Efficiency measurement for general network systems: a slacks-based measure model

Abstract

Traditional radial DEA models treat DMUs as black boxes, whose internal structures are ignored, and measure input and output changes proportionally. On the other hand, network DEA models consider the internal structure of a DMU as a network system where sub-processes are connected by intermediate products aside from consuming main inputs and producing final outputs. The interest in network DEA has increased over the years producing different types of formulations including the network slacks-based measure DEA (NSBM). NSBM is a non-radial network approach suitable for measuring efficiencies when inputs and outputs may change non-proportionally. However, NSBM models and some of its recent developments failed to adhere to three important efficiency measurement issues: (a) able to properly define overall and divisional efficiencies, (b) able to identify Pareto-Koopmans efficiency status, and (c) able to show equivalence of primal (multiplier) and dual (envelopment) forms of the network DEA model. This study addressed these issues based on the NSBM approach and compared the results of the proposed network SBM model with other existing models in the literature. A numerical study on 10 electric power companies further illustrated the use and significance of the proposed network SBM model in efficiency measurement.