Best performance modeling using complementary DEA-ANN approach: Application to Japanese electronics manufacturing firms

Abstract

Purpose

The purpose of this paper is to design an innovative performance modeling system by jointly using data envelopment analysis (DEA) and artificial neural network (ANN). The hybrid DEA-ANN model integrates performance measurement and prediction frameworks and serves as an adaptive decision support tool in pursuit of best performance benchmarking and stepwise improvement.

Design/methodology/approach

Advantages of combining DEA and ANN methods into an optimal performance prediction model are explored. DEA is used as a preprocessor to measure relative performance of decision-making units (DMUs) and to generate test inputs for subsequent ANN prediction modules. For this sequential process, Charnes, Cooper, and Rhodes and Banker, Chames and Cooper DEA models and back propagation neural network (BPNN) are used. The proposed methodology is empirically supported using longitudinal data of Japanese electronics manufacturing firms.

Findings

The combined modeling approach proves effective through sequential processes by streamlining DEA analysis and BPNN predictions. The DEA model captures notable characteristics and efficiency trends of the Japanese electronics manufacturing industry and extends its utility as a preprocessor to neural network prediction modules. BPNN, in conjunction with DEA, demonstrates promising estimation capability in predicting efficiency scores and best performance benchmarks for DMUs under evaluation.

Research limitations/implications

Integration of adaptive prediction capacity into the measurement model is a practical necessity in the benchmarking arena. The proposed framework has the potential to recalibrate benchmarks for firms through longitudinal data analysis.

Originality/value

This research paper proposes an innovative approach of performance measurement and prediction in line with superiority-driven best performance modeling. Adaptive prediction capabilities embedded in the proposed model enhances managerial flexibilities in setting performance goals and monitoring progress during pursuit of improvement initiatives. This paper fills the research void through methodological breakthrough and the resulting model can serve as an adaptive decision support system.

Citation

Kwon, H.-B., Lee, J. and Roh, J.J. (2016), "Best performance modeling using complementary DEA-ANN approach: Application to Japanese electronics manufacturing firms", Benchmarking: An International Journal, Vol. 23 No. 3, pp. 704-721. https://doi.org/10.1108/BIJ-09-2014-0083