Linkage Efficiency

The feature that fundamentally characterizes a network system is the intermediate products produced and consumed in the system. In the corresponding whole-unit (black-box) system, only the (exogenous) inputs sent into the system to be used for production and the (exogenous) outputs which are produced and sent out of the system are taken into consideration when measuring the efficiency of the system. In the case of a network system, on the other hand, the operations of the system’s component divisions are factored into the efficiency assessment, so that the intermediate products that are their inputs and outputs are taken into account. In short, a network-based approach to evaluating the efficiency of a system incorporates both exogenous and endogenous inputs and outputs. When the divisions of a system are operating independently, a division that produces an intermediate product wishes to produce more of it in order to maximize efficiency. On the contrary, the division that consumes this intermediate product in its own production process wishes to consume less of it in order to be more efficient. At times, there is a discrepancy between the amount of the intermediate product produced by the supply division and that consumed by the demand division. If the amount produced is greater than the amount consumed, then the excess amount is left unused in the system and wasted.