Proceedings of the Eastern Asia Society for Transportation Studies, Vol.

6, 2007

EVALUATING THE OPERATING EFFICIENCY OF INTERNATIONAL PORTS IN ASIA: THE DEA/TOPSIS APPROACH
Chen-Huei YEH Ph.D. Student Department of Shipping and Transportation Management National Taiwan Ocean University 2 Peining Rd., Keelung 20224 Taiwan, R.O.C. Fax: +886-2-2463-1903 E-mail: chyeh@yml.com.tw Kee-Kuo CHEN Associate Professor Department of Shipping and Transportation Management National Taiwan Ocean University 2 Peining Rd., Keelung 20224 Taiwan, R.O.C. Fax: +886-2-2463-1903 E-mail: kkchen@mail.ntou.edu.tw Hsuan-Shih LEE Professor, Corresponding author Department of Shipping and Transportation Management National Taiwan Ocean University 2 Peining Rd., Keelung 20224 Taiwan, R.O.C. Fax: +886-2-2463-1903 E-mail: hslee@mail.ntou.edu.tw Kuang LIN Professor Department of Shipping and Transportation Management National Taiwan Ocean University 2 Peining Rd., Keelung 20224 Taiwan, R.O.C. Fax: +886-2-2463-1903 E-mail: b0031@mail.ntou.edu.tw Ta-Shun CHO Research assistant Department of Communications and Guidance Engineering National Taiwan Ocean University 2 Peining Rd., Keelung 20224 Taiwan, R.O.C. Fax: +886-2-2463-3492 E-mail: tashun@yahoo.com Ming-Tao CHOU Assistant Professor Department of Aviation and Maritime Management Chang Jung Christian University Taiwan 711, Taiwan. Fax: +886-6-278-5056 E-mail: mtchou@mail.cju.edu.tw

Abstract: This paper aims to recommend a promising alternative approach for evaluating the operation efficiency of the top 20 international container ports in Asia for the year 2004. Evaluation of efficiency for the target DMU (Decision Making Unit) with conventional DEA (Data Envelopment Analysis) is to determine the most beneficial multipliers of input and output and derive the best efficiency that the target DMU can achieve with these multipliers. However, the available studies have not yet provided a satisfactory answer to the problem of making international comparisons of port efficiency. For performance enhancement, TOPSIS (Technique for Order Preference by Similarity to Ideal Solution) can be employed to aggregate efficiencies in different aspects, which leads to an innovative two-stage relative efficiency estimation technique, called DEA/TOPSIS. Superior to the traditional DEA approach, determination of the overall ranks of the container ports with better precision is accessible based on the DEA/TOPSIS approach. Key Words: DEA/TOPSIS, decision making unit (DMU), operation efficiency, Asian container ports

