Resource allocation and target setting based on virtual profit improvement

One application of Data Envelopment Analysis (DEA) is the resource allocation and target setting among homogeneous Decision Making
Units (DMUs). In this paper, we assume that all units are under the supervision and control of a central decision making unit, for instance chain stores,
banks, schools, etc. The aim is to allocate available resources among units in
a way that the so-called organisational overall ”virtual profit” is maximized.
Our method is highly flexible in decision making to achieve the goals of the
Decision Maker (DM). The resulting production plans maintain the following
characteristics: (1) the virtual profit of each unit is calculated with a common
set of weights; (2) the selected weights for calculating the virtual profit prevent
the virtual profit of the system from getting worse; (3) the virtual profits of
less profitable units are improved as much as possible. The proposed method
is illustrated with a simple numerical example and a real life application.