Gradual efficiency improvement through a sequence of targets

Abstract

The goal in efficiency analysis is not only to evaluate a decision-making unit (DMU) performance, but also to find an efficient target which provides information on inputs reduction and outputs increment values that are necessary to remove inefficiencies for each inefficient DMU. In data envelopment analysis (DEA), the target unit is located on the efficient frontier and possibly far from the unit under assessment. Therefore, in practice performance improvement seems to be disappointing or even impossible to achieve in only one step for some inefficient DMUs. In this regard, finding intermediate targets is of great importance in benchmarking literature. In this article, we find a sequence of targets instead of a single target for each inefficient unit. In our method, the intermediate target at each step has three properties: (I) the intermediate targets and the unit under evaluation are all similar in size; (II) efficiency scores are ascending through the sequence of targets; (III) the target unit at each step is close to the special part of the efficient frontier as much as possible. These properties lead to finding a target that is more achievable in real applications.