An Efficiency Measurement Framework for Multi-stage Production Systems

Boaz Golany (), Steven T. Hackman and Ury Passy
Additional contact information
Boaz Golany: Technion—Israel Institute of Technology
Steven T. Hackman: Georgia Institute of Technology
Ury Passy: Technion—Israel Institute of Technology

Chapter Chapter 13 in Data Envelopment Analysis, 2014, pp 285-305 from Springer

Abstract: Abstract We develop an efficiency measurement framework for systems composed of two subsystems arranged in series that simultaneously computes the efficiency of the aggregate system and each subsystem. Our approach expands the technology sets of each subsystem by allowing each to acquire resources from the other in exchange for delivery of the appropriate (intermediate or final) product, and to form composites from both subsystems. Managers of each subsystem will not agree to “vertical integration” initiatives unless each subsystem will be more efficient than what each can achieve by separately applying conventional efficiency analysis. A Pareto Efficient frontier characterizes the acceptable set of efficiencies of each subsystem from which the managers will negotiate to select the final outcome. Three proposals for the choice for the Pareto efficient point are discussed: the one that achieves the largest equiproportionate reduction in the classical efficiencies; the one that achieves the largest equal reduction in efficiency; and the one that maximizes the radial contraction in the aggregate consumption of resources originally employed before integration. We show how each choice for the Pareto efficient point determines a derived measure of aggregate efficiency. An extensive numerical example is used to illustrate exactly how the two subsystems can significantly improve their operational efficiencies via integration beyond what would be predicted by conventional analysis.

Keywords: Multi-stage production systems; Productivity and efficiency measurement; Data envelopment analysis (search for similar items in EconPapers)
Date: 2014
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:isochp:978-1-4899-8068-7_13

Ordering information: This item can be ordered from
http://www.springer.com/9781489980687

DOI: 10.1007/978-1-4899-8068-7_13

Access Statistics for this chapter

More chapters in International Series in Operations Research & Management Science from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().