cie39 troyes
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CIE39, Troyes,July 6, 2009
Using Data Envelopment Analysis to benchmark logistic performance
in Belgian manufacturing companies
Sofie Van Volsem, Hendrik Van LandeghemDepartment of Industrial Management, Ghent University, Belgium
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CIE39, Troyes,July 6, 2009CIE39, Troyes,July 6, 2009
Aggregate information
Multi-Input Multi-Output
DEA
•Efficient Frontier
•Efficient Input and
Output target
Extending classical Output / Input rate
Hypothesis: Input/Output relationship is assumed
2
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CIE39, Troyes,July 6, 2009CIE39, Troyes,July 6, 2009
Identification Best-Practice Frontier
0
1
2
3
4
5
0 1 2 3 4 5
Input
Ou
tpu
t
D
B
C
A
S. Van Volsem 3
INEFFICIENT
DMU name Input OutputA 1 1B 2 3C 4 4D 3 2
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CIE39, Troyes,July 6, 2009
Type of Frontier
0
1
2
3
4
5
0 1 2 3 4 5 6
input
ou
tpu
t
B
C
A
D
•VRS: Variable Return to Scale.
Removing the constraint
With the constraint:
∑λj = 1
With the constraint:
∑λj ≤ 1
With the constraint:
∑λj ≥ 1
•NDRS: Non-Decreasing Return to Scale.•CRS: Constant Return to Scale.•NIRS: Non-Increasing Return to Scale.•VRS: Variable Return to Scale
•CRS: Constant Return to Scale
•NIRS: Non-Increasing Return to Scale
•NDRS: Non-Decreasing Return to Scale
n
1jjλ
CIE39, Troyes, 6-8 July 2009
4S. Van Volsem
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CIE39, Troyes,July 6, 2009
0
1
2
3
4
5
0 1 2 3 4 5
Input
Ou
tpu
t
D
B
C
A
•Input-oriented approach
•Output-oriented approach
Two alternative approaches
1,5
D’
0,53
1,5
InputPresent
InputEfficientθ
D’3,5
1,752
3,5
OutputPresent
OutputEfficient
5
CIE39, Troyes,July 6, 2009
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CIE39, Troyes,July 6, 2009
n,...,2,1j0
1
s,...,2,1rysy
m,...,2,1ixsx
tosubject
)ss(min
j
n
1jj
n
1j0rrrjj
n
1j0iiijj
m
1i
s
1rri
n,...,2,1j0
1
s,...,2,1rysy
m,...,2,1ixsx
tosubject
)ss(max
j
n
1jj
n
1j0rrrjj
n
1j0iiijj
m
1i
s
1rri
VRS Envelopment ModelInput-Oriented Output-Oriented
6S. Van Volsem
CIE39, Troyes,July 6, 2009
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CIE39, Troyes,July 6, 2009
0
1
2
3
4
5
0 1 2 3 4 5 6
Input
Ou
tpu
tE
B
C
A
D
Slacks
7S. Van Volsem
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CIE39, Troyes,July 6, 2009
Undesirable Measures Model
Undesirable Outputs may be present: outputs we wish to decrease
Internal processes and
activities
% BP LEAN
% BP INV
% BP CIM
% BP LOGPLAN
% Perfect Orders
Days of Inventory
Flexibility
8S. Van Volsem
CIE39, Troyes,July 6, 2009
Days needed to increase productivity by 20%
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CIE39, Troyes,July 6, 2009
Undesirable Measures Model
Output-Oriented Model with Undesirables Measures: and
0vyy rbrj
brj 1ymaxv b
rjjr
grjy b
rjy
n,...,2,1j;0
1
xx
yy
yhy
tosubject
hmax
j
n
1jj
n
1j0iijj
n
1j
b0r
brjj
n
1j
g0r
grjj
*r
b0r
*r
b0r
*r
g0r
*g0r
*i0i0i
syhvy
syhy
sxx
where
Efficient target for DMU0
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CIE39, Troyes,July 6, 2009
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CIE39, Troyes,July 6, 2009
DEA Models in Spreadsheets
Joe Zhu
“Quantitative Models for Performance Evaluation and Benchmarking”
2003
Excel Spreadsheets
Solver
Visual Basic+
10S. Van Volsem
CIE39, Troyes,July 6, 2009
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CIE39, Troyes,July 6, 2009
Benchmarking applied on logistics Case 80 Belgium companies
Best Practices Data
General Best Practice rate
Human Resources, Assets, Design, quality control,
