Efficiency of a firm is calculated as a ratio of its outputs to its inputs. There are two different methods to measure efficiency: parametric and non-parametric .
In parametric method, by specifying an appropriate production function,and then using usual econometric or statistical tools, its coefficients are obtained and efficiency is calculated. But, in non-parametric method,efficiency of a firm is calculated by using some mathematical optimization methods.
In this paper, we used data envelopment analysis (DEA), a specific non-parametric method, the efficiency of sugar factories is obtained. The main advantage of these non-parametric method, comparing parametric one, is that there is no necessity to specify a production function, and also, they provide some ways to calculate the efficiency of multi-product firms.
In this study, we measure the efficiency of 33 sugar factories of Iran in 1999. For this purpose, technical and scale efficiency of the sugar factories are calculated. The result shows the average technical efficiency is 69 percent. In addition, the technical efficiency of 7 factories including Neishabour, Piranshahr, Joveen, Isfahan, Eghlid, Miyandoab and Ghazvin is 100% (relatively).
Also, the results of the scale efficiency, show that 14 factories satisfy the efficient boundary condition and the average scale efficiency of the factories is about 75 percent. In addition, the rank of the efficient factories is determined, using different ranking methods. Finally, using a bench marking which is introduced by the DEA method, the method under which the efficiency of the factories could be improved is shown.