Discretionary Inputs Research Articles

Efficiency evaluation in hybrid two-stage network DEA with non- discretionary inputs and shared discretionary inputs

In the network DEA models, it is assumed that all inputs are varied according to decisions of manager. However, in many cases, there are non-discretionary inputs that are beyond the control of a sub-DMUs and DMUs management in the efficiency evaluation, and this problem has not been discussed considerably in network DEA so far. This study proposed a multiplier model to treat a two-stage network system comprised of three sub-DMUs in hybrid form with non- discretionary inputs and shared discretionary inputs, while this issue is not sufficiently rich in the network systems, here, it is being analyzed seriously in this study. The proposed model simulate precisely the parallel-series internal structure of network system with non-discretionary inputs and shared discretionary inputs between sub-DMUs, and also uses synthetically additive and multiplicative DEA approaches for evaluating the efficiency of two-stage network system. An example of measuring the efficiency of the heart surgery hospitals in Iran, that has been discussed in this study, illustrates the idea presented in this study.

Performance measurement and resource sharing among business sub-units in the presence of non-discretionary factors

PurposeThis paper aims to apply a new approach for resource sharing and efficiency estimation of subunits in the presence of non-discretionary factors and partial impacts among inputs and outputs in the data envelopment analysis (DEA) framework.Design/methodology/approachFirst, inspired by the Imanirad et al.’s model (2013), the authors consider that each decision-making unit (DMU) may consist of several subunits, that each of which can be affected by non-discretionary inputs. After that, the Banker and Morey’s model (1996) is used for modeling non-discretionary factors. For measuring performance of several subunits, which can be considered as DMUs, the aggregate efficiency is suggested. At last, the overall efficiency is computed and compared with each other.FindingsOne of the important features of proposed model is that each output in this model applies discretionary input according to its need; therefore, the result of this study will make it easier for the managers to make better decisions. Also, it indicates that significant predictions of the development of the overall efficiency of DMUs can be based on observing the development level of subunits because of the influence of non-discretionary input. Therefore, the proposed model provides a more reasonable and encompassing measure of performance in participating non-discretionary and discretionary inputs to better efficiency. An application of the proposed model for gaining efficiency of 17 road patrols is provided.Research limitations/implicationsMore non-discretionary and discretionary inputs can be taken into consideration for a better analysis. This study provides us with a framework for performance measures along with useful managerial insights. Focusing upon the right scope of operations may help out the management in improving their overall efficiency and performance. In the recent highway maintenance management systems, the environmental differences exist among patrols and other geotechnical services under the climate diverse. Further, in some cases, there might exist more than one non-discretionary factor that can have different effects on the subunits’ performance.Practical implicationsThe purpose of this paper was to measure the performance of a set of the roadway maintenance crews and to analyze the impact of non-discretionary inputs on the efficiency of the roadway maintenance. The application of the proposed model, on the one hand, showed that each output in this model uses discretionary input according to its requirement, and on the other hand, the result showed that meaningful predictions of the development of the overall efficiency of DMUs can be based on observing the development level of subunits because of the impact of non-discretionary input.Originality/valueProviding information on resource sharing by taking into account non-discretionary factors for each subunit can help managers to make better decisions to increase the efficiency.

Supervision and autonomy of ophthalmology residents in the outpatient clinic in the United States II: a survey of senior residents

BackgroundA balance between autonomy and supervision can be difficult to obtain in medical education. In this study, we sought to determine whether the presence and level of supervision of ophthalmology resident outpatient clinic correlates with metrics of resident success, professionalism and stress.MethodsA survey was emailed to all US ophthalmology program directors requesting it be forwarded to PGY4 residents. Questions included whether their program provided a resident-hosted outpatient clinic, and if so, whether residents were mandated to discuss every patient with faculty. Residents were assigned to three categories based on this question (0: no clinic, 1: mandated faculty input, 2: discretionary faculty input). Success metrics included numbers of manuscripts submitted, OKAP scores and success in obtaining fellowships. Professionalism metrics included rating comfort obtaining informed consent, breaking bad news, managing time in clinic, and confidence in providing care in various settings. Residents affirming participation in a continuity clinic also provided perceptions of the level of supervision and how the clinic affected stress.ResultsCategory 1 residents perceived somewhat too much supervision, while category 2 residents felt that they had somewhat insufficient supervision. The majority of residents in either category did not feel that the continuity clinic affected their overall stress, although those who reported a change in stress usually indicated that the presence of the clinic increased stress. There were no other statistically significant differences between the responses from any category.ConclusionsThe presence of a resident-hosted continuity clinic neither adds nor detracts from the success or sense of professionalism of ophthalmology residents. However, when such a clinic is present, the degree of supervision appears to correlate inversely with resident perception of autonomy. These results suggest that the decision of a training program to offer a clinic hosted by residents offering comprehensive continuity care can be informed primarily by faculty and trainee philosophy and personal preferences without comprising education quality, clinical efficiency, residents’ perception of stress or their success in fellowship matching.

