Efficiency improvement based upon overall value judgment and weight restriction

Abstract

Purpose – The purpose of this paper is to consider the following problem: the authors consider a new constructed unit system to indicate the characteristics of the inputs and outputs of different decision-making units (DMUs) and propose several modified models to calculate their efficiencies based on overall value judgment and weight restriction in the production process. Design/methodology/approach – This paper applies principal component analysis (PCA) to analyze the original value judgment information, and the key indices in the production process are extracted. The modified data envelopment analysis (DEA) models are proposed and DEA efficiencies and their projections are calculated. Findings – By incorporate PCA and DEA, the authors propose new virtual DMUs composed of unique optimal multipliers of each DMU. Crucial indexes are extracted and the weights of inputs and output are ranked through using PCA by taking the preference and value judgments of all DMUs into consideration. Weight constraints from the ranking are utilized to improve the traditional CCR-DEA model. The empirical results validate the feasibility of the approach. Practical implications – The method can be used in many organizations which have excessive amounts of inputs and outputs variables, such as banks, chain stores, car factory, etc. Originality/value – This paper presents an integrated methodology of using PCA and DEA for considering the preferences of the inputs and outputs and value judgment of all DMUs and ranks the importance of the indicators from the overall perspectives.