Inventory,…
Best Practices related with logistics
• Logistic plan (LOGPLAN)
• Inventory (INV)
• Lean (LEAN)
• Monitorizaton (CIM)
11S. Van Volsem
CIE39, Troyes,July 6, 2009
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CIE39, Troyes,July 6, 2009CIE39, Troyes,July 6, 2009
General BP adoption
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CIE39, Troyes,July 6, 2009
Internal processes and
activities
% BP LEAN
% BP INV
% BP CIM
% BP LOGPLAN
ROA
Cash Cycle Time
Added Value
TEST 1: Multi-input / Multi-output – general output
% BP LEAN
% BP INV
% BP CIM
% BP LOGPLAN
TEST 2: Multi-input / Multi-output – logistics output
TESTS
% Perfect Orders
Days of Inventory
Flexibility
Internal processes and
activities
13S. Van Volsem
CIE39, Troyes,July 6, 2009
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CIE39, Troyes,July 6, 2009
Internal processes and
activities
% BP LEAN
% BP INV
% BP CIM
% BP LOGPLAN
Results Test 1 : general output
Results:
Efficiency
Frequency
1,61,51,41,31,21,11,0
10
9
8
7
6
5
4
3
2
1
0
1
0
11
2
4
10
Histogram of Efficiency
DMU No.
Output-OrientedEfficiency
1 1,370782 1,191804 1,105726 1,5860010 1,0963611 1,3331912 1,0783114 1,1897419 1,06008
ROA
Cash Cycle Time
Added Value
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CIE39, Troyes,July 6, 2009
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CIE39, Troyes,July 6, 2009
% BP LEAN
% BP INV
% BP CIM
% BP LOGPLAN
Efficiency
Frequency
1,161,121,081,041,00
1817161514131211109876543210
1000000
10
17
Histogram of Efficiency
DMU No.
Output-OrientedEfficiency
2 1,002045 1,0019911 1,0421114 1,18687
% Perfect Orders
Days of Inventory
Flexibility
Results Test 2 : logistics output
Results:
Internal processes and
activities
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CIE39, Troyes,July 6, 2009
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CIE39, Troyes,July 6, 2009CIE39, Troyes,July 6, 2009
What can we offer to companies?
• A benchmarking tool
• Identification of Efficient Frontier
• Relative efficiency in the set of companies
• Visual information
For this, we only need aggregate data => low information cost
16S. Van Volsem
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CIE39, Troyes,July 6, 2009CIE39, Troyes,July 6, 2009
Efficient company
52,2 % BPCIM
52,9 % BPINV
36,4 % BPLEAN
28,6 % BPLOGPLAN
COMPANY ID_DAT_TIM:
720304081839
96 days Inv.
• Company Position: 1/19
18 days Prod.
94% P. O.
Efficient
Visual information display
17S. Van Volsem
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CIE39, Troyes,July 6, 2009CIE39, Troyes,July 6, 2009
Non-efficient company
47,8 % BPCIM
64,7 % BPINV
27,3 % BPLEAN
39,3% BPLOGPLAN
COMPANY ID_DAT_TIM:
3130501241053
40 days Inv. 17 days
80 days Prod. 3 days
50% P. O. 77,5 %
96%
58%
55%
COMPANY POSITION:
19/19
Visual information display
18S. Van Volsem
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CIE39, Troyes,July 6, 2009CIE39, Troyes,July 6, 2009
Relative position in the whole set
0%
10%
20%
30%
40%
50%
Po
ssib
le i
mp
rove
me
nt
23 CompaniesEFFICIENT
YOUR COMPANY
20 / 23
33 %
Visual information display
19S. Van Volsem
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CIE39, Troyes,July 6, 2009CIE39, Troyes,July 6, 2009
Conclusions: Data Envelopment Analysis as a benchmarking tool
• Identification of efficient companies and output efficient targets
• No information about how to improve internal performance to reach the efficiency
• Relationship Input-Output is assumed
• Quality of a DEA benchmarking does highly depend on the available data
• Visual information display available20S. Van Volsem