EVALUATING PERFORMANCE OF APPAREL RETAIL STORES USING DATA ENVELOPMENT ANALYSIS

The purpose of this research paper is to evaluate the performance of chain of organised apparel retail stores and also to benchmark their performance at company as well as store level considering both discretionary as well as non-discretionary variables. The paper aims to use data envelopment analysis firstly, for calculating the efficiency score and secondly for calculating projections for each of the retail store in order to understand the excess in discretionary inputs and shortfalls in output. Results show that most of the retail stores are performing well but there is a scope for improvement in several cases. The study provides a framework for performance evaluation and also assists in identifying the areas of improvement.

A DEA-based approach for competitive environment analysis in global operations strategies

While competitive environment analysis is critical to a global retailing operations strategy, there exist research gaps from perspectives of operational performance, retailing industrial environment, and nondiscretionary factors. Therefore, our research objective is to propose a new approach to conduct competitive environment analysis for a global operations strategy in retailing, by examining relationships between discretionary inputs of the supply chain, nondiscretionary inputs of the environment, and performance of retailing. We develop a nondiscretionary data envelopment analysis model to assess performance in retailing and integrate it with econometric analysis. Using multisource data of 124 organizations in the global retailing industry, it is interesting to find: while nondiscretionary factors significantly influence the operational performance of global retailers, firms in an environment with a higher market concentration, larger consumer spending per capita, and smaller inhabitants’ population are more likely to achieve a higher operational efficiency in retailing. Another interesting finding with practical implication is: inputs relevant to outside environment (e.g., suppliers in upstream and outlets in downstream supply chain) can influence operational efficiency more than inputs in internal supply chain (e.g., warehouses).

Special District Libraries and Operating Costs: An Application of Data Envelopment Analysis (DEA) with Discretionary and Non-Discretionary Inputs

ABSTRACTData envelopment analysis (DEA) was used to assess the technical efficiency of special district libraries in the United States with respect to three cost-related outputs: operating cost per hour, program costs per visit, and program costs per attendance. A set of discretionary and non-discretionary inputs were used to obtain the technical efficiency scores of 999 special district libraries. The DEA input-oriented analysis shows that 30% of the libraries were technically efficient with respect to the use of the inputs to achieve their level of operating costs in 2015. The DEA analysis also shows that inefficient libraries need to make proportional reductions in the level of discretionary inputs to become technically efficient.

Uma avaliação da eficiência econômica das políticas públicas de saúde dos Estados brasileiros com o uso da análise envoltória de dados

The evaluation of public policies allowsidentifying the most efficient, effectiveand effective programs. The informationcoming from the evaluation processenables the Government to correcterrors and improve policies. When itcomes to health, one of the greatadvances in the decentralization processof Brazilian public health policies wasthe implementation of the UnifiedHealth System (SUS). However,budgetary constraints, coupled with theheterogeneity of geographic, economicand social characteristics of theBrazilian states, have limited theefficiency of SUS. This study sought toevaluate public health policies, focusingon the economic efficiency of totalexpenditure per capita, using for thispurpose the Data Envelopment Analysiswith constant returns of scale, orientedto the inputs. Six models were built. Inthe first one, only the discretionary input was used, and in the others thenon-discretionary inputs were inserted,that is, variables that are not under thecontrol of health managers, but that canchange the efficiency indicators. Theresults showed that States could beefficient with lower costs and identifieda greater frequency of States of theNortheast and North Regions at theefficiency frontier.

