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ABSTRACT
Keywords: Readymade Garment firm, Production efficiency, Data Envelopment Analysis, Ratio
Analysis
Overview of notations:
xi = input vector of ith firm
yi = output vector of ith firm
x j = input vector of j firms, where j 1,2,......, N
y j = output vector of j firms, where j 1,2,......, N
u = vector of output weights
= vector of input weights
= efficiency score corresponding to the input oriented models
1/ = efficiency score corresponding to the output oriented models
= vector of constants
Assume, there are data on K inputs data for all N firms. Then, the efficiency of a
and M outputs for each of N firms. For the garment firm is defined as the ratio of
ith firm, inputs and outputs are represented weighted sum of outputs to weighted sum of
by the column vectors xi and yi inputs (u ' yi / v ' xi ) . The optimal weights are
respectively. The KxN input matrix, X, and obtained for the ith firm by solving the
the MxN output matrix, Y, represent the mathematical linear programming problem:
1
Efficiency score
0.8
0.6 OPE
PPE
0.4
SE
0.2
0
1
8
F
F
G
Garment firm
Table 3. Reference Set, Peer Counts and Return to Scale of Garment Firms
Garment Reference set Peer Return to scale
firm Count
GF1 GF1 5 Constant return to scale
GF2 GF2 4 Decreasing return to scale
GF3 GF8, GF 2, GF 1 0 Decreasing return to scale
GF4 GF 8, GF 2, GF 1 0 Decreasing return to scale
GF5 GF 8, GF 2, GF 1 0 Decreasing return to scale
GF6 GF 2, GF 1 0 Decreasing return to scale
GF7 GF 8, GF 1 0 Decreasing return to scale
GF8 GF 8 4 Decreasing return to scale
The BCC model assumes the overall production efficiency, but have 100
variable return to scale (VRS) and the percent pure production efficiency. This
measured efficiency is called pure clearly indicates that these two firms are
production efficiency (PPE). It indicates capable of converting its inputs into output
how efficiently the inputs are converted into with 100 percent pure production efficiency,
outputs, irrespective of the size of the firm. but their overall production efficiency is low
It is observed from the figure that out of due to low scale efficiency. This
eight garment firms, three are efficient under demonstrates that if the effect of scale-size
VRS technology (PPE=1). Average pure is neutralized, firms GF2 and GF8 can
production efficiency is 0.83, implying that become efficient. Of the eight firms, GF1
an individual firm is inefficient in positions best practice firm by comprising
managerial performance by 17 percent. Out highest peers count of five in the whole
of eight firms, GF3 is the most inefficient sample. It achieves the most productive
firm that has scored the lowest score of 0.64. scale size (OPE = PPE = SE = 1). Thus, it
This firm can follow the best practices of can be a role model for most of the
firms GF1, GF2 and GF8 for improving its inefficient firms. Best practices of this firm
efficiency. It is also observed from the can be followed as norms or benchmarking
figure that the firm GF2 and GF8 obtain low by them to monitor their performances.
The scale efficiency scores of the observed that out of the eight firms, only
individual firms are shown in Figure 1. It is one firm (GF1) is scale-efficient. This firm