I. GENERAL COURSE INFORMATION VIRGINIA TECH NORTHERN VIRGINIA CENTER GRADO DEPARTMENT OF INDUSTRIAL & SYSTEMS ENGINEERING

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1 I. GENERAL COURSE INFORMATION VIRGINIA TECH NORTHERN VIRGINIA CENTER GRADO DEPARTMENT OF INDUSTRIAL & SYSTEMS ENGINEERING ISE 544 PERFORMANCE AND PRODUCTIVITY MEASUREMENT AND EVALUATION: ISE 644: RESEARCH IN THE DESIGN OF PERFORMANCE MEASUREMENT SYSTEMS Fall 2009 D. K. Tiantis Scope: The objective of this couse is to pesent pinciples leading to the design of pocessbased yet integated (i.e., that include multiple dimensions) pefomance measuement systems and within this context to intoduce concepts leading to the advancement of measuement science in management systems engineeing. In this couse, the functions of benchmaking (assessing) cuent pefomance levels and planning (designing) fo futue pefomance impovement inteventions will be stessed. Modeling appoaches of pefomance measuement including index numbes, data envelopment analysis (DEA), statistical poduction fonties, multi-attibute pefomance indices, system dynamics, and pogam evaluation will be intoduced. Concepts will be demonstated by completing a eseach/modeling poject. Justification: The effective management of pefomance (opeational and stategic) impacts the long-tem suvivability of oganizations and systems. Theefoe, it is necessay to design (o plan fo) the development of the oganization's (system s) pefomance management capabilities. In this couse, the oganization's (system s) pefomance is being viewed as a multi-dimensional entity involving elements such as, pofitability, quality, poductivity (efficiency), effectiveness (outcome), innovation, quality of wok life among othes. Ove the last six decades, within the scope of opeational pefomance management, poductivity and efficiency pefomance has eceived extensive attention by enginees, economists, opeation eseach analysts, and manages. Enginees need to be awae of the poductivity and pefomance management appoaches poposed in the liteatue. These appoaches offe a wide ange of choices fo the effective design of pefomance and pocess impovement inteventions and addess significant technological and societal issues. Peequisites: This couse will use as pat of its cuiculum pobabilistic/statistical, math pogamming concepts, and systems thinking modeling and simulation appoaches. Students should be convesant with the basic pinciples of pobability and statistics (STAT 5004, STAT 564 o the equivalent) and math pogamming pinciples (ISE 504 o ISE 5405). Gaduate Hono System: The Viginia Tech Gaduate Hono System is in effect fo this couse and all assignments shall be subject to the stipulations of the Gaduate Hono Code which is located online at Please take the time to ead this document and make sue that you undestand you esponsibilities as a student. Be infomed of the potential violations of the Gaduate Hono Code: Cheating, Plagiaism, Falsification, and Academic Sabotage. Plagiaism o othe foms of violations of the Gaduate Hono System will not be toleated. Take time to ead how to avoid plagiaism which is located online at Please contact the instucto at any time if you have questions about the Gaduate Hono System at Viginia Tech.

2 Majo Couse Concepts and Techniques. Pocess desciption 2. Oganizational system analysis 3. Specification of inputs and outputs/expet opinion elicitation 4. Poduction axioms 5. Theoy of the fim 6. Pefomance based decision making and impovement 7. Goup modeling 8. Data envelopment analysis 9. Stochastic fontie analysis 0. Engineeing applications of pefomance measuement. Distance and diectional functions 2. Pefomance scoes, tagets and pees 3. Vitual vesus eal wold 4. Model validation and veification 5. Uncetainty 6. Dynamic pefomance measuement 7. Outcome based measuement 8. Policy and best pactice evaluation 9. Big-pictue thinking 20. Measuement science Educational Objectives Thee ae fou boad educational objectives that elate to pefomance modeling that need to be developed fo an oganization. These include: qualitative skills (eveyone), modeling skills (a few), facilitation skills (a few), and had-to-measue life changing outcomes (hopefully many). The couse will focus pimaily on the fist two set of educational objectives hoping to inspie continuous lifetime leaning and eseach. Qualitative Educational Objectives. Develop an appeciation fo the design of pefomance measuement systems; 2. Define a poblem, a system whee the poblem is manifested and hypothesize the stuctue of the system that is esponsible fo the poblem; 3. Use pocess flow diagams (tansfomation o poduction function); 4. Use oganizational system analysis; 5. Define inputs (esouces) and outputs (poducts and sevices) that epesent poduction systems; 6. Identify the physical, oganizational, decision-making stuctues within systems; 7. Identify stuctual (infastuctue) and envionmental (socio-economic) vaiables that impact poduction (opeational) pefomance; 8. Identify citical vaiables in a system and thei elationships (statistical and causal) to othe vaiables; 9. Define the poduction behavio of systems; 0. Undestand how to elicit tacit knowledge;. Identify pees and pefomance tagets; 2. Identify best pactices; 3. Define a pefomance impovement policy; 2

