Fuzzy data envelopment analysis: A fuzzy expected value approach Fuzzy data envelopment analysis: A fuzzy expected value approach q Ying-Ming Wang a,⇑, Kwai-Sang Chin b a School of Public Administration, Fuzhou University, Fuzhou 350002, PR China b Department of Manufacturing Engineering and Engineering Management, City University of Hong Kong, 83 Tat Chee Avenue, Kowloon Tong, Hong Kong a r t i c l e i n f o Keywords: Fuzzy data envelopment analysis Fuzzy expected values Double frontier analysis (DFA) Flexible manufacturing system a b s t r a c t Performance assessment often has to be conducted under uncertainty. This paper proposes a ‘‘fuzzy expected value approach’’ for data envelopment analysis (DEA) in which fuzzy inputs and fuzzy outputs are first weighted, respectively, and their expected values then used to measure the optimistic and pes- simistic efficiencies of decision making units (DMUs) in fuzzy environments. The two efficiencies are finally geometrically averaged for the purposes of ranking and identifying the best performing DMU. The proposed fuzzy expected value approach and its resultant models are illustrated with three numer- ical examples, including the selection of a flexible manufacturing system (FMS). � 2011 Elsevier Ltd. All rights reserved. 1. Introduction Traditional data envelopment analysis (DEA) (Charnes, Cooper, & Rhodes, 1978) requires crisp input and output data, which may not always be available in real word applications. Significant ef- forts have been made to handle fuzzy input and fuzzy output data in DEA. For example, Sengupta (1992) incorporated fuzziness into DEA by defining tolerance levels for both the objective function and violations of constraints and proposed a fuzzy mathematical programming approach. Triantis and Girod (1998) transformed fuzzy input and fuzzy output data into crisp data using member- ship function values and suggested a mathematical programming approach in which efficiency scores were computed for different values of membership functions and then averaged. Guo and Tanaka (2001) converted fuzzy constraints such as fuzzy equalities and fuzzy inequalities into crisp constraints by predefining a pos- sibility level and using the comparison rule for fuzzy numbers and presented a fuzzy CCR model. León, Liern, Ruiz, and Sirvent (2003) suggested a fuzzy BCC model based on the same idea. Lertworasirikul, Fang, Joines, and Nuttle (2003) proposed a pos- sibility DEA model for fuzzy DEA. In the special case that fuzzy data are trapezoidal fuzzy numbers, the possibility DEA model became a linear programming (LP) model. They (Lertworasirikul, Fang, Joines, & Nuttle, 2003) also presented a credibility approach as an alternative way for solving fuzzy DEA problems. The possibility and credibility approaches were further extended to fuzzy BCC model in Lertworasirikul, Fang, Nuttle, and Joines (2003) by the same authors. Wu, Yang, and Liang (2006) applied the possibility DEA model for efficiency analysis of cross-region bank branches in Canada. Garcia, Schirru, and Melo (2005) utilized the possibility DEA model for failure mode and effects analysis (FMEA) and presented a fuzzy DEA approach to determining ranking indices among failure modes. Wen and Li (2009) employed credibility measure to represent fuzzy CCR model as an uncertain program- ming and solved it with a hybrid intelligent algorithm which inte- grates fuzzy simulations and genetic algorithms. Kao and Liu (2000a, 2000b, 2003, 2005) transformed fuzzy in- put and fuzzy output data into intervals by using a-level sets and Zadeh’s extension principle, and built a family of crisp DEA models for the intervals. Based on their crisp DEA models for a-level sets, Liu (2008) and Liu and Chuang (2009) took further into consider- ation the concept of assurance region (AR) and developed a fuzzy DEA/AR model for the selection of flexible manufacturing systems (FMSs) and the assessment of university libraries, respectively. Saati, Menariani, and Jahanshahloo (2002) defined fuzzy CCR mod- el as a possibilistic-programming problem and transformed it into an interval programming by specifying a a-level set. Their ap- proach was further extended in Saati and Memariani (2005) so that all decision making units (DMUs) could be evaluated with a com- mon set of weights under a given a-level set. Entani, Maeda, and Tanaka (2002) and Wang, Greatbanks, and Yang (2005) also chan- ged fuzzy input and fuzzy output data into intervals by using a- level sets, but suggested two different interval DEA models. Dia (2004) proposed a fuzzy DEA model