Production Efficiency of Sugar Factory of Bangladesh: An Application of Data Envelopment Analysis

Abstract

Measuring the efficiency of production departments is an important part of promoting and maintaining efficient operations. Dataenvelopment analysis (DEA) is a linear programmingbased technique which mirrors the capability of a decision making unit to attain the highest level of output from a given set of inputs.. To measure the efficiency, we have considered the use of sugarcane and crushing days as in put-variable and the amount of sugar production as an output-variable. About 99.6 percent of variations in the output variable was explained by these explanatory input variables (R2 = 99.6 percent).Applying DEA under CRS technology assumption, average production efficiency score is.97 in the sugar units .This indicates that on an average, the firms could increase their output by 3 percent with the existing level of inputs. Out of 10 sugar units,4 units showed significant decrease in efficiency.TSM had used excess 8.90 percent sugarcane and 31.20 percent crushing days due to production inefficiency and this unit would be able to increase sugar production by 9.77 percent as compared to peer units.