiency measurement in two different ways. First, including information on the input allocation substantially increases the discriminatory power of the efficiency measurement. Second, it allows us to decompose the efficiency value of a DMU into output-specific efficiency values, which facilitates the identification of the outputs the manager should focus on to remedy the observed inefficiency. We demonstrate the usefulness and managerial implications of our methodology by means of a unique data set collected from the activity-based costing (ABC) system of a large service company with 290 DMUs.",
author = "B. Dierynck and L.J.H. Cherchye and J. Sabbe and F. Roodhooft and {de Rock}, B.",
year = "2013",
doi = "10.1287/opre.2013.1185",
language = "English",
volume = "61",
pages = "1148--1165",
journal = "Operations Research",
issn = "0030-364X",
publisher = "INFORMS Inst.for Operations Res.and the Management Sciences",
number = "5",

}

Opening the "Black Box" of efficiency measurement : Input allocation in multi-output settings. / Dierynck, B.; Cherchye, L.J.H.; Sabbe, J.; Roodhooft, F.; de Rock, B.

In: Operations Research, Vol. 61, No. 5, 2013, p. 1148-1165.

Research output: Contribution to journalArticleScientificpeer-review

TY - JOUR

T1 - Opening the "Black Box" of efficiency measurement

T2 - Input allocation in multi-output settings

AU - Dierynck, B.

AU - Cherchye, L.J.H.

AU - Sabbe, J.

AU - Roodhooft, F.

AU - de Rock, B.

PY - 2013

Y1 - 2013

N2 - We develop a new data envelopment analysis (DEA)-based methodology for measuring the efficiency of decision-making units (DMUs) characterized by multiple inputs and multiple outputs. The distinguishing feature of our method is that it explicitly includes information about output-specific inputs and joint inputs in the efficiency evaluation. This method contributes to opening the “black box” of efficiency measurement in two different ways. First, including information on the input allocation substantially increases the discriminatory power of the efficiency measurement. Second, it allows us to decompose the efficiency value of a DMU into output-specific efficiency values, which facilitates the identification of the outputs the manager should focus on to remedy the observed inefficiency. We demonstrate the usefulness and managerial implications of our methodology by means of a unique data set collected from the activity-based costing (ABC) system of a large service company with 290 DMUs.

AB - We develop a new data envelopment analysis (DEA)-based methodology for measuring the efficiency of decision-making units (DMUs) characterized by multiple inputs and multiple outputs. The distinguishing feature of our method is that it explicitly includes information about output-specific inputs and joint inputs in the efficiency evaluation. This method contributes to opening the “black box” of efficiency measurement in two different ways. First, including information on the input allocation substantially increases the discriminatory power of the efficiency measurement. Second, it allows us to decompose the efficiency value of a DMU into output-specific efficiency values, which facilitates the identification of the outputs the manager should focus on to remedy the observed inefficiency. We demonstrate the usefulness and managerial implications of our methodology by means of a unique data set collected from the activity-based costing (ABC) system of a large service company with 290 DMUs.

U2 - 10.1287/opre.2013.1185

DO - 10.1287/opre.2013.1185

M3 - Article

VL - 61

SP - 1148

EP - 1165

JO - Operations Research

JF - Operations Research

SN - 0030-364X

IS - 5

ER -