1. Data Envelopment Analysis (DEA)

2. Measuring Service Productivity Branch Bank Example
1. ACCOUNTING RATIO: COST PER TELLER TRANSACTION
HIGHER RATIO WOULD BE INEFFICIENT RELATIVE TO OTHERS, BUT COULD BE
EXPLAINED BY:
A. MIX OF OUTPUTS TRANSACTIONS (SELLING CD’S VS SIMPLE DEPOSITS)
B. MIX OF INPUTS (USE OF ATM’S PLUS LIVE TELLERS)
2. BROAD BASED MEASURE: RETURN ON INVESTMENT
OVERALL IMPORTANT BUT NOT SUFFICIENT TO EVALUATE OPERATING EFFICIENCY
OF INDIVIDUAL DECISION MAKING UNIT (DMU)
FOR EXAMPLE:
A PROFITABLE BRANCH COULD BE THE RESULT OF HIGHER-THAN-AVERAGE
PROPORTION OF REVENUE GENERATING TRANSACTIONS RATHER THAN
COST-EFFICIENT USE OF RESOURCES.

3. THE DEA MODEL Fractional Form
j =1,2,…,M
i= 1,2,…,N

4. DEA in Standard LP Form (Scaling inputs to sum to 1.0)

5. Burger Palace Example

6. Burger Palace Productivity Frontier
S1 (2,200)
S2 (4,150)
S3 (4,100)
S4 (6,100)
S5 (8,80)
C (5.3, 88.9)
S6 (10,50)

7. Summary of DEA Results

8. DEA and Strategic Planning
Under-performing Benchmark
potential stars group
Problem Candidates
Branches for divestiture
High
Profit
Low
Low
High
Efficiency