Measuring the performance of pharmacy stores using discretionary and non-discretionary variables

Abstract

The purpose of this paper is to measure the performance of chain of 46 pharmacy retail stores located in Delhi and National Capital Region (NCR) and to analyze the impact of non-discretionary variables on the efficiency of the stores. A two stage procedure is used for benchmarking the retail stores. Firstly, data envelopment analysis is applied and in the second stage, Tobit regression model is applied to determine the drivers of efficiency. The results indicate that most of the retail stores are either average or below average in their performance and therefore needs improvement. Scale plays an important role in efficiency evaluation. Footfalls, sales, operating expenses and store size are identified as drivers of efficiency. The non-discretionary input variables, age and location of the store has insignificant impact on efficiency of retail stores. This shows that the current efficiency level is mainly attained through the controllable operations taking place at the store level. This study provides us with a framework for performance measures along with useful managerial insights. Also, assists in focusing upon the right areas of operations by identifying the efficiency drivers. This may help out the management in improving their overall performance.