Solving DEA in Excel Spreadsheets

Joe Zhu School of Business Worcester Polytechnic Institute Worcester, MA 01609 jzhu@wpi.edu www.deafrontier.net

DEA Example: Banking

The Banking industry has been the subject of DEA analysis by researchers in various areas and probably is the most heavily studied business

Branches Banks across countries

Inputs FTE in dollars Premise/IT expenses Other Expenses Outputs Loan Balances Deposit Balances Securities Balances Gross Revenue
Source: Paradi et al. 2004 Data Envelopment Analysis Joe Zhu 1

Bank Branch

DEA: Graphical Presentation

Output DEA Best-Practice D Frontier

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D

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Output augmentation

K D Input reduction

Data Envelopment Analysis Joe Zhu

Input

A DEA Model VRS model

min subject to n j x ij x io
*

j y rj y ro
j= 1 j= 1 n j

j 1 n

i 1 , 2 ,..., m ; r 1 , 2 ,..., s ; j 1 , 2 ,..., n .

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j 0

Excel Spreadsheet Modeling

Effective way for dealing with data and modeling Spreadsheet Modeling

Enter data Cells for decision variables Cell for objective function Cells for right-hand side Cells for left-hand side
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DEA Spreadsheet Components

The Model

Formulas

INDEX(array,row number,column number) returns the value in the specified row and column of the given array

Cell D20 =$F$19*INDEX(B2:B16,E18,1) Cell D23 =INDEX(F2:F16,E18,1)

Solver

Solver Parameters

Automating DEA Calculation

VBA code

Visual Basic (VB) Editor

Alt-F11 key combination (or using Developer Tab)

Set a reference to Solver Add-In

Insert a Module

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VB Editor

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VBA Code

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VBA Code Explained

SolverSolve UserFinish:=True tells the Solver to solve the DEA problem without displaying the Solver Results dialog box Offset(rowOffset, columnOffset) property takes two arguments that correspond to the relative position from the upper-left cell of the specified Range The statements With Range(J1) and .Offset(DMUNo, 0)=Range(F19) take the optimal objective function value (efficiency score) in cell F19 and place it in cell J DMUNo (that is, cell J2, J3, , J16)
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Run VBA Procedure/Macro

Enter the Run Macro dialog box by pressing Alt-F8 key combination

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Joe Zhu, Quantitative

Models for Performance Evaluation and Benchmarking: Data

Envelopment Analysis with Spreadsheets ISBN: 978-0-387-85981-1

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DEAFrontier

Add-In for Microsoft Excel and provides a custom menu of DEA approaches which include more than 150 different DEA models Does not set limit on the number of units, inputs or outputs. With the capacity of Excel Solver, the DEAFrontier can deal with large sized performance evaluation tasks DEAFrntier with OpenSolver www.deafrontier.net

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OpenSolver

Opensolver.org No artificial limits DEAFrontier version designed for use with OpenSolver

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DEA Text

W.D. Cook and Joe Zhu, Data Envelopment Analysis: Modeling Operational Processes and Measuring Productivity, 2008, ISBN/EAN13: 1434830233 / 9781434830234

Data Envelopment Analysis Joe Zhu

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