Assessing The Efficiency of Small and Medium Industry: An Application of Data Envelopment Analysis

Abstract

The educational toy business is one of the businesses with a good prospect and is expected to continuously grow. The estimated spending of educational toys in Central Java is 757,257 units per year. However, the local manufacturers can only fulfil 27% of the total needs, while the rest are filled by other manufacturers from Daerah Istimewa Yogyakarta or even from China. This is due to the high selling price, so it is less competitive compared to other competitors—according to the Chairman of “Asosiasi Penggiat Mainan Edukatif dan Tradisional Indonesia”. This high selling price is affected by high manufacturing cost caused by waste in resources usage; or in other words, low efficiency. This paper aims to investigate the relative efficiency of manufacturers’ education toys by employing the data envelopment analysis approach. Results show that three manufacturers are categorized as inefficient. Recommendations would be given so that the manufacturers could improve their efficiencies.