Proceedings of the Eastern Asia Society for Transportation Studies, Vol.6, 2007

1. INTRODUCTION In view of the contemporary global economic development, both international and regional trades have become increasingly important, and the related issues on ocean shipping have been getting attractive. In particular, container transportation plays a key role in the process for traders in coastal countries where access to seaports is considered to be easy. This is explained by the significance of ports in the international environment; the increasing levels of operation and competition the ports have been facing for many coastal countries or areas such as Taiwan, where development of the shipping industry and increase of the port performance are important issues for increasing the international competitive ability. Due to the relatively low production costs and high trade ratio, the overall ocean shipping market for the Asian developing countries has reached up to 60% of the world. Taking the advantages of superior geography location, infrastructure and superstructure requirements, Taiwan has very good trade competitive capability. However, as compared to the other major competitive ports in Asia, Taiwans growth rate in container transportation is relatively slow and the level of competitive capability is relatively low. Summary of the top 20 Asian international container ports and their ranking in the world (indicated in the parenthesis) in terms of volume for the year 2004 is shown in Table 1. According to the data adopted from the Containerisation International Yearbook, as shown in Table 1, China is the country with the largest growth rate of number of containers. Among the top 30 international container ports in the world, there are 8 container ports located in China, which are ports of Hong Kong (1), Shanghai (3), Shanghai (4), Qingdao (14), Ningbo (17), Tianjin (18), Guangzhou (22), and Xiamen (26), respectively. (The numbers in the parenthesis indicate the ranks of the ports.) Most of the ports (except Hong Kong) have the growth rate over 20% in recent years. This information shows the rapid economic growth in China has increasingly brought significant impact to the global economy. Ports form a vital link in the overall trading chain monitoring and comparing ones port with other ports in terms of overall efficiency has become an essential part of many countries microeconomic reform programs. Port efficiency is an important contributor to a nation's international competitiveness. Efficiency is usually defined as the ratio of benefits achieved (outputs) to resources used (inputs). The factors in port management are multiple and complex. This complexity of factors affecting port performance leads to considerable difficulty in determining efficiency or the extent to which a port's resources are fully employed in attainment of goals. In order to support trade oriented economic development, port authorities have increasingly been under pressure to improve port efficiency by ensuring that port services are provided on an internationally competitive basis. Most literatures aim to provide the piecemeal estimation on port performance, while a few literatures aim to provide the whole estimation on port performance. The performance evaluation for ports can be more comprehensive if efficiency ratios are considered. There might be several weight restrictions related to criteria that lead to various versions of the interviewer by questionnaire. Data envelopment analysis (DEA) can be used to measure the port efficiency of Decision Making Unit (DMU) with multiple outputs and inputs. DEA could be used to handle problems with a number of inputs and outputs, and would not be influenced by different quantified units, and deals with highly flexible in ordinal data, and applies mathematical programming techniques to measure each DMU's efficiency. DEA is a nonparametric approach without requiring any assumptions about the functional forms of the production function. Three of the DEA models that are most often associated with the DEA

Proceedings of the Eastern Asia Society for Transportation Studies, Vol.6, 2007

methodology are the CCR, BCC (Banker et al., 1984) and Additive models. This paper incorporates the Technique for Order Preference by Similarity to Ideal Solution (TOPSIS) method into DEA, which leads to the DEA/TOPSIS approach. TOPSIS is a rational method developed by Hwang and Yoon (1981). The advantages of TOPSIS method are that it is relatively simple and yields a highly reliable preference order. The underlying concept is that most preferred alternative should not only have shortest distance from ideal solution, but also longest distance from negative-ideal solution. The objective is to find a solution closest to the positive ideal solution and furthest from the negative ideal solution. Positive ideal solution refers to the most effective or least costly value among a set of feasible solutions. Conversely, negative ideal solution refers to the least effectiveness and highest costly value among a set of feasible solutions. Available studies have not provided a satisfactory answer to the problem of making international comparisons of port efficiency. In certain case, the operation efficiency of container ports may be concluded to be effective while the relative efficiency is not available based on the conventional DEA approach. This problem can be resolved by the DEA/TOPSIS approach. This study aims to contribute to this important task by applying an innovative approach to port efficiency ratings covering a selected sample of ports. Relying on mathematical programming techniques, the approach, called DEA/TOPSIS, is applied to a wide number of different situations where efficiency comparisons are required due to its inherent advantages compared with conventional approaches. This study examines efficiency with respect to containerized cargoes across ports recognized for their high level performance (in terms of throughput) in Asia. In this study, the ports efficiency estimation is conducted based on the top 20 international container ports in Asia. The data sources for this study cover all the related documents of container port performance indicator for the year 2004. The innovative two-stage relative efficiency estimation technique, DEA/TOPSIS, is employed to evaluate the performance. The rest of the paper is organized as follows. Section 2 gives a brief review of related studies. Section 3 introduces the proposed DEA/TOPSIS methodology. Section 4 provides the empirical results and analysis for the proposed DEA/TOPSIS approach applied to 20 container ports. Finally, Section 5 summarizes the main results in the paper. 2. LITERATURE REVIEW Originally proposed by Charnes, Cooper and Rhodes (CCR) (1978a, 1979) to measure the relative efficiency for organizations or firms, DEA (Data Envelopment Analysis) is a nonparametric approach without requiring any assumptions about the functional forms of the production function. DEA is a special method that does not use decision matrix directly. It evaluates the efficiency of a group of alternatives, but does not indicate a clear winner. The advantage of DEA is that no explicit functional forms need to be imposed on the data. Thus, the use of DEA has become increasingly widespread since then. Charnes, Cooper and Rhodes introduced a ratio of efficiency, also called the CCR ratio, which generalizes the single-output to single-input classical engineering-science ratio to multiple outputs and inputs without requiring preassigned weights. CCR introduced a mathematical programming technique to measure each DMU's efficiency or productivity by the multiple inputs and outputs. The CCR model is a fractional programming, which can be transformed to linear programming (LP). Solve the LP for each of the N firms; one obtains the efficiency score for each firm.

