REALLOCATION OF INPUTS AND OUTPUTS BASED ON REVENUE, COST AND PROFIT EFFICIENCY

Abstract

Due to the circumstances of the situation, the output of organizational units cannot be changed in some production and service organizations. Therefore, in these conditions, the only possible option is the change in the amount of inputs generated by the units in question, with the limitation that the entire output of organization remains constant. In this study, we present a centralized approach for reallocating output based on cost efficiency across a set of decision making units (DMUs) under a centralized decisionmaking environment. The proposed model extends the traditional cost efficiency model by allowing for reallocation of output within the DMUs. In fact, reallocate of existence outputs between decision makers allows us to reach the optimal allocation of output and in this regard to achieve the highest level of cost efficiency. Examples of various numerical are presented to illustrate the proposed approach that helps to better understand. The results show that our approach is able to achieve less total cost compared with the conventional non-centralized cost efficiency model. In other words, using the presented models with less input can achieve same output and increased efficiency in the system. Furthermore, a profit analysis is performed, which can provide information for the central decision-maker with respect to how to reallocate the output and input across the DMUs.

Keywords

• DEA,EFFICIENCY

References

1. Kao