An Optimization Approach to the Construction of a Sequence of Benchmark Targets in DEA-Based Benchmarking

Abstract

Stepwise efficiency improvement in data envelopment analysis (DEA)-based benchmarking is a realistic and effective method by which inefficient decision making units (DMUs) can choose benchmarks in a stepwise manner and, thereby, effect gradual performance improvement. Most of the previous research relevant to stepwise efficiency improvement has focused primarily on how to stratify DMUs into multiple layers and how to select immediate benchmark targets in leading levels for lagging-level DMUs. It can be said that the sequence of benchmark targets was constructed in a myopic way, which can limit its effectiveness. To address this issue, this paper proposes an optimization approach to the construction of a sequence of benchmarks in DEA-based benchmarking, wherein two optimization criteria are employed : similarity of input-output use patterns, and proximityof input-output use levels between DMUs. To illustrate the proposed method, we applied it to the benchmarking of 23 national universities in South Korea.