Proceedings of the Eastern Asia Society for Transportation Studies, Vol.6, 2007

Table 1 Summary of the top 20 Asian international container ports and their ranking in the world in terms of volume for the year 2004 (Unit: TEU)
Ranking
1(1) 2(2) 3(3) 4(4) 5(5) 6(6) 7(13) 8(14) 9(16) 10(17) 11(18) 12(19) 13(20) 14(22) 15(23) 16(26) 17(28) 18(29) 19( -- ) 20( -- )

Port
Hong Kong Singapore Shanghai Shenzhen Busan Kaohsiung Port Klang Qingdao Tanjung Pelepas Ningbo Tianjin Laem Chabang Tokyo Guangzhou Tanjung Priok Xiamen Manila Yokohama Keelung Taichung

Country/Area
China Singapore China China Korea Taiwan Malaysia China Malaysia China China Thailand Japan China Indonesia China Philippines Japan Taiwan Taiwan

Year 2004
21932000 20600000 14557200 13650000 11430000 9710000 5243593 5139700 4020421 4005500 3814000 3624000 3580000 3308200 3248149 2871700 2629342 2576522 2070192 1245000

Year 2003
20449000 18100000 11283000 10614900 10407809 8840000 4840000 4239000 3487320 2772000 3015000 3181050 3313647 2761700 2757513 2331000 2552187 2504628 2000001 1244826

Growth rate (%)

7.3 13.8 29.0 28.6 10.4 9.8 8.3 21.2 15.3 44.5 26.5 13.9 8.0 19.8 17.8 23.2 3.0 2.9 3.5 0.01

Source: Containerisation International Yearbook (March 2005)

Data envelopment analysis (DEA) has recently been successfully applied to a number of different economic efficiency measurement situations. DEA has recently attracted much attention for evaluating competing alternatives performing essentially the same task. Roll and Hayuth (1993) have advocated the use of this approach to the measurement of port efficiency, and demonstrated, based on hypothetical port data, how the relative efficiency ratings of ports could be obtained. They show how DEA can be useful in assessing the relative effectiveness using seven variables from annual reports in twenty ports, in which there are three input variables: manpower, capital, cargo uniformity; and four output variables: cargo throughput, level of service, users satisfaction, ship calls. Tsai (1994) suggested that DEA model can be useful in evaluating and comparing the efficiency of Taiwan international ports from the data during three years for ports of Keelung, Taichung, Kaohsiung, Hualien, and Suao, respectively, using four input variables (number of cranes, number of berths, ton-day of capacity and man-hour), and two output variables (number of containers, ton-day of storage). Tongzon (2001) applied the DEA-CCR and DEA-Additive model to evaluate 4 Australian and 12 other international container ports for the year 1996. Six inputs were used: number of cranes, number of container berths, number of tugs, terminal area, delay time, labor; and two outputs were used: cargo throughput, ship working rate. Wang et al. (2003) employed the DEA-CCR, DEA-BCC, and Free Disposal Hull (FDH) approaches for analyzing the port efficiency. The sample for analysis comprised a total of 57 observations, of either container ports or individual terminals within container ports. In his study, five inputs variables (total quay length, terminal area, number of gantry cranes, number of yard gantry cranes, number of straddle carriers), and one output variable (container throughput) were selected. Tseng (2004)

