Additive efficiency decomposition in network DEA

Abstract

In conventional data envelopment analysis (DEA), decision making units (DMUs) are generally treated as a black-box in the sense that internal structures are ignored, and the performance of a DMU is assumed to be a function of a set of chosen inputs and outputs. A significant body of work has been directed at problem settings where the DMU is characterized by a multistage process; supply chains and many manufacturing processes take this form. The current chapter presents DEA modeling approaches for network DEA where additive efficiency decompositions are assumed for sub-units/processes/stages. In the additive efficiency decomposition approach, the overall efficiency is expressed as a (weighted) sum of the efficiencies of the individual stages. This approach can be applied under both constant returns to scale (CRS) and variable returns to scale (VRS) assumptions.