Responsive Pricing Newsvendor Networks with Discretionary Commonality

Discretionary commonality is a form of operational flexibility used in multi-product manufacturing environments. Consider a case where a firm produces and sells two products. Without discretionary commonality, each product is made through a unique combination of input and production capacity. With discretionary commonality, one of the inputs could be used for producing both products, and one of the production capacities could be used to process different inputs for the production of one of the products. In the latter case, the manager can decide, upon the realization of uncertainty, not only the quantities for different products (outputs) but also the means of transforming inputs into outputs. The objective of this paper is to understand how the firm’s value, its inventory levels for common and unique inputs, and capacity levels for flexible and dedicated resources are affected by the demand characteristics and market conditions faced by the firm. In pursuing this research, we extend Van Mieghem and Rudi (2002)’s newsvendor network model to allow for the modeling of product interdependence, demand functions, and random shocks, and for the modeling of firm’s ex-post price setting. Applying the general framework to the network with discretionary commonality, we discover that inventory and capacity management can be quite different compared to a network where commonality is non-discretionary. Among other results, we find that as the degree of product substitution increases, the relative need for discretionary commonality increases; as the market correlation increases, while the expected firm value may increase for complementary products, the discretionary common input decreases but the dedicated input increases. Numerical study shows that discretionary flexibility and responsive pricing are strategic substitutes.

Use of High Quantification Evidence in Fair Value Audits: Do Auditors Stay in their Comfort Zone?

ABSTRACTResearch documents significant management bias and opportunism around the discretionary inputs of audited complex estimates, including fair value measurements (FVMs), which raises questions about auditors' ability to test these estimates. We examine how the degree of quantification in client evidence and client control environment risk influence auditors' planned substantive testing of management's discretionary inputs to FVMs. We find that auditors allocate a lower proportion of effort to testing the subjective inputs to the fair value estimate when the degree of quantification in the client evidence and level of client risk are both high. Further, this tendency persists even after auditors receive a regulatory practice alert reminding them to focus more audit effort on testing fair value (FV) inputs that are susceptible to management bias, and despite the auditors increasing their overall audit effort. Qualitative analyses of the procedures auditors selected indicate that inapt attention to the degree of quantification in evidence is a potential root cause of the difficulty auditors encounter when testing complex estimates. Our results imply that in situations where both quantified and non-quantified data are important to the audit, there is the potential for management to manipulate the evidence they provide to auditors to distract auditors from testing the discretionary inputs to complex estimates that are susceptible to management opportunism.Data Availability: Contact authors for data availability.

Monte‐Carlo Comparison of Conditional Nonparametric Methods and Traditional Approaches to Include Exogenous Variables

AbstractThe aim of this paper is to compare the performance of the conditional nonparametric approach with several traditional nonparametric methods to incorporate the effect of exogenous or environmental variables into the estimation of efficiency measures. To do this, we conduct a Monte Carlo experiment using a translog production function with one output, two discretionary inputs and two exogenous variables to generate simulated data. According to the values of different accuracy measures calculated to evaluate the performance of each method, the conditional data envelopment analysis clearly outperforms all the traditional alternatives.

Resource reallocation and target setting for improving environmental performance of DMUs: An application to regional highway transportation systems in China

In managerial decisions, situations frequently occur when the decision makers need to allocate/reallocate limited resources among a group of decision making units (DMUs) to improve the efficiencies of the DMUs and make better utilization of the limited resources. In this paper, we propose a resource reallocation and target setting approach for improving the environmental performance of the DMUs based on data envelopment analysis (DEA). Firstly, a model is given to identify the best revenue for each DMU in the resource reallocation and target setting process, and the concept of satisfaction degree of a DMU toward a resource allocation and target setting result is introduced. Then, under a DEA common-weight evaluation framework, a centralized resource allocation and target setting model is proposed for reallocating the DMUs’ discretionary inputs and setting output targets for the DMUs. Our approach can obtain for the DMUs a resource reallocation and target setting result which can not only guarantee that all the adjusted DMUs will be environment efficient in the new production period but also maximizes the minimum satisfaction degree among all the DMUs. Finally, the proposed approach is used for an empirical study of resource allocation and target setting for 30 regional highway transportation systems in China.

