Discrete Event Simulation and Data Envelopment Analysis to Evaluate and Improve Efficiency: A Case Study of Commercial Bank Branches

Authors

https://doi.org/10.48314/jidcm.v1i1.57

Abstract

Performance measurement, encompassing efficiency and effectiveness, is fundamental to organizational dynamics and achieving strategic goals. This study proposes an integrated model utilizing Discrete Event Simulation (DES) and Data Envelopment Analysis (DEA) to evaluate the performance and efficiency of commercial bank branches. The primary research question addressed is: How can the performance of bank branches be assessed and improved using Arena simulation software and DEA? The study focuses on estimating key branch outputs—namely, the number of customers served, value-added, and employee productivity—which are difficult to measure precisely in real-world settings. These outputs are derived from simulating branch operations using Arena software, considering customer priority, service process, and service duration factors. After validating the simulation model, statistical analysis is performed on various scenarios. The generated outputs are then used as inputs for the DEA model (Specifically, the BCC model) to assess the relative efficiency of the branches Decision-Making Units (DMUs). The results identify the efficiency frontier, inefficient units, and potential causes of inefficiency. Furthermore, the integrated approach facilitates the analysis of improvement scenarios by modifying simulation parameters and re-evaluating efficiency through DEA. A case example demonstrates how identifying and addressing a bottleneck in an inefficient branch (DMU6) leads to a significant improvement in its efficiency score. This research highlights the practical utility of combining DES and DEA for data-driven performance evaluation and improvement in service organizations like commercial banks.

Keywords:

Bank efficiency, Data envelopment analysis, Decision-making units, Discrete event simulation

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Published

2025-03-04

Issue

Vol. 1 No. 1 (2025): Journal of Intelligent Decision and Computational Modelling

Section

Articles

How to Cite

Monzeli, A. ., & Daneshian, B. . (2025). Discrete Event Simulation and Data Envelopment Analysis to Evaluate and Improve Efficiency: A Case Study of Commercial Bank Branches. Journal of Intelligent Decision and Computational Modelling, 1(1), 1-14. https://doi.org/10.48314/jidcm.v1i1.57