The use of categorical variables in Data Envelopment Analysis

Article Abstract:

Used in several types of business applications (to determine decision-making units' technical inefficiencies and generate improvement goals), Data Envelopment Analysis (DEA) achieves these objectives by creating peer groups for every functional unit and identifying means for improving the functioning of each peer group, with applicable on-off elements integrated into the planned improvement. The emphasis in this examination is on the estimation of efficient production frontiers. The technical inefficiency evaluation mathematical formulation is extended to address the case of noncontrollable categorical variables. Utilizing real data for 69 pharmacies, the DEA technique is demonstrated. This introduction of categorical variables into the DEA approach relaxes specific assumption needs, and adds credibility to the knowledge gained about improvement goals.

Decision-making, Decision making, Industrial efficiency, Economic efficiency, Logistics, Business logistics, Industrial management

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A comparative application of data envelopment analysis and translog methods: an illustrative study of hospital production

Article Abstract:

Two estimation models, translog cost function and data envelopment analysis (DEA), are compared by applying each model to identical hospital cost and production data. The translog cost function method suggests that constant returns to scale are present throughout the production correspondence. The DEA results suggest that there are differing returns to scale in different segments of the production correspondence. Both models find that hospital care for children is more resource-intensive than is the production of care for adults. The DEA technical efficiency estimates are related to capacity utilization. The translog estimates were not related to capacity utilization.

General medical & surgical hospitals, Operations research, Management science, Hospitals, Production standards, Hospital administration

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Integrated system design and operational decisions for service sector outlets

Article Abstract:

A normative approach is presented to aid decisions concerning acquisition, building and operating a new outlet of a fast food operation at a particular site, identifying best practices in various environments. The method is seen as appropriate also for use by other service outlets such as banks and pharmacies. The approach involves an integration of parametric regression analysis with non-parametric allocative data envelopement analysis. A case involving Hardees is used to illustrate the method.

Eating places, Noncommercial research organizations, Planning, Fast food restaurants, Services industry, Service industries, Store location

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