Data Envelopment Analysis in Three-Stage Network Structure with Slack Based Measure (SBM)

Abstract

Data envelopment analysis (DEA) is a non-parametric technique for measuring and analyzing the relative efficiency of the Decision-Making Unit (DMU) having multiple homogeneous types of inputs and outputs. Traditional DEA treats DMU as black boxes and calculates their efficiencies by considering their initial inputs and final outputs. But the overall efficiency of DMU is directly depended upon the performances of intermediate processes of operations. In many situations, DMUs have a three-stage network structure. Against the aforesaid backdrop, this paper introduces a non-oriented and non-radial the slacks-based measure (SBM) of efficiency framework for the three-stage network production process. In the proposed model we have considered both series and parallel relationship between the inputs and outputs of different independent and dependent stages. Additionally, this research is aimed at measuring the Indian banking efficiency by using the three-stage network DEA model.