Proceedings of the Eastern Asia Society for Transportation Studies, Vol.6, 2007

investigated the efficiency for 27 international container ports during the years 19992002. He employed four approaches: Cobb-Douglas, translog methods, CCR, and BCC. In his work, three inputs (number of cranes, length of container berth, number of cargo handling cranes), and one output (cargo throughput) were used. Using the same data for the same objective as in Tongzon (2001), Lee et al. proposed the improved version of DEA, called recursive DEA (RDEA) in 2005. Applications of DEA for evaluation of port efficiency are summarized in Table 2. Tongzon (2001) has demonstrated that DEA provides a viable method of evaluating relative port efficiency. The technique offers a significant alternative to classical econometric approaches to extracting efficiency information from sample observations, such as the use of stochastic frontier production functions. Important features of DEA are that the technique is non-parametric and that more than one output measure can be specified. In the case of port efficiency, the ability to handle more than one output is particularly appealing because a number of different measures of port output are available, depending on which features of port operation are being evaluated. In addition to providing relative efficiency rankings, DEA also provides results on the sources of input and output inefficiency, as well as the port, which were used for the efficiency comparison. The ability to identify the sources of inefficiency could be useful to port authority managers in inefficient ports, acting as a guide to focusing efforts at improving port performance. DEA has a multi-criteria flavor: minimize all inputs, and maximize all outputs. There are several weight restrictions related to criteria that lead to various versions of the method. Since the early work of Charnes, Cooper and Rhodes, there have been a number of extensions to the DEA model. In addition to the CCR model, two other DEA models are also often associated with the DEA methodology (e.g., Ali et al., 1995): the BCC model and the Additive model. The models differ mainly in their envelopment surface orientation and projection path to the efficient frontier for an inefficient DMU. The CCR model results in a constant returns to scale, piece-wise linear envelopment surface with both input and output orientations for projection paths. The BCC model provides a variable returns to scale, piece-wise linear envelopment surface, which is similar to the Additive model. The primary aim of DEA is in general to identify the alternatives that are not efficient in some sense, and to assess where the inefficiencies arise, rather than to rank or select one or more competing alternatives. Furthermore, the selection of inputs and outputs to be included in the evaluation process is often subject to some difficulty (Deng H., Yeh C.-H., and Willis, R. J., 2000). TOPSIS (Technique for Order Preference by Similarity to Ideal Solution) is rational and relatively simple method developed by Hwang and Yoon (1981). TOPSIS is developed to rank competing companies in terms of their overall performance on multiple financial ratios. The underlying concept is that most preferred alternative should not only have the shortest distance from ideal (or positive ideal) solution, but also the longest distance from negative ideal solution. As indicated by Hwang and Yoon, the chosen alternative should have the shortest distance from the positive-ideal solution and the longest distance from the negative-ideal solution. The ideal solution is the collection of the ideal scores (or ratings) in all attributes considered. TOPSIS defines a similarity index (relative closeness) by combining the proximity to the positive ideal solution and the remoteness of the negativeideal solution. The basic concept of TOPSIS is that the most preferred object should not only have the shortest distance from the positive ideal solution, but also have the longest distance from the negative ideal solution. Euclidean norm is used as the distant measure, to calculate

Proceedings of the Eastern Asia Society for Transportation Studies, Vol.6, 2007

the distance. If the evaluated object is closer to the ideal and farther to the negative-ideal solution, then the value of the object is larger. Table 2 Applications of DEA for evaluation of port efficiency
References
Roll and Hayuth (1993)

Data description
Hypothetical numerical example of 20 ports 5 ports in Taiwan (Keelung Taichung Kaohsiung Hualien Suao) 4 Australian and 12 other international container ports for the year 1996 57 ports (container ports or individual terminals within container ports) 27 international container ports during the years 1999 2002 Same data as in Tongzon (2001)

Model (s)

