An integrated benchmarking approach for operational level performance using dea modeling: evidence from Indian automobile industry

There is an increasing recognition of the role played by an organization's performance measurement system in achieving competitive advantage. The success of an organization may well depend upon the compatibility between the performance measurement system in operation at subordinate organizational levels and the organization's global goals. There is a need of integrated and balanced performance measurement system. Also it is observed that there is a change in focus from single performance measure to composite performance measure and at the same time from individual person to organizational level. But still the focus remains either on single performance measure or multiple measures analyzed sequentially and not simultaneously. Assigning of weights to each metric is based either on intuition or expert opinion, which makes comparison among studies difficult. In this article we use Data Envelopment Analysis technique to assign the weights using mathematical programming. This also acts as an integrated benchmarking mechanism. Data from financial statements of organizations is used to find the efficient frontier considering few operational ratios as the input and few profitability ratios as an output to the DEA model for an automobile industry in India. The basic objective is to find out organizations, which use better management practices for inventory management, procurement, production planning and scheduling etc. at operational level, which finally results in better performance at the strategic level. The organizations on the efficient frontier can further be used for benchmarking.