3 4. Wok within a goup-modeling paadigm; 5. Complete model veification and validation; 6. Test models using softwae (SAS, EXCEL SOLVER, MATHEMATICA, othe). Modeling Educational Objectives. Develop vey specialized modeling skills that will enable the modele to build and code data envelopment analysis models; 2. Build use intefaces to the DEA models fo easy input of poduction data and intepetation of DEA model esults; 3. Use and integate the DEA models with additional quantitative famewoks gounded in fuzzy set theoy (fuzzy DEA, fuzzy clusteing), statistical theoy (bootstapping and obust methods (high beakdown pocedues)), economic theoy (diectional and distance functions), system dynamic theoy, math pogamming theoy (validation and veification), systems theoy, and oganizational theoy; 4. Intepet the esults of data envelopment models and build the esulting decision suppot systems; 5. Become in-house taines fo the design of integated pefomance measuement systems. Facilitation Educational Objectives. Develop facilitation skills that can enable individuals within the oganization to lead inhouse goup modeling initiatives. Had-to-measue Life Changing Objectives. Expeience the powe of leaning when designing integated measuement systems. Pofesso GA Konstantinos (Kostas) Tiantis Ms. Roma Bhatkoti Office: 442 Gaduate Cente Building Office: 453 Gaduate Cente Building Office Phone: Office Phone: Office Hous: By appointment tiantis@vt.edu oma3@vt.edu Visiting Lectues Pofesso Chis Pamete pams@vt.edu Ms. Saiedeh Fallah-Fini, Ph.D. candidate Gado Depatment of ISE fallah@vt.edu Ms. Yueqin Zhao, Ph. D. candidate Gado Depatment of ISE yueqinz@vt.edu 3

4 Student Sevices Ms. Hannah Swige Gado Depatment of ISE 250 Duham Hall Office Phone: Class Meeting Time Wednesday: 4:00 p.m. - 6:45 p.m. Requied Notes Tiantis, K., ISE 544: Pefomance Poductivity Measuement and Evaluation, Class Notes, Fall 2009 Discussion Case Studies ) Chew, No-Nonsense Guide to Measuing Poductivity, Havad Business School, Case# 8802, ) Ducke, The New Poductivity Challenge, Havad Business School, Case# 9605, 99. 3) Hayes and Clak, Why Some Factoies ae Moe Poductive than Othes, Havad Business School, Case# 86508, 986. Requied Couse Reading Mateials ) Baumol, Blackman and Wolff, Poductivity and Ameican Leadeship: The Long View, MIT Pess, Chapte 2, ) Boussofiane, Dyson and Thanassoulis, "Applied Data Envelopment Analysis," Euopean Jounal of Opeations Reseach, volume 52, numbe, -5, 99. 3) Chanes, A., Coope, W., Lewin, A., Seifod, L., editos, Data Envelopment Analysis: Theoy, Methodology and Applications, Kluwe Academic Publishes, Chapte2, Boston, ) Gaig and Hais, Total Poductivity Measuement at the Fim, Sloan Management Review, ) Gold, "Pactical Poductivity Analysis fo Management: Pat I. Analytic Famewok," IIE Tansactions, volume 4, numbe 4, , ) Gold, "Pactical Poductivity Analysis fo Management: Pat II. Measuement and Intepetation," IIE Tansactions, volume 5, numbe, 63-78, ) Hendeson and Quandt, Micoeconomic Theoy: A Mathematical Appoach, McGaw- Hill, chapte 4 (pp ),

