Enhancing Operational Efficiency by Optimizing Working Capital Management of Manufacturing Firms

Abstract

In this paper, we present formulations to improve operational efficiency with optimum utilization of working capital management. A case of manufacturing firm is conducted to discuss the stages of analysis. This paper discussing the method to establish the target values for the firms to optimize the working capital and perform as an efficient firm. The concept is explained with the help of Data Envelopment Analysis (DEA) and Goal Programming (GP) techniques. By using the principles of DEA, the firms are able to identify their slacks in inputs and outputs variables to perform as efficient firms. GP model is formulated in which input and output variables are set as goals and then target values are calculated. GP model solution provides the values of each variable with the efficiency in attaining the goals. Here the analysis is explained with the help of a published dataset obtained from the firm Wheel India Limited. The output of the GP model provides the values to be maintained by input variables. These outputs from GP model are validated using output oriented DEA analysis, by replacing the variables value of Wheels India Ltd. by model value.