based upon fuzzy arith- metic operations and fuzzy comparisons between fuzzy numbers. The model requires the decision maker (DM) to specify a fuzzy aspiration level and a safety a-level so that the fuzzy DEA model could be transformed into a crisp DEA model for solution. Wang, Luo, and Liang (2009) constructed two fuzzy DEA models from the perspective of fuzzy arithmetic to deal with fuzziness in input 0957-4174/$ - see front matter � 2011 Elsevier Ltd. All rights reserved. doi:10.1016/j.eswa.2011.03.049 q The work described in this paper was supported by the National Natural Science Foundation of China (NSFC) under the Grant Nos. 70771027 and 70925004 and also partially supported by a grant from CityU (Project No. 7002571). ⇑ Corresponding author. Tel.: +86 591 22866681; fax: +86 591 22866677. E-mail addresses: msymwang@hotmail.com, ymwang@fzu.edu.cn (Y.-M. Wang). Expert Systems with Applications 38 (2011) 11678–11685 Contents lists available at ScienceDirect Expert Systems with Applications j o u r n a l h o m e p a g e : w w w . e l s e v i e r . c o m / l o c a t e / e s w a http://dx.doi.org/10.1016/j.eswa.2011.03.049 mailto:msymwang@hotmail.com mailto:ymwang@fzu.edu.cn http://dx.doi.org/10.1016/j.eswa.2011.03.049 http://www.sciencedirect.com/science/journal/09574174 http://www.elsevier.com/locate/eswa and output data in DEA. The two fuzzy DEA models were both for- mulated as linear programs and could be solved to determine fuzzy efficiencies of DMUs. Triantis (2003) introduced a fuzzy DEA approach to calculate fuzzy non-radial technical efficiencies and implemented the ap- proach in a newspaper preprint insertion manufacturing process. Soleimani-damaneh, Jahanshahloo, and Abbasbandy (2006) addressed some computational and theoretical pitfalls of the fuzzy DEA models developed in Kao and Liu (2000a), León et al. (2003) and Lertworasirikul et al. (2003) and provided a fuzzy DEA model to yield crisp efficiencies for the DMUs with fuzzy input and fuzzy output data. Jahanshahloo, Soleimani-damaneh, and Nasrabadi (2004) extended a slack-based measure (SBM) of efficiency in DEA to fuzzy settings and developed a two-objective nonlinear DEA model for fuzzy DEA. Existing fuzzy DEA models exhibit some drawbacks. For in- stance, fuzzy DEA models derived from the direct fuzzification of crisp DEA models ignore the fact that a fuzzy fractional program cannot be transformed into an LP model in the traditional way that we do for a crisp fractional program. Fuzzy DEA models built on the basis of a-level sets require the solution of a series of LP models and thus considerable computational efforts. Fuzzy DEA models constructed from the perspective of fuzzy arithmetic demand a ra- tional yet easy-to-use ranking approach for fuzzy efficiencies. To overcome these drawbacks, we propose in this paper a ‘‘fuzzy ex- pected value approach’’ for fuzzy DEA, which first weights fuzzy in- puts and fuzzy outputs, respectively, and then utilizes their expected values for measuring the performances of DMUs in fuzzy environments. The paper is organized as follows. Section 2 introduces the mea- sures of fuzzy expected values and develops fuzzy expected value models for fuzzy DEA. Section 3 illustrates the developed fuzzy ex- pected value models with three numerical examples, including the selection of a FMS. Section 4 concludes the paper. 2. Fuzzy expected values and fuzzy DEA models Fuzzy numbers are convex fuzzy sets, characterized by given intervals of real numbers, each interval with a grade of member- ship between 0 and 1. The most commonly used fuzzy numbers are triangular and trapezoidal fuzzy numbers defined by the following membership functions, respectively: leA 1ðxÞ¼ ðx � aÞ=ðb � aÞ; a 6 x 6 b; ðd � xÞ=ðd � bÞ; b 6 x 6 d; 0; otherwise; 8>< >: ð1Þ leA 2ðxÞ¼ ðx � aÞ=ðb � aÞ; a 6 x 6 b; 1; b 6 x 6 c; ðd � xÞ=ðd � cÞ; c 6 x 6 d; 0; otherwise: 8>>>< >>>: ð2Þ For brevity, triangular and trapezoidal fuzzy numbers are often denoted as (a, b, d) and (a, b, c, d). It is evident that triangular fuzzy numbers are special cases of trapezoidal fuzzy numbers with b = c. For any two positive trapezoidal fuzzy numberseA ¼ðaL; aM; aN; aUÞ and eB ¼ðbL; bM; bN; bUÞ, fuzzy addition and fuzzy multiplication on eA and eB are respectively defined aseA þ eB ¼ðaL þ bL; aM þ bM; aN þ bN; aU þ bUÞ and eA � eB �ðaL bL; aM bM; aN bN; aU bUÞ. Let n be a fuzzy variable with a membership function l: R !½0; 1� and r be a real number. The possibility and the necessity of {n P r} are respectively defined by Posfn P rg¼ sup xPr lðxÞ; ð3Þ Necfn P rg¼ 1 � Posfn < rg¼ 1 � sup x