Manufacturing enterprise performance using network DEA: A profitability and marketability framework

Despite providing a holistic view of a company's progress, existing performance measurement system (PMS) models report performance separately for every single measure and leaves the overall performance of the corporate untouched. The concept of vertical and horizontal alignment has been described theoretically in PMS literature. However, the existing PMSs do not provide a mechanism for how to link each organisational level in a PMS. This study aims to promote the use of network data envelopment analysis (NDEA) for measuring manufacturing enterprises' performance. NDEA can deliver a single composite index, derived from multidimensional measures, which can represent the overall manufacturing performance. An alignment concept as a prerequisite of an integrated PMS is explained using the NDEA technical properties. The proposed NDEA-based PMS is tested in a pharmaceutical company to illustrate how it works in evaluating profitability and marketability. We modify an existing profitability and marketability framework into a three-stage model: production acquisition, profit earning, and marketability, to capture the complexity in manufacturing operations. The proposed NDEA-based PMS is useful for conducting a performance review to seek the sources of inefficiency and determine improvement target.