4/28/2017 Aslacksbasedmeasureofefficiencyindataenvelopmentanalysis

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Abstract
EuropeanJournalofOperationalResearch
Keywords Volume130,Issue3,1May2001,Pages498509
1. Introduction
2. A slacks-based measure of efficie
3. Relationship with the CCR model
4. Observations on the dual problem TheoryandMethodology
5. An illustrative example
6. How to deal with zeros in data
Aslacksbasedmeasureofefficiencyindataenvelopment
7. Comparisons with the Russell mea analysis
8. Conclusion
Acknowledgements KaoruTone
References
Showmore
https://doi.org/10.1016/S03772217(99)004075 Getrightsandcontent
Figures and tables
Table 1
Table 2
Table 3 Abstract
Table 4
Inthispaper,wewillproposeaslacksbasedmeasure(SBM)ofefficiencyinData
EnvelopmentAnalysis(DEA).Thisscalarmeasuredealsdirectlywiththeinputexcesses
andtheoutputshortfallsofthedecisionmakingunit(DMU)concerned.Itisunitsinvariant
andmonotonedecreasingwithrespecttoinputexcessandoutputshortfall.Furthermore,
thismeasureisdeterminedonlybyconsultingthereferencesetoftheDMUandisnot
affectedbystatisticsoverthewholedataset.Thenewmeasurehasacloseconnection
withothermeasuresproposedsofar,e.g.,CharnesCooperRhodes(CCR),Banker

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CharnesCooper(BCC)andtheRussellmeasureofefficiency.Thedualsideofthis
modelcanbeinterpretedasprofitmaximization,incontrasttotheratiomaximizationof
theCCRmodel.Numericalexperimentsshowitsvalidityasanefficiencymeasurement
toolanditscompatibilitywithothermeasuresofefficiency.

Keywords
DEAEfficiencySlacksProfitUnitsinvariantRussellmeasure

1.Introduction
SincetheinnovativeworkbyCharnesetal.(1978),studiesinDataEnvelopment
Analysis(DEA)havebeenextensive:morethan1000papersby1996.Oneofthemain
objectivesofDEAistomeasuretheefficiencyofaDecisionMakingUnit(DMU)bya
scalarmeasurerangingbetweenzero(theworst)andone(thebest).Thisscalarvalueis
measuredthroughalinearprogrammingmodel.Specifically,theCharnesCooper
Rhodes(CCR)modeldealswiththeratioofmultipleinputsandoutputsinanattemptto
gaugetherelativeefficiencyoftheDMUconcernedamongalltheDMUs.Thisfractional
programissolvedbytransformingitintoanequivalentlinearprogramusingthe
CharnesCoopertransformation.Theoptimalobjectivevalue(*)iscalledtheratio(or
radial)efficiencyoftheDMU.Theoptimalsolutionreveals,atthesametime,the
existence,ifany,ofexcessesininputsandshortfallsinoutputs(calledslacks).ADMU
withthefullratioefficiency,*=1,andwithnoslacksinanyoptimalsolutioniscalledCCR
efficient.Otherwise,theDMUhasadisadvantageagainsttheDMUsinitsreferenceset.
Therefore,indiscussingtotalefficiency,itisimportanttoobserveboththeratioefficiency
andtheslacks.Someattemptshavebeenmadetounify*andslacksintoascalar
measure,seeTone(1993)andPastor(1995)amongothers.
Meanwhile,Charnesetal.(1985)developedtheadditivemodelofDEA,whichdeals
directlywithinputexcessesandoutputshortfalls.Thismodelhasnoscalarmeasure
(ratioefficiency)perse.Althoughthismodelcandiscriminatebetweenefficientand
inefficientDMUsbytheexistenceofslacks,ithasnomeansofgaugingthedepthof

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inefficiency,similarto*intheCCRmodel.Inanattempttodefineinefficiencybasedon
theslacks,Russell,1985Russell,1988,Pastor(1996),LovellandPastor(1995),
Torgersenetal.(1996),CooperandPastor(1997),CooperandTone(1997),Thrall
(1997)andothershaveproposedseveralformulaeforfindingascalarmeasure.The
followingpropertiesareconsideredasimportantindesigningthemeasures.

