A data envelopment analysis based approach for target setting and resource allocation: application in gas companies

Abstract

Resource allocation is an important application of data envelopment analysis and has been investigated by many researchers and managers from both economic and managerial field. In real managerial and economical decisions, situations often occur when extra productions of goods are utilized and the decision maker (DM) would like to determine the numbers of extra products that each unit can produced. In this paper, several methods based on the data envelopment analysis for resource allocation in such situations are introduced that can help the managers to make better decisions. The primary aim of this paper is to allocate resources such that the inefficient decision making units (DMUs) to become efficient as possible. For this aim, firstly several homogeneous units under the control of a central unit are considered and then the efficiency of each unit is determined. In addition, if the production of additional products seems logical, the DM wants to know how much of additional outputs should be produced by each unit such that the total outputs reach to a predetermined level. In this case the proposed algorithms determine quantities of the consumed input and produced output levels for each DMU to obtain the desirable output level. For using the whole power of system, the multi objective programming (MOP) problem has been used. A numerical example is given to show the solution process to improve the clarity of the proposed method. Finally, the real data of a gas company extracted from extant literature are used to demonstrate the proposed method.