Table 2-3 reports the results of DEA applied to these five branches.
DEA identified the same inefficient branches that were identifiable
through observation of the data. Bl and B2 have efficiency ratings
below 100%, which identifies them as inefficient. In addition, DEA
focuses the manager's attention on a subgroup of the bank branches
referred to as the efficiency reference set in Table 2-3. This efficiency
reference set (ERS) includes the group of service units against which
DEA calculates the efficiency rating for B2 to be 85.7% and the
value for vj = 1.429 for hours, V2 = 0.286 for supply $s, and wj =
0.0857 for service units. DEA would be rerun for each branch in the
objective function as was done above to branch B2.
Management is provided with alternative paths to improve the
efficiency of bank branches in Table 2-2. For example, for branch B2,
one path suggested in Table 2-4 (or model (2.2)) is for B2 to reduce H
by 4.3 units and to reduce S by 29 units. Other paths can also be
ascertained from the model (2.1). For branch B2, we have an optimal
value of u = 0.000857 for transaction outputs, vl = 0.01429 for teller
hours (H) and v2 = 0.00286 for supply dollars (S). This means that for
each reduced teller hour, the efficiency of B2 increases by 1.43%. For
each supply dollar decrease, the efficiency of B2 will increase by
0.286%. For B2 to become relatively efficient, it must increase its
efficiency rating by 14.3 percentage points (100-85.7%). Hence, B2
can become efficient by decreasing H by 10 hours (10 hours X
1.43=14.3%) or by decreasing S by 50 units (50x0.286%=14.3%), or
by some combination of these reductions in H and S. Of course.