Inputs
Manpower Capital Cargo uniformity

Outputs
Cargo throughput Level of service User satisfaction Ship Calls

CCR

Tsai (1994)

CCR BCC

Number of cranes Number of berths Ton-day of capacity Man-hour

Cargo throughput Ton-day of storage

Tongzon (2001)

Additive CCR

Number of cranes Number of container berths Number of tugs Terminal area Delay time Labor Total quay length Terminal area Number of gantry cranes Number of yard gantry cranes Number of straddle carriers Number of gantry cranes Container berth length Number of cargo handling cranes

Cargo throughput Ship working rate

Wang et al. (2003)

CCR BCC FDH CobbDouglas, Translog CCR BCC RDEA

Container throughput

Tseng (2004)

Cargo throughput

Lee et al. (2005)

Same data as in Tongzon (2001)

Same data as Tongzon (2001)

in

Source: Authors 3. DEA/TOPSIS METHODOLOGY DEA is a clear method that does justice to the multiple input multiple output character of organizations. An insufficient number of DMUs for the variables being used would tend to rate all DMUs 100% efficient simply because of inadequate number degrees of freedom. Incorporation of the TOPSIS into the DEA is an ideal way to overcome the deficiency of DEA, which yield an innovative approach, called DEA/TOPSIS. The DEA/TOPSIS approach is a two-stage TOPSIS-coupled DEA approach, which gains the merits from each individual ones. Using the hybrid DEA/TOPSIS, the problem of inadequate number degrees of freedom can be resolved and the reasonable ranking of efficiency can be obtained. Figure 1 provides the framework of hybrid DEA/TOPSIS model for efficiency evaluation and ranking.

Proceedings of the Eastern Asia Society for Transportation Studies, Vol.6, 2007

Specification of input/output measure

Identify efficiency ratios for DMUs via DEA-CCR

Decision matrix

TOPSIS Efficiency evaluation and ranking

Figure 1 Framework of hybrid DEA/TOPSIS model for efficiency evaluation and ranking Detailed DEA/TOPSIS methodology is introduced as follows. The decision matrix for the problem can be obtained as
l11 l12 l 21 l 22 L= L L l n1 l n 2 L l1m L l 2m = [l ] tj nm L L L l nm

(1)

and the efficiency

= hk = r m1

urk yrk
(2)
vik xik
i =1

k where u r and vik are defined using the CCR model. Symbolically, we have

max hk =

r =1 m

u rk y rk
=1

(3)

subject to

i =1

vik xik

(4)

r =1

u rk y rj vik xij
i =1 k ur > 0

j = 1, K , n

(5)

r = 1, K , s i = 1, K , m

vik > 0

Let the optimal solution for the above equation be

Proceedings of the Eastern Asia Society for Transportation Studies, Vol.6, 2007

vik ,

k u r , ltk

= r =1

u rk
i =1

y rt

vik xit

(6)

TOPSIS evaluates a decision matrix in several steps starting by normalizing columns and then multiplying values in columns is by corresponding weights of criteria. Then, best and worst value in each column is identified followed by creation of two sets of these values across all columns named positive ideal solution and negative ideal solution, respectively. Using the matrix L, the positive ideal solution and negative ideal solution are determined, where Z + represents the positive ideal solution:
+ + + Z + = ( Z1 , Z 2 ,..., Z m )

while Z represents the negative ideal solution:

Z = ( Z1 , Z 2 ,..., Z m )

In the above expressions, Z + = max l tj , and Z = min ltj . j j

t =1 t =1

The so-called separation measures for all alternatives are computed based on their Euclidean distances from ideal and negative-ideal solutions (across all criteria). Calculation of the Euclidean (or Frobenius) norm between the decision matrix L and the alternatives Z + and Z for obtaining the ideal solution ( Di+ ):
Di+ =

(lij Z + ) 2 j
j =1 m

(7)

and the negative-ideal solution ( D ):

Di =

(lij Z ) 2 j
j =1

(8)

