Finance

About the crucial role of cost information for accurate efficiency assessments

December 19, 2013

Managers and controllers of companies that have different stores (e.g. McDonalds, Albert Heijn, Saturn, ABN-Amro, H&M, smaller chains such as Brainwash and Oil & Vinegar, hotel chains such as Van der Valk) really want to know which of their stores are operating inefficient and how the efficiency of inefficient stores can be improved. We developed a new methodology that helps managers in addressing these questions.

Image: © Nationale Beeldbank

Compared to previous methods to assess the efficiency of stores or business units, our method is much more powerful to detect inefficient stores and allows calculating efficiencies at the level of the product group. The latter benefit of our methodology leads to much more focused improvement actions and allows managers to devote their time and effort to the product groups that are most problematic in terms of efficiency.

The unique and new feature of our approach is that we include cost information into the efficiency assessment. As many firms already collect cost information for other purposes, implementing our approach is definitely possible at reasonable cost. We tested our methodology on data from a European service company and our analysis helped managers and controllers to take better strategic and operational decisions.

In times of crisis, companies are under high pressure to improve the efficiency of their processes. Our newly developed methodology can help companies to accomplish this goal and has the attractive feature that better decisions can be extracted from cost information that the company already collects!

If you are interested in this methodology and/or if you want more information about the usefulness of this methodology for your firm, please contact dr. Bart Dierynck.

Read more

Opening the Black Box of Effenciency Measurement: Input Allocation in Multi-Output Settings, Cherchyey, De Rockz, Dierynckx, Roodhooft, Sabbekpening (2013)

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