A sequence of targets toward a common best practice frontier in DEA

Abstract

Original data envelopment analysis models treat decision-making units as independent entities. This feature of data envelopment analysis results in significant diversity in input and output weights, which is irrelevant and problematic from the managerial point of view. In this regard, several methodologies have been developed to measure the efficiency scores based on common weights. Specifically, Ruiz and Sirvant (Omega 65:1-9, 2016) formulated an aggregated DEA model to minimize the gap between actual performances and best practices and identify a common best practice frontier. Their model is capable of determining target units for all units under evaluation, simultaneously, with the property that all of them are located on a common best practice frontier. However, in practice it is difficult for some units to achieve that specified target in a single step. Consequently, developing a methodology for assisting units to reach their corresponding targets, through a path of intermediate improving targets, is useful. This problem is investigated in this paper, and we propose a stepwise target setting approach which provides a path of intermediate targets for each unit. We study efficient and inefficient units separately and provide two distinct models for each category, although both of them are intrinsically similar. A simple numerical example and an application are also provided to illustrate our approach.