The overall performance index for each alternative is computed by

Ci = Di+ + Di Di

(9)

The larger the index value Ci , the better the performance of the alternative. The algorithm for the DEA/TOPSIS approach for port efficiency rating is summarized as follows. Step 1. Selection of the decision making units. Efficiency is usually defined as the ratio of benefits achieved (outputs) to resources used (inputs). DEA generalizes this single output/input technical efficiency measure to multiple outputs/inputs by constructing a relative efficiency measure based on a single virtual output and a single virtual input. The efficient frontier is then determined by selecting DMUs which are most efficient in producing the virtual output from the virtual input. Since DMUs on the efficient frontier have an efficiency score equal to 1, inefficient DMUs are measured relative to the efficient DMUs. A rule of thumb (Bowlin, 1987) for maintaining an adequate number of degrees of freedom when using DEA is to obtain at least two

Proceedings of the Eastern Asia Society for Transportation Studies, Vol.6, 2007

decision-making units (DMU) for each input or output measure. An insufficient number of DMUs for the variables being used would tend to rate all DMUs 100% efficient simply because of an inadequate number degrees of freedom. In this article, 20 international container ports in Asia for the year 2004 are selected as the decisionmaking units. Step 2. Specification of input/output measure. One of the disadvantages of DEA is that in most variants, the method only compares organizations with comparable production levels. The method therefore stands or falls on the presence or lack of comparable organizations. Extremely large organizations are quickly seen as efficient due to the fact that there is no other organization present with a similar production level. In addition, the more products that are distinguished, the fewer organizations with comparable production levels there will be, and this will increase the number of efficient organizations. Step 3. Selection of the DEA model. There have been a number of extensions to the DEA model. In this article, the CCR model is employed on empirical analysis. The DEACCR model is popular since it is very convenient in terms of Scale Efficiency and Technical Efficiency. Step 4. Utilization of the DEA software tool. DEA is an easily comprehensible method for which a large number of standard packages are available. This makes the calculations relatively easy to carry out and interpret. A number of different commercial software packages are now available, for which some examples of the well known packages are LINGO, EXCEL, IDEAS, WARWICK, Frontier Analyst, Onfront, Banxia, EMS, DEA-solver, WDEA and DEAP. In addition, a DEA model can basically be transformed to a LP problem, and the model can be solved using the LP software. Step 5. Implementation of the DEA/TOPSIS efficiency evaluation. Through solving the constructed DEA model, the DMU efficiency evaluation value can be obtained and substituted into the normalized TOPSIS performance matrix (decision matrix). Step 6. Efficiency evaluation and ranking. The relative closeness to ideal solution is calculated for each alternative, and alternatives are appropriately ranked. The resulting C j is used as the ranking criterion. According to the idea from TOPSIS, top-ranked alternative is with the shortest distance from ideal solution and TOPSIS guarantees that it also has the longest distance from negative-ideal solution. This means that a larger C j implies better efficiency whereas a smaller C j implies worse efficiency. 4. EMPIRICAL RESULTS AND ANALYSIS In this section, efficiency ranking for the 20 Asian international container ports in the world for the year 2004 is adopted for empirical study. The study is conducted based on the DEA/TOPSIS two-stage efficiency evaluation technique and the result will be compared to the conventional DEA-CCR approach. For the DEA/TOPSIS, the first stage deals with the conventional DEA-CCR processing, while the second stage deals with the TOPSIS processing, as presented in Section 3. 4.1 Sources of the Data

