Performance evaluation of power distribution sector of Sri Lanka based on data envelopment analysis

Abstract

Performance Evaluation of Power Distribution Sector of Sri Lanka Based on Data Envelopment Analysis Performance benchmarking is very important for any type of organization. Results of such benchmarking studies allow the organization or the unit to compare themselves with the best organization or unit and to develop strategic plans for improvements in their performance. There are several methods and techniques for the measurement of the relative efficiency of organizations or units in relation to an efficient frontier or best practice. Each technique is either based on linear programming or econometrics. Data Envelopment Analysis (DEA), Parametric Programming Analysis (PPA), Partial Factor Productivity (PFP), Corrected Ordinary Least Squares (COLS) and Stochastic Frontier Analysis (SFA) The algorithm which can be followed by top managers of any organization to evaluate and improve relative performance is discussed. Relative performance of 20 areas within Distribution Division 02 (DD2) of Ceylon Electricity Board is evaluated using Data Envelopment Analysis (DEA). Relative efficiency scores and methods to improve efficiencies can be identified for each area. This paper studies how to carry out DEA analysis to evaluate CRS, VRS and scale efficiency scores and slack analysis in order to find efficient input targets and output targets. Then DEA analysis was carried out with different models and justified the selected base model for the analysis. This paper also discusses the classification of DMUs according to the sensitivity analysis. Generally, the study concludes that DEA analysis can be carried out to evaluate the performance of an organization, department or branch whether it is a public sector or private sector. The evaluation can be carried out once a year or once in two years in order to identify their position and utilized resources can also be reduced according to the results of the analysis.