Generalized DEA: an approach for supporting input/output factor determination in DEA

Abstract

Purpose The determination of input and output factors is a well-known source of pitfalls when applying data envelopment analysis (DEA). The purpose of this paper is to contribute to overcome the respective problems of input/output factor determination related to factor selection, dual-role factors and undesirable factors. Design/methodology/approach The problems of input/output factor determination are discussed from a goal-oriented perspective, shedding a new light on the role of input/output factors in DEA. This is exemplified by the case of measuring pharmacy stores’ efficiency concerning their goal of customer retention. Findings The findings suggest to applying a generalized DEA (GDEA). The three steps of this approach include the development of a system of objectives, the derivation of corresponding performance criteria as well as the construction of cost and benefit functions. These functions build the basis for GDEA models, of which one is exemplarily described and applied to the customer retention case. Research limitations/implications While traditional DEA implicitly assumes linear cost and benefit functions, GDEA requires to explicitly specifying these functions. In doing so, the approach contributes to solve the problem of factor selection, the problem of dual-role factors and the problem of undesirable factors. Practical implications For determining input/output factors in a consistent and transparent manner, it is recommended to apply GDEA in practical benchmarking studies. Originality/value GDEA integrates well-known concepts of multi-criteria decision making into traditional DEA. The new approach helps to cope with the challenges of input/output factor determination in DEA.