5 8) Sink, Poductivity Management: Planning, Measuement & Evaluation, Contol and Impovement, John Wiley & Sons, chapte 5 (pp ), ) Sink and Tuttle, Planning and Measuement in You Oganization of the Futue, Industial Engineeing and Management Pess, chapte 4 (pp. 75-6), ) Stalk, G., Time-The Next Souce of Competitive Advantage, Havad Business Review, July-August, 988. ) Tiantis, "Total and Patial Poductivity Measuement at the Plant Level: Empiical Evidence fo Lineboad Manufactuing," in Poductivity Management Fonties (edited by D. Sumanth), Elsevie Science Publishes, 3-23, ) Tiantis, "An Assessment of Technical Efficiency Measues fo Manufactuing Plants," in People and Poduct Management in Manufactuing (edited by J. Edosomwan), 49-65, ) Tiantis, K., Engineeing Applications of DEA, Handbook of Data Envelopment Analysis, Kluwe Publishes, chapte 4 (pp ), Refeence Textbook Coope, Seifod, Tone, Data Envelopment Analysis: A Compehensive Text with Models, Applications, Refeences and DEA-Solve Softwae, Kluwe Academic Publishes, Othe Refeence Textbooks Coope, Seifod, and Zhu (editos), Handbook of Data Envelopment Analysis, Kluwe Academic Publishes, Cook, W. D. and Zhu, J., Modeling Pefomance Measuement: Applications and Implementation Issues in DEA, Spinge, Daaio, C. and Sima, L., Advanced Robust and Nonpaametic Methods in Efficiency Analysis, Spinge, 2007 Fäe and Gosskopf, New Diections: Efficiency and Poductivity, Kluwe Academic Publishes, Fied, H, Lovell, C.A.K., and Schmidt. S. (editos), The Measuement of Poductive Efficiency and Poductivity Gowth, Oxfod Univesity Pess, Geene, W., Econometic Methods, Peason Education, Hackman, S., Poduction Economics: Integating the Micoeconomic and Engineeing Pespectives, Spinge, 2008 Ray, S., Data Envelopment Analysis, Theoy and Techniques fo Economics and Opeations Reseach, Cambidge Univesity Pess, Sheman H.D. and Zhu, J., Sevice Poductivity Management, Spinge,

6 Thanassoulis, E., Intoduction to the Theoy and Application of Data Envelopment Analysis, Kluwe Academic Publishes, 200. Thoe, S., Technology Commecialization: DEA and Related Analytical Methods fo Evaluating the Use and the Implementation of Technical Innovation, Kluwe Academic Publishes, Zhu, J., Quantitative Models fo Pefomance Evaluation and Benchmaking: Data Envelopment Analysis with Speadsheets and DEA Excel Solve, Kluwe Academic Publishes, Zhu, J. and Cook, W., Modeling Data Iegulaities and Stuctual Complexities in DEA, Spinge, Supplemental Couse Reading Mateials and Advanced Topics Abhishek, P.J., Evaluation of the Pefomance of Custome Sevice Repesentatives in a Call Cente Using a Fuzzy DEA/Netwok Model, VT, MS Thesis in ISE, Athanassopoulos, A. and Tiantis, K., "Assessing Aggegate Cost Efficiency and the Related Policy Implications fo Geek Local Municipalities," Infomation Systems and Opeational Reseach, vol. 36, no. 3, -8, August 998. Battese, G., Pasada Rao, D., Technology Gap, Efficiency, and a Stochastic Metafontie Function, Intenational Jounal of Business and Economics, Vol., No. 2, 87-93, Battese, G., Attese, D., O Donnel, C., A Metafontie Poduction Function fo Estimation Technical Efficiency, Jounal of Poductivity Analysis, 2, 9 03, Boja-Medina, A. A Non-paametic Appoach to Evaluate the Pefomance of Social Sevice Oganizations, VT, Ph.D. in ISE, Chenick, M., Bootstap Methods: A Guide fo Pactitiones and Reseaches, John Wiley, New Jesey, Coelli, Rao, and Battese, An Intoduction to Efficiency and Poductivity Analysis, Kluwe Academic Publishes, 998. Cook, R. D., Weisbeg, S., An Intoduction to Regession Gaphics, John Wiley, New Yok, 994. Coope, Seifod, and Zhu (editos), Handbook of Data Envelopment Analysis, Kluwe Academic Publishes, Cook, W. D. and Zhu, J., Modeling Pefomance Measuement: Applications and Implementation Issues in DEA, Spinge, Davidson, Small Goup Activity at Musashi Semiconducto Woks, Sloan Management Review, 982. Daaio, C. and Sima, L., Advanced Robust and Nonpaametic Methods in Efficiency Analysis, Spinge,

