An Optimal Budgeting Model for Dynamic Network Systems Design via Data Envelopment Analysis

Abstract

Data envelopment analysis (DEA) is a nonparametric method aimed to estimate production frontiers. This technique has been empirically used to measure the productive efficiency of decision making units (  comprising a wide range of entities (i.e. banks, car makers, schools) in terms of their inputs conversion into outputs. The decision makers are challenged with the problem of restricted resources and optimal allocation of budget to each DMU. The common budget allocating models (except those having series internal processes) do not seriously address the internal processes of the DMUs. That is, they are overlooked and rather passed up as block boxes. This paper proposed a new model for optimal budgeting for designing dynamic network system using DEA implication. The advantages of this model (which can be regarded as the first accomplishment) are expounded through the research body. Within the framework of the dynamic network systems of optimal system design (OSD) via insights gained by DEA, the optimal budgeting, the budget deficit and the budget congestion along with superior features of the proposed model were systematically investigated. Finally, two cases were presented on which the suggested model was applied. In one application, the OSD network of a business entity with 5 DMUs was addressed; while the other one dealt with a business venture with 24 DMUs.