(P1)Unitsinvariant:Themeasureshouldbeinvariantwithrespecttotheunitsof
data.
(P2)Monotone:Themeasureshouldbemonotonedecreasingineachslackininput
andoutput.
(P3)Translationinvariant:Themeasureshouldbeinvariantunderparallel
translationofthecoordinatesystemapplied(AliandSeiford,1990Pastor,1996).

Inthispaper,wefurtheremphasizetheoriginalpropertyofDEA:
(P4)Referencesetdependent:Themeasureshouldbedeterminedonlyby
consultingthereferencesetoftheDMUconcerned.

GiventhatDEAemployspiecewiselinearefficientfrontierswhicharespannedby
efficientDMUs,andthataninefficientunitis`inefficient'withrespecttoDMUsinits
referenceset,themeasureofefficiencyshouldbedeterminedbythereferenceset
dependentvalues,asintheCCRandBCC(Bankeretal.,1984)models.Itshouldnot
beinfluencedbytheextremevalues,e.g.,theminimumandthemaximumofthedata
set,orbystatisticscoveringthewholedataset.
Thenewmeasureproposedinthispapersatisfiestheproperties(P1),(P2)and(P4).

Therestofthepaperisorganizedasfollows.Section2proposesanewmeasureof
efficiency(SBM)basedoninputexcessesandoutputshortfalls,alongwiththe
computationalschemeforsolvingthefractionalprogramthatdefinesSBM.Wewillshow
thattheSBMcanbeinterpretedasaproductofinputandoutputinefficiencies.The
relationshipwiththeCCRmodelisdescribedinSection3.ThedualsideoftheSBM
modelispresentedinSection4,whereitisshownthatthemodelmaximizesthevirtual
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profitinsteadofthevirtualratiooftheCCRmodel.Thisenablesustointroduceeconomic
aspectsintotheSBM:wecanembedinformationoncostsandpricesintoit.
Furthermore,byrestrictingthefeasibleregionofthedualvariables(virtualcostsand
prices),wecanmakeinterpretationswhichareclosetoreality,similartothoseusingthe
assuranceregionmethodofThompsonetal.(1986)fortheradialtypemodels,e.g.the
CCRandtheBCC.InSection5,anillustrativeexampleisexhibitedwhichcomparesthe
SBMwithotherCCRtypemodels.InSection6,wewillrelaxthepositivityassumptionof
thedataset.Finally,inSection7,comparisonsbetweentheSBMandtheRussellgraph
measureoftechnicalefficiency(Russell,1988Freetal.,1978Freetal.,1985)will
bediscussedfromtechnicalandeconomicviewpoints.

2.Aslacksbasedmeasureofefficiency
Thedefinitionofaslacksbasedmeasure(SBM)ofefficiencywillbegiven,alongwithits
interpretationasaproductofinputandoutputinefficiencies.

2.1.DefinitionandcomputationalschemeofSBM
WewilldealwithnDMUswiththeinputandoutputmatrices and
,respectively.Weassumethatthedatasetispositive,i.e.X>0and
Y>0.(ThisassumptionwillberelaxedinSection6.)
TheproductionpossibilitysetPisdefinedas

(1)

where isanonnegativevectorin .(Wecanimposesomeconstraintson ,such

asj=1nj=1(theBCCmodel),ifitisneededtomodifytheproductionpossibilityset.)