The efficiency of the European banking groups and its determinants

Purpose – The purpose of this paper is twofold. First, it aims to measure and compare the efficiency change of French, German, Italian, Spanish and UK banking groups in a context of financial crisis, over the period 2006-2010; second, it attempts to analyse the internal and environmental determinants of banking groups efficiency. Design/methodology/approach – In this paper the efficiency is estimated by a two-stage semi-parametric procedure. In the first stage, we build a common production frontier across countries using the data envelopment analysis (DEA) (Debreu, 1951; Farrell, 1957). To further analyse the efficiency changes over years we use the Malmquist total factor productivity index, based on DEA technique. In the second stage, in order to determine the factors that impact on bank efficiency, the authors perform a bootstrapped truncated regression model with discretionary inputs as independent variables, following Simar and Wilson (2007). Findings – The empirical results show that overall the “large” banking groups are more efficient than the “small” ones. However the Malmquist total factor productivity analysis highlights that during the crisis, in particular between 2007 and 2009, unless Britain, in all countries the small banks show a better cost performance than the larger ones. In general, the authors find a moderate efficiency convergence between countries and between large and small banking groups. As regards the determinants of banking groups efficiency, we find that more liquid, less capitalized banking groups and those more oriented towards the traditional activity of lending are more efficient. Practical implications – The authors find a positive and high statistically significant relationship between both long- and short-term liquidity degree and the cost efficiency of the banking groups. The policy implication of this result is very significative also in the light of the new banking regulation introduced by Basel III that imposes new rules to strengthen the liquidity risk management. Social implications – The authors find that the macroeconomic environment variables have some impact on efficiency: the higher the debt and the GDP per capita of the country the lower the bank’s efficiency. Originality/value – Unlike the most literature on this topic, that usually considers individual banks even if they belong to the same financial conglomerate, the authors analyse only banking groups. In particular, the authors consider all banking groups belonging to the most industrialized European countries in a context of financial crisis and cross-border aggregation movements. Furhermore the authors compare cross-country cost performance of small and large groups, considering the loan loss provisions as an additional input in order to correct the efficiency score for credit risk.

Eficiência na provisão de educação pública municipal: uma análise em três estágios dos municípios brasileiros

O artigo busca analisar as características municipais que afetam a eficiência dos municípios brasileiros na gestão educacional, consequência do processo de descentralização educacional na década de 90. As informações foram extraídas da Prova Brasil, Censo Escolar, Finbra e STN para 2005. Empregamos um procedimento em três estágios, cujo primeiro consiste no uso de modelos SBM (slacks based measure) no cálculo da eficiência no uso de insumos discricionários. Em seguida, controlamos pelos insumos não discricionários, resultando em um novo índice de eficiência. Finalmente, aplicamos as misturas finitas para analisar a heterogeneidade existente entre os diversos municípios em relação aos níveis de eficiência da gestão municipal. Os resultados mostram a não uniformidade de impactos demográficos, políticos e de recursos sobre a eficiência da gestão educacional entre os diversos grupos de municípios brasileiros. O aumento de democracia e recursos como o decorrente do Fundef, em geral, aumenta a eficiência da administração escolar municipal.

Estimating technical and allocative efficiency in the public sector: A nonparametric analysis of Dutch schools

Public sector output provision is influenced not only by discretionary inputs but also by exogenous environmental factors. In this paper, we extended the literature by developing a conditional DEA estimator of allocative efficiency that allows a decomposition of overall cost efficiency into allocative and technical components while simultaneously controlling for the environment. We apply the model to analyze technical and allocative efficiency of Dutch secondary schools. The results reveal that allocative efficiency represents a significant 37 percent of overall cost efficiency on average, although technical inefficiency is still the dominant part. Furthermore, the results show that the impact of environment largely differs between schools and that having a more unfavorable environment is very expensive to schools. These results highlight the importance of including environmental variables in both technical and allocative efficiency analysis.

Categorical and continuous non-discretionary variables in data envelopment analysis: a comparison of two single-stage models

Non-discretionary or environmental variables are regarded as important in the evaluation of efficiency in Data Envelopment Analysis (DEA), but there is no consensus on the correct treatment of these variables. This paper compares the performance of the standard BCC model as a base case with two single-stage models: the Banker and Morey (1986a) model, which incorporates continuous environmental variables and the Banker and Morey (1986b) model, which incorporates categorical environmental variables. Simulation analyses are conducted using a shifted Cobb-Douglas function, with one output, one non-discretionary input, and two discretionary inputs. The production function is constructed to separate environmental impact from managerial inefficiency, while providing measures of both for comparative purposes. Tests are performed to evaluate the accuracy of each model. The distribution of the inputs, the sample size and the number of categories for the categorical model are varied in the simulations to determine their impact on the performance of each model. The results show that the Banker and Morey models should be used in preference to the standard BCC model when the environmental impact is moderate to high. Both the continuous and categorical models perform equally well but the latter may be better suited to some applications with larger sample sizes. Even when the environmental impact is slight, the use of a simple two-way split of the sample data can produce significantly better results under the Categorical model in comparison to the BCC model.

