Assessing the Impact of Non-Discretionary Variables on the Performance of Pharmacy Retail Stores Using DEA Approach

Purpose: The purpose of this paper was to measure the performance of intra-chain pharmacy retail stores and to analyze the impact of non-discretionary variables on the efficiency of the stores. Design/methodology/approach: Charnes-Cooper-Rhodes model (1978) and CCR model for discretionary and non-discretionary variables (Banker and Morey, 1986) of DEA technique were used for analyzing the efficiency of stores using different set of inputs and outputs. The efficiency scores obtained through these models were further validated using ANOVA. Findings: Major finding was that there is no significant difference between the efficiencies calculated using different models. Two of the input variables namely age and location of the store turn out to be ambiguous as their inclusion as nondiscretionary input variables do not make much difference in the efficiency scores calculated. The efficiency level was mainly attained through the controllable operations taking place in the stores. Research limitations/implications: More financial and controllable inputs can be taken into consideration for a better analysis. Originality/value: This study provides us with a framework for performance measures along with useful managerial insights. Focusing upon the right areas of operations, may help out the management in improving their overall performance. Paper Type: Research Paper. Abbreviations: CCR model - Charnes Cooper Rhodes model, BCC model - Banker Charnes Cooper model, DEA - Data Envelopment Analysis, DMU - Decision Making Unit.