7 Fäe, R. and Gosskopf, S., Intetempoal Poduction Fonties: With Dynamic DEA, Kluwe Academic Publishes, 996. Fäe, R. and Gosskopf, S., New Diections: Efficiency and Poductivity, Kluwe Academic Publishes, Fäe, R., Gosskopf, S., Lovell, C. A. K., Poduction Fonties, Cambidge Univesity Pess, Cambidge, 994. Fied, H, Lovell, C.A.K., and Schmidt. S. (editos), The Measuement of Poductive Efficiency and Poductivity Gowth, Oxfod Univesity Pess, Feie, G. D., Kestens, K., VanDen Eeckaut P., "Radial and NonRadial Technical Efficiency Measues Based on a DEA Refeence Technology: A Compaison Using US Banking Data," Discussion Pape, Cente fo Opeations Reseach and Econometics, Univesity Catholique de Louvain, 995. Fied, H. O., Lovell, C. A. K., and Schmidt S., editos, The Measuement of Poductive Efficiency: Techniques and Applications, Oxfod Univesity Pess, New Yok/Oxfod, 993. Giod, O., "Measuing Technical Efficiency in a Fuzzy Envionment," VT, Ph.D. in ISE, 996. Giod, O. and Tiantis, K., "The Evaluation of Poductive Efficiency Using a Fuzzy Mathematical Pogamming Appoach: The Case of the Newspape Pepint Insetion Pocess," IEEE Tansactions on Engineeing Management, vol. 46, No. 4, , 999. Geene, W., Econometic Methods, Peason Education, Hackman, S., Poduction Economics: Integating the Micoeconomic and Engineeing Pespectives, Spinge, Hamme and Champy, Reengineeing the Copoation, Hape Business, 993. Havad Business Review, Measuing Copoate Pefomance, Havad Business School Pess, Cambidge Massachusetts, 998. Hoopes, B., Tiantis, K., and Patangel, N., The Relationship Between Pocess and Manufactuing Plant Pefomance: A Goal Pogamming Appoach, Intenational Jounal of Opeations and Quantitative Management, 6(4), , Decembe Hoopes, B. and Tiantis, K., Efficiency Pefomance, Contol Chats and Pocess Impovement: Complementay Measuement and Evaluation, IEEE Tansactions on Engineeing Management, 48(2), , May 200. Jatikuma, S., Dynamics of Data Envelopment Analysis: Theoy of System Efficiency, Kluwe Academic Publishes, 995. Kabnuka, A., Mathematical Modeling fo Data Envelopment Analysis with Fuzzy Restictions on Weights, VT, MS Thesis in ISE,

8 Mateo, F., Coelli, T., O Donnell, C., Optimal Paths and Costs of Adjustment in Dynamic DEA Models: with Application to Chilean Depatment Stoes, Annals of Opeations Reseach, 45, 2 227, Medina-Boja, A., Pasupathy, K., and K. Tiantis Lage Scale Data Envelopment Analysis Implementation: A Stategic Pefomance Management Appoach, Jounal of Opeational Reseach Society, 58, , Medina-Boja, A. and K. Tiantis. A Conceptual Famewok to Evaluate the Pefomance of Non Pofit Social Sevice Oganizations, Intenational Jounal of Technology Management, 37 (/2), 49-60, Mendes, P. and Tiantis, K., "Using Dynamic Models to build Testable Hypotheses: Veifying Beliefs About Pefomance Incentives, Annals of Opeations Reseach, vol. 82, pp , 998. Mois, Implementation Stategies fo Industial Enginees, Gid Publishing, 979. O Donnell, C., Pasada Rao, D., Battese, G., Meta fontie Famewoks fo the Study of Fim- Level Efficiencies and Technology Ratios, Empiical Economics, 34:23 255, 2008 Otis, P. Dominance Based Measuement of Envionmental Pefomance and Poductive Efficiency of Manufactuing, VT, Ph.D. in ISE, 999. Ozbek, M. de la Gaza, J., and Tiantis, K. Data Envelopment Analysis as a Decision Making Tool fo the Tanspotation Pofessionals, fothcoming, Jounal of Tanspotation Engineeing. Ozbek, M., de la Gaza, J., and Tiantis, K., Data and Modeling Issues Faced duing the Efficiency Measuement of Road Maintenance using Data Envelopment Analysis, fothcoming, Jounal of Tanspotation Systems. Ozbek, M., de la Gaza, J., Tiantis, K., Efficiency Measuement of Bidge Maintenance using Data Envelopment Analysis, fothcoming, Jounal of Tanspotation Systems. Patangel, N, The Relationship Between Pocess and Plant Efficiency: A Goal Pogamming Appoach, VT, MS Thesis in ISE, 999. Pasupathy, K., The Modeling of Undesiable Outputs in DEA, VT, MS Thesis in ISE, Ray, S., Data Envelopment Analysis, Theoy and Techniques fo Economics and Opeations Reseach, Cambidge Univesity Pess, Saaiya, D., The Impact of Envionmental Vaiables in Efficiency Analysis: A fuzzy clusteing- DEA Appoach, VT, MS Thesis in ISE, Seave, B., Tiantis, K., "A Fuzzy Clusteing Appoach Used in Evaluating Technical Efficiency Measues in Manufactuing," Jounal of Poductivity Analysis, Volume 3, , Decembe