Proceedings of the Eastern Asia Society for Transportation Studies, Vol.6, 2007

Data availability is particularly important and difficult due to confidentiality reasons. Apart from the data obtained from the survey, the study has to depend on secondary sources. The required secondary data are mainly taken from various issues of the Containerisation International Yearbook (2005), Lloyds Ports of the World (2004), and Cargo System Supplement (2005). The data available on port/terminal throughput (from annual report and internet website information) is quite reliable and unbiased and was chosen as the basis for the analysis. 4.2 Selected Sample of Ports Given the multiplicity of ports and cargoes handled, it is necessary to restrict the scope of the analysis to a limited number of ports and a specific type of cargo. The sample is selected based on size, geographical location, and data availability. When using DEA, Bowlin (1987) suggested that at least two DMUs for each input or output measure is necessary for maintaining an adequate number of degrees of freedom. If the selected sample size is too small, the result of statistical testing tends to be inadequate. This paper examines the efficiency rating on 20 container ports for their high level performance (in terms of throughput) in Asia, i.e., the Decision Making Units (DMUs) are the international container ports in Asia for the year 2004, which include the ports of Hong Kong, Singapore, Shanghai, Shenzhen, Busan, Kaohsiung, Port Klang, Qingdao, Tanjung Pelepas, Ningbo, Tianjin, Laem Chabang, Tokyo, Guangzhou, Tanjung Priok, Xiamen, Manila, Yokohama, Keelung, and Taichung. 4.3 Inputs and Outputs Variables Based on the production framework in container port industry, port inputs can be generalized as land, labor and capital (including equipment). The major capital inputs in port operations are the number of cranes, berth length, and terminal area. The most fundamental labor input is the number of cranes due to a lack of information on this particular variable. The most important output in port performance and the advantage of economies of scale is the number of containers due to the highly relative of equipment and service efficiency in port; moreover, the suitable and easy evaluation of port performance is measured in terms of the number of containers moved through a port (throughput) on the assumption that ports are throughput maximizes. In this paper, six inputs which are the number of cranes, berths, tugs, berth length, terminal area, terminal storage; and one output which is the number of containers is adopted to evaluate the efficiency of the international container ports in Asia. 4.4 Analysis of Results In general, port performance cannot be assessed on the basis of a single value or measure. Evaluations are made by comparing indicator values for a given port over time as well as across ports for a given time period. The efficiency evaluation with respect to containerized cargoes across ports recognized for their high level performance (in terms of throughput) for 20 Asian international container ports for the year 2004 is examined in this section. The innovative two-stage relative efficiency estimation technique, called DEA/TOPSIS, is performed and the result is compared to the conventional DEA-CCR approach. Six inputs (number of cranes, berth length, number of berths, number of tugs, terminal area, terminal storage), and one output (number of containers) are adopted to evaluate the performance.

Proceedings of the Eastern Asia Society for Transportation Studies, Vol.6, 2007

Table 3 summarizes the rankings for port efficiency based on DEA/TOPSIS as compared to DEA-CCR. In addition, Figure 2 provides plots for the port efficiency versus their rankings given by DEA-CCR and DEA/TOPSIS approaches. The input-output efficiency of a decisionmaking unit (DMU) is a value between 0 and 1 in the ratio form. According to the DEA-CCR model dentition, a DMU is recognized the most efficient when its efficiency ratio equal to 1; while a DMU is recognized the least efficient when its efficiency ratio equal to 0. According to the result based on the DEA-CCR, there are 10 ports that obtain efficiency ratio 1 among the Asia 20 international container ports, including Hong Kong, Singapore, Shanghai, Shenzhen, Kaohsiung, Tanjung Pelepas, Ningbo, Guangzhou, Xiamen, Manila. Furthermore, the efficiency ratios for ports of Yokoham, Taichung are only 0.174813 and 0.226307, respectively. Table 3 Rankings for port efficiency based on DEA-CCR and DEA/TOPSIS
Ports
Singapore Guangzhou Shenzhen Xiamen Hong Kong Ningbo Shanghai Kaohsiung Tianjin Busan Tanjung Pelepas Laem Chabang Port Klang Tokyo Qingdao Tanjung Priok Keelung Manila Taichung Yokohama

DEA-CCR Efficiency
1 1 1 1 1 1 1 1 0.815386 0.596436 1 0.483351 0.442265 0.42314 0.482735 0.402461 0.555347 1 0.226307 0.174813