WeconsideranexpressionfordescribingacertainDMU as

with and .Thevectors and indicatethe

inputexcessandoutputshortfallofthisexpression,respectively,andarecalledslacks.
FromtheconditionsX>0and ,itholds

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(4)

Usings ands + ,wedefineanindexasfollows:

(5)

Itcanbeverifiedthatsatisfiestheproperties(P1)(unitsinvariant)and(P2)
(monotone).Furthermore,from(4),itholds

0< 1. (6)

Inanefforttoestimatetheefficiencyof ,weformulatethefollowingfractional
+
programin,s ands .
[SBM]

(7)

[SBM]canbetransformedintoalinearprogramusingtheCharnesCooper
transformationinthesimilarwayastheCCRmodel.(SeeCharnesandCooper,1962
Charnesetal.,1978.)
Letusmultiplyascalarvariablet(>0)toboththedenominatorandthenumeratorof(7).
Thiscausesnochangein.Weadjusttsothatthedenominatorbecomes1.Thenthis
termismovedtoconstraints.Theobjectiveistominimizethenumerator.Thus,wehave
[SBMt]

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(8)

Theproblemgivenaboveisanonlinearprogrammingproblemsinceitcontainsthe
nonlinearterm .Howeverwecantransformitintoalinearprogram
asfollows.Letusdefine

Then,[SBMt]becomesthefollowinglinearprogramint,S ,S + and :
[LP]

(9)

Letanoptimalsolutionof[LP]be

Then,wehaveanoptimalsolutionof[SBM]asdefinedby

(10)

Basedonthisoptimalsolution,wedetermineaDMUasbeingSBMefficientasfollows:
Definition1SBMefficient.
ADMU isSBMefficientif*=1.

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Thisconditionisequivalentto and ,i.e.,noinputexcessesandno

outputshortfallsinanyoptimalsolution.

ForanSBMinefficientDMU ,wehavetheexpression:

TheDMU canbeimprovedandbecomeefficientbydeletingtheinputexcess
andaugmentingtheoutputshortfallasfollows:

ThisoperationiscalledtheSBMprojection.

Basedon * ,wedefinethereferencesetto asfollows:

Definition2Referenceset.

Thesetofindicescorrespondingtopositivej*siscalledthereferencesetto .
Intheoccurrenceofmultipleoptimalsolutions,thereferencesetisnotunique.Wecan
chooseanyoneforourpurpose.
ThereferencesetRois

(13)

UsingRo,wecanexpress by

SincetheSBM*dependsonlyons * ands + * ,i.e.,thereferencesetdependent

values,*isnotaffectedbyvaluesattributedtootherDMUsnotinthereferenceset.In
thissense,*proposedinthispaperisdifferentfromotherefficiencymeasureswhich
incorporatestatisticsoverthewholedataset.

2.2.InterpretationofSBMasproductofinputandoutputinefficiencies
Theformulaforin(5)canbetransformedinto

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Inthefirsttermontherighthandside,theratio(xiosi)/xioevaluatestherelative
reductionrateofinputiandhencethefirsttermcorrespondstothemeanreduction
rateofinputsorinputinefficiency.Similarly,inthesecondterm,theratio(yro+sr+)/yro
evaluatestherelativeexpansionrateofoutputrand(1/s)(yro+sr+)/yroisthemean
expansionrateofoutputs.Itsinverse,thesecondtermmeasuresoutputinefficiency.
Thus,SBMcanbeinterpretedastheproductofinputandoutputinefficiencies.

2.3.Imposingboundsontheslacks
Theprojectionformulasmayresultinalargereduction(enlargement)ininputs
(outputs)oftheDMU( ),whichmaynotbeallowedintheactualsituations.Inorder
toavoidsuchadifficulty,wecanimposeboundsontheslackss ands + ,suchas

(16)

wherethevector istheupperboundofinputreduction(output
enlargement)oftheDMUandshouldbespecifiedforeachDMU.Restrictingthe
feasibleregionofslacksinthismannerwillgivetheefficiencymeasureascorenot
lessthantheoriginalSBMscore*.

