In this example, there are 4 Universities or DMUs (A,B,C & D)
For the data, there are 2 inputs & 3 outputs.
There are 4 weights (γ) for each DMU. They can be preset to any value in an Excel sheet (e.g, 1), because they are decision variables (changing cells in Solver). Solver will produce an optimal value for each γ in the end.
Four cells are reserved for the weights(lambdas). These cells are then selected as changing cells in Solver, representing unknown decision variables.
One cell is reserves for the efficiency score (theta). This cell is then selected as a changing cell (in addition to the lambda cells) in Solver. This theta is also a unknown decision variable and we use an initial value of 1 for this cell. Solver will return the optimal value to this cell, once it is solved.
Formula = sumproduct() is used to facilitate the setup of the constraints.
On the left-hand side of the constraints, for the input cells, we enter = sumproduct(Input array, weight array). Instead of using the product of each DMU’s input and its corresponding weight, =sumproduct() enables us to finish this step quicker.
On the right-hand side of the constraints, for input cells, we reserve the cell of the input value for the DMU under evaluation (DMU A in this example), and multiply it with the cell for the efficiency score (θ)
For the output cells on the right-hand side of the constraints, we link them to outputs for the DMU under evaluation, because they are fixed at their current levels.
Also in the constraints, set up the sum of 4 weights (γ) equal to 1.
In Excel, open the Solver under the Data tab.
Inside the Solver, choose the cell for the efficiency value as the objective cell and the goal is to minimize it.
For the blank space under “by changing variable cells:”, choose the cells that contain 4 γ values and the efficiency (θ).
It is important that the cell containing θ is selected as a changing cell. Otherwise, the Solver will not solve. This is because θ is a decision variable, NOT a given value.
Click “add” button to enter the constraints for inputs, outputs, and sum of γ.
Make sure to check the box “Make unconstrained variables non-negative”.
Select simplex LP as the solving method, since we are solving a linear programming problem.
Inside option, check the box “use automatic scaling” – this is a default in Excel 2010 and 2013.
Click “solve”, we should have the solution for the weight values and efficiency score.
In this case, efficiency score for DMU A is 1, which mean university A is efficient.
To evaluate the next DMU, for example DMU b, we only need to change the right-hand side of the constraints for inputs and outputs. We replace the right-hand side with the current inputs and outputs of the DMU under evaluation.
No change is needed to the left-hand side of the constraints.
There is no need to make any change to the Solver parameters.
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