9 Seave, B., Tiantis, K., "The Impact of Outlies and Leveage Points fo Technical Efficiency Measuement Using High Beakdown Pocedues," Management Science, vol. 4, No. 6, pp , June 995. Seave, B., Tiantis, K. and Reeves, C., "Fuzzy Selection of Influential Subsets in Regession," Technometics, Vol. 4, No. 4, , Novembe 999. Seave, B., Tiantis, K., and B. Hoopes, Efficiency Pefomance and Dominance in Influential Subsets: An Evaluation using Fuzzy Clusteing and Pai-wise Dominance, Jounal of Poductivity Analysis, 2, , Sheman H.D. and Zhu, J., Sevice Poductivity Management, Spinge, 2006 Sheth, C., The Measuement and Evaluation of Pefomance of Uban Tansit Systems: The Case of Bus Routes, VT, MS Thesis in ISE, Sheth C, Tiantis, K., and Teodoović, D., The Measuement and Evaluation of Pefomance of Uban Tansit Systems: The Povision of Bus Sevice along Diffeent Routes, Tanspotation Reseach: Pat E, 43, , Sheth, N., Measuing and Evaluating Efficiency and Effectiveness Using Goal Pogamming and Data Envelopment Analysis in a Fuzzy Envionment, VT, MS Thesis in ISE, 999. Sheth, N. and K. Tiantis, Measuing and Evaluating Efficiency and Effectiveness Using Goal Pogamming and Data Envelopment Analysis in a Fuzzy Envionment, Yugoslav Jounal of Opeational Reseach, 3(), -26, Sennett, R., The Coosion of Chaacte, W.W. Noton, New Yok, 998. The Shingo Pize fo Excellence in Manufactuing, Application Guidelines. Sink, "Using the Nominal Goup Technique Effectively," National Poductivity Review, 73-84, 983. Sima, L., Wilson, P., Sensitivity Analysis of Efficiency Scoes-How to Bootstap in Nonpaametic Fontie Model, Management Science, Vol. 44, No., 49-6, Jan Sima, L., Wilson, P., Estimation and Infeence in Two-stage, Semi-paametic Models of Poduction Pocesses, Jounal of Econometics, 36(), 3-64, Sima, L., Wilson, P. Statistical infeence in nonpaametic fontie models: Recent developments and pespectives. In H. Fied, C. A. K. Lovell, & S. Schmidt (Eds.), The measuement of poductive efficiency and poductivity change, pp , Oxfod Univesity Pess, New Yok, Spendolini, The Benchmaking Book, Ameican Management Association, 992. Thanassoulis, E., Intoduction to the Theoy and Application of Data Envelopment Analysis, Kluwe Academic Publishes,

10 Thoe, S., Technology Commecialization: DEA and Related Analytical Methods fo Evaluating the Use and the Implementation of Technical Innovation, Kluwe Academic Publishes, Tiantis, K., "Fuzzy Non-Radial DEA Measues of Technical Efficiency," Intenational Jounal of Automotive Technology and Management, 3 (3/4), , Tiantis, K. and Boja-Medina, A., "Pefomance Measuement: The Development of Outcome Objectives: Amed Foces Emegency Sevices," Ameican Red Coss, Chapte Management Wokbook, Amed Foces Emegency Sevices, August 996. Tiantis, K. and Boja-Medina, A., Pefomance Measuement: The Development of Outcome Objectives: Intenational Sevices," Ameican Red Coss, Chapte Management Wokbook, Intenational Sevices, May 997. Tiantis, K. and Boja-Medina, A. The Development of Outcome-Based Objectives: A Manual fo Chaptes Paticipating in the Biomedical Sevices Pogam, System Pefomance Laboatoy, Ameican Red Coss, Chapte Management Wokbook, May 998. Tiantis, K. and Giod, O., "A Mathematical Pogamming Appoach fo Measuing Technical Efficiency in a Fuzzy Envionment," Jounal of Poductivity Analysis, vol. 0, 85-02, July 998. Tiantis, K. and Haigan, C. "Pefomance Measuement: The Development of Outcome Objectives: Health and Safety Sevices," Ameican Red Coss, Chapte Management Wokbook, Health and Safety Sevices, Mach 997. Tiantis, K. and Otis, P., "A Dominance Based Definition of Poductive Efficiency fo Manufactuing Taking into Account Pollution Pevention and Recycling," Euopean Jounal of Opeational Reseach, 54, , Tiantis, K. and Philips, J., "Pefomance Measuement: The Development of Outcome Objectives: Disaste Sevices, Ameican Red Coss, Chapte Management Wokbook, Disaste Sevices, May 997. Tiantis, K. and Vanden Eeckaut, P., "Fuzzy Paiwise Dominance and Implications fo Technical Efficiency Pefomance Assessment," Jounal of Poductivity Analysis, Vol. 3, No. 3, , May Tiantis, K., Saangi, S., and Kuchta, D., Fuzzy Pai-Wise Dominance and Fuzzy Indices: An Evaluation of Poductive Pefomance, Euopean Jounal of Opeational Reseach, 44, , Tiantis, K., Jain, S., Liu, S., Sheth, C. and Kothai, V., DEA Pefomance Measues fo Manufactuing Facilities, CHPM Poject Repot, Tiantis, K., Coleman, G., Hacke, M., Kible, G., Sheth, N, VanAken, S., and Washington, M., Design of a Balanced and Effective Measuement System that Woks fo the United States Postal Sevice, System Pefomance Laboatoy, distibuted to the United States Postal Sevice, Mach

