I'm doing research on the performance efficiency of different oil companies in the world. It has come to my attention that many scholars use DEA Analysis to measure it. However, it is not clear which variable should be treated as an output or input, for instance, should revenue be considered an output? How about oil reserves? Choosing the wrong variable alters the results.
the total revenue can be added as desirable output. whereas labor, capital, energy consumption, or any other variables can be added as input variables.
Dear Rodrigo,
Some industry studies using DEA have use the following inputs and outputs variables.
• Input would be circulating capital, Investment, labor, selling cost, expense, and energy consumption.
• Output would be revenue, monetary income, profit and net value of output value
Dear Dr. Lyra,
I think you can consider two types of inputs in the performance evaluation process including operational and non-operational inputs. Production capacity, total hours of operation and fuel consumption can be considered as operational inputs. Among non-operational inputs, I can mention number of employees, training cost and etc. Revenue and total amount of oil produced along with some green criteria can be suitable outputs.
DEA is taken as Drug Enforcement Agency, USA . The following inputs and outputs variables should be considered.
• Input would be circulating capital, Investment, labor, selling cost, expense, and energy consumption.
• Output would be revenue, monetary income, profit and net value of output value
Input variables are equivalent to explanatory variables while output variables = outcome variables
In some studies, you can find the same variable as an input or output, and the correct classification depends on the objective of your research, what do you want to analyze with the DEA model. So to take a position about the revenue as an input or output, I think it is necessary to know more about the nature and propose of your research. But usually, I have seen the revenue as output; you can do it a literature review in your specific company field.
From a different viewpoint, you can review undesirable input and undesirable output concepts in DEA.
Usually, what constitutes an input or output is determined from existing theory and literature. In the banking sector in particular, there are different approaches to determine input and output variables and I think you may check how this is done and then adapt it to your work in the oil sector. Possible Output variables are: total revenue, total production, total investment and input variables could include labour, cost of production.
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