OVERVIEW
DEA (Data Envelopment Analysis) is used to evaluate the technical and scale efficiency of a dairy company’s different bottling plants (in Asturias regional, Spain) over a period of three semesters so as to see the evolution of their behaviour and discover which plants are inefficient. Areas giving rise to inefficiency at the inefficient plants are pinpointed according to the results of the above study, and potential improvements (cost cutting, increased productivity given the optimum resource level, and so on) are put forward.
KEY WORDS: Technical efficiency, benchmarking, DMU, productivity, DEA.
1. INTRODUCTION
Technical efficiency is a technological concept that basically focuses on production processes and task organisation; it thus deals with the consequences of inadequate exploitation of a chosen process. A manufacturer is considered to be technically efficient if production occurs at the frontier of the set of production potentials.
Knowing the production function beforehand is therefore the basic requirement to achieving an operative measurement of efficiency. However, if we accept the definition of frontier production function, which we might call “theoretical”, we come up against the fact that it is impossible to apply in empirical analysis, as it cannot in practice be observed.
In consequence, the concept of frontier that will be applied here is related to observed data, in the sense that the frontier function acts as a limit to these observations. An “empirical” frontier production function is thus obtained, given the observed values, so that production can occur below the frontier, or at the frontier itself, but never above it. Efficiency or inefficiency that is pinpointed in the analysis ...