11 Vaneman, W., Evaluating Pefomance in a Complex and Dynamic Envionment, VT, Ph.D. in ISE, Vaneman, W. and K. Tiantis, The Dynamic Poduction Axioms and System Dynamics Behavios: The Foundation fo Futue Integation, Jounal of Poductivity Analysis, 9 (), 93-3, Vaneman, W. and K. Tiantis, Evaluating the Poductive Efficiency of Dynamical Systems, IEEE Tansactions on Engineeing Management, 54 (3), , Zhu, J., Quantitative Models fo Pefomance Evaluation and Benchmaking: Data Envelopment Analysis with Speadsheets and DEA Excel Solve, Kluwe Academic Publishes, Zhu, J. and Cook, W., Modeling Data Iegulaities and Stuctual Complexities in DEA, Spinge IDEAS, Vesion 6.0, 998. Notes:. The equied couse eading mateials will be posted on Blackboad. 2. The in-class pesentation mateials will be posted on Blackboad. 3. Some of the supplementay eadings will be posted on Blackboad. 4. Go to amazon.com and ode the discussion case studies. 5. The detailed pocedue to ode the book is:. Go to 2. Go to the link fo Book stoe on left hand side menu &stoeid=0404&demokey=d&catalogid= Go to FIND YOUR TEXTBOOKS AND COURSE MATERIALS 4. Ente infomation about the tem, depatment, couse and section (fo the DEA textbook the section numbe is 966) 5. Submit 6. Add to cat and go to cat

12 II. OUTLINE OF TOPICS AND READINGS Pogam of Study Session Topic Assignment Unit # (pesentation notes) Requied Mateial Readings: Refeence # (chapte #) fom Requied Couse Reading Mateials 8/26 Review of Couse Outline; Units #, #2, #3 High Pefomance Systems; Fomation of poject teams Pefomance Management; System Pefomance Lab (SPL); Fomation of Poject Teams 9/2 Why Poductivity Mattes; Units # 4, #5, #6 The Poductivity Management Pocess; Requied Mateial Readings: Oganizational Systems Analysis; # (Chapte 2) Poductivity Measuement Pocess; #9 (Chapte 4) Poductivity Basics: #0 No-Nonsense Guide to Measuing Case Study # Poductivity; Final Fomation of poject teams Data Envelopment Analysis Tutoial; Poject Issues and Appoach. 9/9, 6 Theoy of the Fim. Unit #7, Systems Modeling: Pat Systems Modeling: Pat One Requied Mateial Readings: #7 (Chapte 4); Poblem Definition and Pocess/ System Desciption Pesentation (9/9) 9/23, 30 Efficiency Measues; Units #8, #9, JORS Reading Data Envelopment Analysis; Requied Mateial Readings: Issues in DEA; Softwae fo DEA Analysis Chaptes -3 fom Coope, Seifod and Tone; #2, # 3 (Chaptes, 2) Poject poposals and Liteatue Review Pesentations ae due on 9/23); Constained Optimization Assignment Due on Session 6 (9/30) Ms. Bhatkoti s Pesentation (9/30) 2

13 0/7 Statistical Poduction Fonties; Units #0, #, Systems Modeling: Systems Modeling: Pat Pat 2 The New Poductivity Challenge Requied Mateial Readings: Case Study #2 #3 (Chaptes, 2), # Chaptes 4, 5 fom Coope, Seifod and Tone Poject input/output data pesentation due on 0/7 0/4 Statistical Poduction Fonties D. Pamete s Lectue 0/2 Midtem Exam 0/28 Index Numbe Appoach. Units #2, #3 The Gaig & Hais Model; Requied Mateial Readings: The Bela Gold Appoach; #4, #5, #6, #8 (chapte 5) The Multifacto Poductivity #2 Measuement Model; DEA Results and Intepetation Multi-citeia Pefomance/ Pesentation Poductivity Technique /4 Engineeing Applications of DEA Unit #4, Satellite Scheduling, Satellite Scheduling, Road Road Maintenance, Poject Maintenance, Poject Selection; Selection Meta Fonties; Bootstapping Requied Mateial Readings: #3 Qualitative Model Pesentation Ms. Fallah-Fini s Pesentation / The Assessment of Technical Efficiency Unit #5 Using Fuzzy Set Theoy /8 Dynamic Efficiency Units #6, #7, Dynamic Sevice Why Some Factoies ae Moe Pefomance Poductive than Othes; Requied Mateial Readings: Case Study #3, Reseach Pojects Due on /8 Ms. Fallah Fini s Pesentation 2/2 Outcome Pefomance; Unit #8c Netwok Model and its Applications Ms. Zhao s Pesentation 2/9 Final Poject Pesentations 3