3.RelationshipwiththeCCRmodel
Inthissection,wewilldemonstratethattheSBM*isnotgreaterthantheCCRefficiency
measure(*)andthataDMUisSBMefficientifandonlyifitisCCRefficient.

3.1.SBMandtheCCRmeasure
The(inputoriented)CCRmodelcanbeformulatedasfollows:
[CCR]

Definition3CCRefficient.
ADMU isCCRefficient,iftheoptimalobjectivevalue*isequaltooneandthe
optimalslackst *andt + *arezeroforeveryoptimalsolutionof[CCR].

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ForaninefficientDMU ,theCCRprojectionisdefinedas

Letanoptimalsolutionof[CCR]be( * , * ,t * ,t + * ) .From(17),itholds

Letusdefine

Then,(,s ,s + ) isfeasiblefor[SBM]anditsobjectivevalueis

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(25)

Wehavethefollowingtheorem.
Theorem1.

TheoptimalSBM*isnotgreaterthantheoptimalCCR*.
Proof.
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Noticethatthecoefficient oftheinputexcesssiinplaysacrucialrolein
validatingTheorem1.

Conversely,foranoptimalsolution( * , * ,s * ,s + * ) of[SBM],letustransformthe
constraintsas

Further,weaddtheconstraint

(28)

Then,( )isfeasiblefor[CCR].

3.2.SBMefficiencyandCCRefficiency
TherelationshipbetweenCCRefficiencyandSBMefficiencyisdemonstratedbythe
followingtheorem.

Theorem2.

ADMU isCCRefficient,ifandonlyifitisSBMefficient.
Proof.

Supposethat isCCRinefficient.Then,wehaveeither*<1or(*=1and
.From(25),inbothcases,wehave<1forafeasiblesolutionof
[SBM].Hence, isSBMinefficient.

Ontheotherhand,supposethat isSBMinefficient.Then,itholds
.Bythestatements(26)and(27),
isfeasiblefor[CCR],provided
.Therearetwocases.

Case1(=1then ).Inthiscase,anoptimalsolution
for[CCR]isCCRinefficient.

Case2(<1).Inthiscase, isCCRinefficient.

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Therefore,CCRinefficiencyisequivalenttoSBMinefficiency.Sincethedefinitionsof
efficientandinefficientaremutuallyexclusive,wehaveprovedthetheorem.

4.Observationsonthedualproblem
OneoftheimportantcharacteristicsofDEAisitsdualside,asrepresentedbythedual
programoftheoriginallinearprogram.Thislinkstheefficiencyevaluationwiththe
economicinterpretation.

4.1.ThedualprogramoftheSBMmodelasprofitmaximization
Thedualprogramoftheproblem[LP]inSection2canbeexpressedasfollows,withthe
dualvariables and :
[DP]

wherethenotation designatestherowvector(1/x1o,1/x2o,,1/xmo).
ByEq.(30),wecaneliminate.Then,thisproblemisequivalenttothefollowing:
[DP]

Thedualvariables and canbeinterpretedasthevirtualcostsand

pricesofinputandoutputitems,respectively.Thedualproblemaimstofindthe
optimalvirtualcostsandpricesfortheDMU sothattheprofit does
notexceedzeroforanyDMU(including ),andmaximizestheprofit
fortheDMU concerned.Apparently,theoptimalprofitisatbestzeroand
*
hence =1fortheSBMefficientDMUs.

Constraints(32)and(33)restrictthefeasiblev andu tothepositiveorthant.Usingthis

framework,wecanincorporateotherimportantdevelopmentsrelatedtothevirtualdual
variablesintotheSBMmodel,e.g.theassuranceregionmethods(Thompsonetal.,
1986Thompsonetal.,1997ThompsonandThrall,1994),andtheconeratiomodels
(Charnesetal.,1990Tone,1997),amongothers.Thesemodificationswillcontributeto

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theenhancementofthepotentialapplicationofthemodelsubstantially.Wewillintroduce
thissubjectinSection4.3.

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