Identifying the efficiency status in network DEA

Data envelopment analysis (DEA) is commonly employed to evaluate the efficiency performance of a decision making unit (DMU) that transforms exogenous inputs into final outputs. In such a black-box DEA approach, details of an internal production process of the DMU are typically ignored and hence the locations of inefficiency are not adequately provided. In view of this, DEA researchers have recently developed various network approaches by looking into the black box, where the inputs that enter the box and the outputs that come out of it are only considered. However, most of these network approaches evaluate divisional efficiency by using an optimal solution of their respective optimization problem. If such an optimal solution is used in the case when there are multiple optima, then managerial guidance based on this solution alone may be inappropriate because more appropriate targets from the viewpoint of management may be ignored. Taking this fact into account, therefore, we propose a network approach for identifying the efficiency status of each DMU and its divisions. This approach provides a practical computational procedure.

► We point out some problems associated with existing network DEA models.
► We propose a network approach for identifying the efficiency status of each DMU and its divisions.
► Our approach provides a practical computational procedure.