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Assessing cost efficiency of pharmacy retail stores and identification of efficiency drivers

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  • Smriti Pande
  • G.N. Patel

Abstract

This paper examines all 46 pharmacy retail stores of an organisation located in National Capital Region (NCR), India, to determine their relative cost efficiency using data envelopment analysis (DEA) models and identify the drivers of cost efficiency using Tobit regression model. Allocative model of DEA technique is applied to identify different types of inefficiency that may exist within the stores. The analysis highlights the need of huge reductions either in per unit cost or number of inputs and also demands for reallocation of the resources. Most of the stores possess inefficient cost-based structures. Footfalls, salary and operating expenses are identified as cost efficiency drivers. The results derived cannot be generalised for the whole sector, because only a player of a huge sector is under examination. The study draws important implications for the managers of the organisation, as managing cost is the most imperative task for improving the overall performance of any business.

Suggested Citation

  • Smriti Pande & G.N. Patel, 2013. "Assessing cost efficiency of pharmacy retail stores and identification of efficiency drivers," International Journal of Business Performance Management, Inderscience Enterprises Ltd, vol. 14(4), pages 368-385.
    • Handle: RePEc:ids:ijbpma:v:14:y:2013:i:4:p:368-385
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    Citations

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    Cited by:

    1. Lagzi, Mohammad Dana & sajadi, Seyed Mojtaba & Taghizadeh-Yazdi, Mohammadreza, 2024. "A hybrid stochastic data envelopment analysis and decision tree for performance prediction in retail industry," Journal of Retailing and Consumer Services, Elsevier, vol. 80(C).
    2. Gupta, Anshu & Pachar, Nomita & Jain, Akansha & Govindan, Kannan & Jha, P.C., 2023. "Resource reallocation strategies for sustainable efficiency improvement of retail chains," Journal of Retailing and Consumer Services, Elsevier, vol. 73(C).
    3. Hui Chen Chiang & Yih Ching Tsaih & Wen-Cheng Hsiao, 2016. "The Efficiency Analysis Of Singapore Real Estate Investment Trusts," Eurasian Journal of Business and Management, Eurasian Publications, vol. 4(4), pages 9-20.
    4. Nomita Pachar & Jyoti Dhingra Darbari & Kannan Govindan & P. C. Jha, 2022. "Sustainable performance measurement of Indian retail chain using two-stage network DEA," Annals of Operations Research, Springer, vol. 315(2), pages 1477-1515, August.
    5. Nurhafiza Md Hamzah & Kok Fong See, 2019. "Technical efficiency and its influencing factors in Malaysian hospital pharmacy services," Health Care Management Science, Springer, vol. 22(3), pages 462-474, September.

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