Benchmarking Indian SMEs: A DEA Approach

Abstract

The study is to benchmark Indian small and medium enterprises (SMEs) through data envelopment analysis (DEA) to predict the performance of SMEs for effective decision making. Forty-one Indian SMEs who are producing auto components are chosen for benchmarking purpose. The peer group and peer weights for the inefficient SMEs have been identified. This is useful for benchmarking for the inefficient DMUs. The SMEs can identify the parameters in which they lack and take necessary steps for improvement. The peer group for the inefficient SMEs indicates the efficient SMEs to which the inefficient SMEs are closer in its combination of inputs and outputs. It assist the managers to predict the performance of individual DMU based on input consumed and generate various ‘what-if’ scenarios. It provides a comprehensive methodology for improving the performance of SMEs in India.