14 III. PROJECT DESCRIPTION, HOMEWORK AND CASE STUDIES RESEARCH PROJECT DESCRIPTION The objective of the poject is to implement and integate the concepts and techniques pesented in this couse and to eseach in-depth a topic and modeling issue in pefomance measuement. The fist and most citical task is to select an oganizational pocess that will be analyzed in tems of its poductivity (efficiency) pefomance. This pocess should be one that poduces a clealy defined output(s) and one that has clealy definable boundaies. It should be one that has pefomance/efficiency goals, uses inputs (esouces), poduces outputs (poducts/sevices), achieves outcomes, uses a technology that can be epesented by its value-adding activities, and has feedback mechanisms. It should also be one fo which input (esouce) and output (poduct/sevice) data can be accumulated. It is ecommended that this pocess be wok-elated but it doesn't have to be. A geneic outline fo the poject is pesented subsequently. This outline delineates the tasks that need to be accomplished fo the poject. It is expected that the final poject document will follow this outline fomat. Weights indicate the impotance of each section fo the final gade of the poject..0 Intoduction (5%). Motivation fo Selecting the "Pocess" and its Need fo Poductivity Impovement; The Pefomance Measuement Poblem Defined; Definition of a Citical Measuement and a Citical Modeling Issue..2 The Reseach Hypothesis o hypotheses; Citical eseach and poject questions..3 Poject Objectives and Pupose of Model.4 An oveview of the Methodologies to be Used (DEA (necessay), Multi-Facto Poductivity Method (optional), Statistical Poduction Fontie (optional), Fuzzy DEA (optional), Dynamic Modeling (necessay)..5 Oganization of the Repot 2.0 Liteatue Review (5%) 2. Measuement Issue (fo example, the measuement of pollution pevention) (what?) 2.2 Modeling Issue (fo example, the use of diectional distance functions) (how?) 2.3 Contibution to Pefomance Measuement (fo example, the inclusion of undesiable outputs in DEA) Sensitive oganizational data should be potected and in the context of this couse, data will be teated as confidential. 4

15 3.0 Pocess Definition (5%) 3. An oveview of the pocess (with a clea definition of the pocess boundaies) 3.2 Poductivity mission/goals 3.3 Inputs (esouces used) 3.4 Tansfomation (value-adding) activities that define the technology of the pocess Outputs (poducts and/o sevices poduced) 3.6 Outcomes 3.7 Pocess feedback mechanisms 3.8 Customes (Intenal/Extenal) 3.9 Vendos (Intenal/Extenal) 3.0 Othe Impotant envionmental and manageial factos 4.0 Input and Output Vaiables 3 (5%) 4.0 Definition of the input vaiables (including units of measuement; classification (contollable o not, envionmental o not, infastuctue o not); uncetainty in measuement) 4 4. Definition of the output vaiables (including units of measuement classification (contollable o not, envionmental o not, infastuctue o not); uncetainty in measuement) Input/Output vaiables fo which no data ae available; Implications fo pefomance measuement. 4.4 The Input/Output data DEA Efficiency Measuement (25%) 5. DEA Fomulation 5.2 The DEA efficiency scoes, pefomance tagets, and pees 2 A flow-pocess diagam that clealy delineates the inputs, tansfomation activities and outputs is equied fo the final document. 3 The input/output vaiable definitions should accuately epesent the undelying poduction technology. 4 Fo each input/output one can accumulate and use quantity o value data. If you have the capability of gatheing both the quantity of each input/output and its unit cost o pice, this will pove useful when implementing the DEA and the dynamic efficiency appoaches. 5 It would be good to accumulate at a minimum thity data points fo you poductivity/efficiency analysis. 5

