Using frontier efficiency models as a tool to re-engineer networks of public sector branches: An application to the Hellenic Tobacco Organization

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Abstract

In this paper we propose a framework concerning the restructuring of public sector branches networks supported by tools such as data envelopment analysis. In the absence of reliable and detailed information concerning the effectiveness of the provided services the assessment of efficiency solely on the basis of cost information versus the notional level of demand coverage may lead to serious efficiency misjudgments. To remedy such problems the assessment of efficiency needs to be complemented with external information in the form of prior information concerning the linkage between use of resources and expected provision of services. With such information embedded into the assessment of performance one can reposition the operation of public sector branches seeking radical performance improvements. The problem concerned was embraced from the solution given to the Hellenic Tobacco Organization and the restructuring of its branch network.

Section snippets

Introduction––Motivation

In this paper we propose a methodology for assessing the feasibility of restructuring branch networks that provide public services. One distinctive feature of public sector networks is that they are deployed over long time periods without having the flexibility of continuously monitoring and changing the size and location of their branches. This may lead, therefore, to considerable gaps between the supply and the demand of services without however implying that the overall cost of service

Restructuring branch networks

Public service provisioning is based primarily on multi-level hierarchies organized in a fashion similar to military organizations. Such structures seek to ensure management control and service homogeneity while incurring high transaction costs concerning their coordination. Research by Grizzle (1993), has focused on the puzzle between public program efficiency and effectiveness. The public administrator should be concerned with waste due to implementing programs inefficiently and not with

The problem area

The HTO has a very long tradition when tobacco production was heavily monitored and controlled by state governments in Europe and internationally. The deepening of European Unification, however, lead to significant changes concerning the mission and activities of the HTO under the regime of European wide control of tobacco production. In accordance with such a framework each European country is obliged to meet a production quota for which there are subsequent subsidies such that tobacco farmers

Designing the new branch network

The design of the new branch network was pursued via a number of steps including inter alia the alignment of the branch network with the mission statement of the HTO, the proposition, of a new structure of branch deployment across the country, and finally the assessment of the appropriateness of the proposed structure in the light of the comparative efficiency assessment of the branches.

Conclusions

In this paper we have sought to demonstrate the potential usefulness of analytical methodologies such that of DEA in aiding decision making in public sector organizational units. Decision making problems can be addressed relying solely on the use of operational criteria since the decision makers have other considerations of equal or higher importance. Furthermore, real life applications that involve restructuring of branch networks always suffer from information inadequacy especially when the

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      Additionally, the outcome from this exercise will set standards that describe the best operating practices for HCs in the new system, and will also define the new targets for future improvements. This analysis is consistent to Athanassopoulos [1] who used expected inputs and outputs to re-access a revised network of public facilities. In our particular application, the efficiencies of the consolidated network have increased considerably with respect to the initial efficiencies and the new solution appears to be a significant improvement.

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