Integrating Theory and Methods for Operational Performance Assessment

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This grant supports research on innovative approaches to assessing relative efficiency of industrial operations and identifying best practices. The assessment approach simultaneously considers all the important resources consumed and all the important products or services produced, in an analysis of a single operation compared to the best practical performance estimated from a large sample of similar operations. The method is based on economic production theory and requires careful specification of the resources and products common to all operations in an industry segment. The benchmarking approach utilizes the relative efficiency assessments of a large sample of operations, along with their potential explanatory attributes. The benchmarking method looks for statistical correlations between attributes and relative efficiencies, and requires both careful specification of the explanatory attributes and application of statistical methods. Both assessment and benchmarking methods will be deployed for experimentation using readily available internet technologies, and a focused case study will be performed for publishing warehouses.If successful, the immediate practical impact is to provide firms in an industry a fast and economical method to determine their overall efficiency relative to other firms in their industry, and also to identify "best practices" within their industry. In the case of warehousing, for example, preliminary results show an average relative efficiency of only 73 percent in an industry accounting for 2.5 percent of GDP. If a broader deployment of best practices could improve the industry relative efficiency to only 80 percent, the potential savings approaches $25 billion per year. The theoretical impacts take several forms. First is the creation of a unique data resource upon which a better understanding of operational modeling can be developed. In the case of warehousing, such a model would begin to associate specific practices with specific types of warehouse requirements. The research also will contribute to the tools and methods for economic analysis of performance.