16 5.3 The evaluation of the DEA efficiency scoes (validation and veification) Systems Modeling: Qualitative Model (0%) 6. Poblem Definition Revisited (pefomance issues; policies; model pupose; system-subsystem definition; time hoizon; endogenous/exogenous excluded vaiables; efeence modes) 6.2 Key Dynamic Hypotheses 6.3 Qualitative Model Policy Analysis (Efficiency/Poductivity Impovement) (0%) 7. DEA based Policy Analysis (opeational impovement goals and stategies) 7.2 Qualitative Model Policy Analysis 8.0 Conclusions (5%) Appendices 8. How do the esults elate (suppot) the eseach hypothesis and eseach questions? 8.2 Futue pefomance/efficiency issues 8.3 Assessment of the poject Developed Softwae Code Iteations of the Qualitative System Dynamics Model Poject Deliveables and Due Dates 9/9 Poblem Definition and Pocess Desciption Pesentation 9/23 Poject Poposal: it is expected that each team will submit sections, 2, and 3 of this outline so as to obtain feedback; Liteatue eview pesentation. 0/7 Input/Output Data Pesentation /4 Qualitative Model Pesentation /8 Final Poject due. The gading of the whole poject will take place at the end of the semeste. It is mandatoy that the final poject document be typed and double-spaced. The final document fo the poject is due on Novembe 8. 6 Detemine the oot causes of inefficient and efficient behavio. Descibe the main poduction chaacteistics. 6

17 Constained Optimization Poblem Set Please answe the following questions. Show all of you wok and wite as clealy as you can. (0%) ) Pove that the MP cuve intesects the AP cuve at its maximum point. 2) Conside the following poduction function q = Ax x2 Bx x2 (5%) a) Find AP MP, x x 5%) b) Find the maximum value of AP x. (0%) c) Find the output elasticity with espect to x 3) Conside the following poduction function q = AK α L β whee A f 0, 0 p α p, 0 p β p (5 %) a) Find MP K, MP L. Show that they ae both positive. (5%) b) Find the output elasticity with espect to L and K. (5%) c) Find the value of technical substitution and show that its value depends on the K/L atio and is independent of the output level. (5%) d) What do the conditions of concavity suggest? (5%) e) Deive the equation of an isoquant. (5%) f) Find the elasticity of substitution. 4) A theoem exists in poduction economics (Shephad (953)) that states that the technology of an oganization can be epesented by its poduction o cost function unde cost minimizing conditions. Fo each poduction function thee exists a unique cost function and vice vesa. Assume that you poduction function is of the fom: 3 ai q = Ax () whee α f 0 and i= i i 3 i= a i =. You ae also given a set of input facto pices i, i =, 2, 3 fo each of the facto inputs x i, i =, 2, 3. (20%) a) Using the constained cost minimization hypothesis deive the facto demand equations; x i = f (q,, 2, 3 ) 7

18 Fo example, a a a a A q x 3 3 ) ( ) ( ) ( = α α α (20%) b) Then deive the equivalent cost function to the poduction function (), i.e., = = + = 3 3 i i i i i i A q b C α α α whee b is a constant. 8

19 IV. COURSE GRADING Gaduate Hono System: The Viginia Tech Gaduate Hono System is in effect fo this couse and all assignments shall be subject to the stipulations of the Gaduate Hono Code which is located online at Please take the time to ead this document and make sue that you undestand you esponsibilities as a student. Be infomed of the potential violations of the Gaduate Hono Code: Cheating, Plagiaism, Falsification, and Academic Sabotage. Plagiaism o othe foms of violations of the Gaduate Hono System will not be toleated. Take time to ead how to avoid plagiaism which is located online at Please contact the instucto at any time if you have questions about the Gaduate Hono System at Viginia Tech. Gade Distibution % of Final Gade Midtem Exam 30 Reseach Modeling Poject (Team Effot) 50 Constained Optimization Assignment 0 Class Paticipation 0 Since 50% of the couse gade is a function of a team effot, it is impeative that the team membes collaboate in a spiit of tust and should equally shae in the buden of each of the assignments. In the case that a team membe is not woking well within the team, each emaining membe can evaluate the contibution of the "toublesome" team membe. This evaluation should be submitted to me in witing pio to Novembe 8. These evaluations will be confidential. Evaluation of a "Non-Coopeating" Team Membe (Maximum Discetionay Points: 20) Contibution to Class Poject and Case Studies Two-Thids of the Requied Effot Half of the Requied Effot A Thid of the Requied Effot No Effot at All Penalty 5 points 0 points 5 points 20 points Gading Policies: Class paticipation: Thoughout the semeste you will be called upon to contibute to the class discussion. If you ae called upon and do not espond because you ae not in class moe than thee times duing the semeste you will eceive one lette gade less than you would othewise eceive. If you ae called upon and do not espond because you ae not in class moe than fou times duing the semeste you will eceive two lette gades less than you would othewise eceive. 9

20 Poject: The final document fo the poject is due on Novembe 8. Pojects handed in late will fofeit 20% of the poject gade. Pojects will not be accepted afte Novembe 8. Re-evaluation Requests: All e-evaluation equests of any gaded assignments, midtems, and pojects should be communicated no late than one week afte the gaded assignment has been initially etuned othewise they will not be consideed. All of these gading policies will be stictly enfoced. 20