Managing Efficiency in International Tourist Hotels in Taipei using a DEA Model with Non-discretionary Inputs

In this paper, an input-oriented data envelopment analysis model with discretionary and non-discretionary variables is proposed for measuring the efficiency of international tourist hotels (ITHs). The model considers two outputs (total revenues and occupancy percentage), two discretionary inputs (total number of employees and total operating costs) and two non-discretionary inputs (total number of guest rooms and food and beverage capacity). Variable returns to scale are assumed. Both the proposed and the traditional input-oriented model are applied to measure the efficiency of 21 ITHs in Taipei during 2003–2007, and different efficiency measures and benchmarks are derived to help the management of these hotels adjust more effectively their discretionary inputs to achieve better efficiency. Implications are also discussed.

A slacks-based measure of efficiency for the case of exogenously fixed factors

Standard data envelopment analysis (DEA) models assume that all inputs and outputs can be varied at the discretion of management or other users. In any realistic situation, however, there may exist “exogenously fixed” or non-discretionary factors that are beyond the control of a DMU’s management, which also need to be considered. This paper proposes a slacks-based measure (SBM) of efficiency in the presence of non-discretionary factors in data envelopment analysis. This scalar measure deals directly with the discretionary input excess and the discretionary output shortfall of the decision making units (DMUs) concerned. The new measure has a close connection with the measure proposed by Banker and Morey (1986). We then apply this measure to a real world data set.

A potent secret for winning a crucial edge over your rivals?

PurposeTo explain that a fully‐engaged employee is an extremely important commercial asset.Design/methodology/approachIn the absence of detailed research, the author draws on his extensive experience of working with numerous large organizations on maximizing the extent to which their employees are engaged. His experience is practical and has involved working with employees who themselves toil at the “coal‐face” of organizational success. The research presents an informed anecdotal approach to the subject and is made systematic through a range of practical guidelines.FindingsThe nature of the research means that it discusses general strategic issues in business rather than specific statistical findings. But inherent in the paper is the fact that these general strategic issues are unchanging and are of permanent importance.Practical implicationsThe practical implications of the paper are enormous. The author is saying nothing less momentous than that the difference between an engaged employee (i.e. one who is fully emotionally and intellectually motivated by his or her work) compared with an employee who is not engaged, is prodigious and can make a huge commercial difference to an organization's performance.Originality/valuePerhaps the most important observation of all given by the author is that engaged employees provide a discretionary input, that is, they give a level of energy and commitment to the job which the job does not require from a contractual perspective.

Centralised target setting for regional recycling operations using DEA

This paper presents an application of data envelopment analysis for analysing the performance of a number of spanish municipalities in terms of the amount of glass recycled. The inputs considered are the number of glass containers assigned to each municipality on one hand and the population and the number of bars and restaurants in town on the other. The number of containers is the only discretionary input; the other two are considered non-controllable. In order to establish for each municipality a target to aim at, an aggregated-output orientation is used. That is, instead of projecting each municipality independently, a centralised approach is used. Thus, the model does not require that each municipality keeps at least the same number of containers but only that the total number of existing containers not be exceeded. The goal of the regional authority is to assign the available containers so as to maximise the total amount of glass recycled by all the municipalities. The fact that the number of containers is an integer variable has been taken into account. Numerical results are shown.

Newsvendor Networks: Inventory Management and Capacity Investment with Discretionary Activities

We introduce a class of models, called newsvendor networks, that allow for multiple products and multiple processing and storage points and investigate how their single-period properties extend to dynamic settings. Such models provide a parsimonious framework to study various problems of stochastic capacity investment and inventory management, including assembly, commonality, distribution, flexibility, substitution and transshipment. Newsvendor networks are stochastic models with recourse that are characterized by linear revenue and cost structures and a linear input-output transformation. While capacity and inventory decisions are locked in before uncertainty is resolved, some managerial discretion remains via ex-post input-output activity decisions. Ex-post decisions involve both the choice of activities and their levels and can result in subtle benefits. This discretion in choice is captured through alternate or “nonbasic” activities that can redeploy inputs and resources to best respond to resolved uncertain events. Nonbasic activities are never used in a deterministic environment; their value stems from discretionary flexibility to meet stochastic demand deviations from the operating point. The optimal capacity and inventory decisions balance overages with underages. Continuing the classic newsvendor analogy, the optimal balancing conditions can be interpreted as specifying multiple “critical fractiles” of the multivariate demand distribution; they also suggest appropriate measures for and trade-offs between product service levels. This paper shows that the properties of optimal newsvendor network solutions extend to a dynamic setting under plausible conditions. Indeed, we establish dynamic optimality of inventory and capacity policies for the lost sales case. Depending on the nonbasic activities, this also extends to the backordering case. Analytic- and simulation-based solution techniques and graphical interpretations are presented and illustrated by a comprehensive example that features discretionary input commonality and a flexible processing resource.