DEA/TOPSIS Efficiency
0.989702 0.987611 0.979228 0.969907 0.959519 0.914535 0.860108 0.848356 0.794208 0.696997 0.670822 0.517387 0.462603 0.392056 0.381043 0.361715 0.272760 0.234333 0.149018 0.086605

Ranking
1 1 1 1 1 1 1 1 11 12 1 14 16 17 15 18 13 1 19 20

Ranking
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

The two-stage hybrid DEA/TOPSIS approach is employed for evaluating port efficiency. As discussed in Section 2, the primary aim of DEA is to identify those companies that are not efficient in some sense, and to assess where the inefficiencies arise, rather than to rank or select one or more competing alternatives. If there were several DMUs whose efficiency ratios equal to 1s, there will be often subject to some difficulty in interpreting some of the empirical results. Fortunately, this problem has been be resolved by DEA/TOPSIS model. The precise ranking regarding the efficiency ratios for some of the ports may not be

Proceedings of the Eastern Asia Society for Transportation Studies, Vol.6, 2007

accessible while this problem can be easily resolved by DEA/TOPSIS model, for which an overall order is feasible. The result from DEA/OPSIS shows that, in terms of efficiency, the top 3 ports are Singapore (1), Guangzhou (2), Shenzhen (3), respectively; the worst 3 ports are Yokoham (20), Taichung (19) and Manila (18), respectively. It should be noted that Manilas ranking for port efficiency has the largest difference between DEA and DEA/TOPSIS. It can also be seen that efficiency monotonically decreases when the ranking increases in the DEA/TOPSIS derived result. The study has demonstrated that DEA/POSIS provides a convincing methodology for evaluating precise relative port efficiency.

(a) DEA-CCR

(b) DEA/TOPSIS Figure 2 Rankings and their port efficiency resulting from two approaches: (a) DEA-CCR; (b) DEA/TOPSIS.

Difference on rankings for port efficiency (DMU) between DEA-CCR and DEA/TOPSIS is given in Table 4. The last column shows the difference in ranking for each DMU based on the

Proceedings of the Eastern Asia Society for Transportation Studies, Vol.6, 2007

results of the DEA-CCR as compared to that of DEA/TOPSIS. It can be seen that those DMUs which are determined efficient all have the same efficiency (e.g.,1) and ranking (e.g.,1) in the DEA-CCR approach. Using the results obtained from the DEA/TOPSIS method, they now become distinguishable (or comparable). Furthermore, the inefficient DMUs can now be ranked more accurately using the results from the DEA/TOPSIS method. Table 4 Difference on rankings for port efficiency between DEA-CCR and DEA/TOPSIS
Ports
Singapore Guangzhou Shenzhen Xiamen Hong Kong Ningbo Shanghai Kaohsiung Tianjin Busan Tanjung Pelepas Laem Chabang Port Klang Tokyo Qingdao Tanjung Priok Keelung Manila Taichung Yokohama

DEA-CCR(1)
1 1 1 1 1 1 1 1 11 12 1 14 16 17 15 18 13 1 19 20

DEA/TOPSIS(2)
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20

(1)-(2)
0 -1 -2 -3 -4 -5 -6 -7 2 2 -10 2 3 3 0 2 -4 -17 0 0

Among the rankings between the two approaches, Tanjung Pelepas and Manila have largest differences, which are descended by 10 and 17 respectively. With CCR, both Tanjung Pelapas and Manila are measured as efficient and ranked at the first place. However, with DEA/TOPSIS, both Tanjung Pelaps and Manila are ranked at the 11th and 18th places. The reason why there exists such large discrepancy is that DEA-CCR determines the efficiency by only taking the weights that are favorable to the measured DMU while DEA/TOPSIS determines the efficiency by considering all aspects. When measuring Manila with DEA-CCR, there exist weights of inputs and outputs such that Manila is measured as efficient. When measuring Singapore with DEA-CCR, we can identify another set of weights that are favorable to Singapore. With the set of weights that are favorable to Singapore, the efficiency of Manila becomes 0.070862 as shown in Table 5. If we regard different set of weights as different scenario, there will be 20 scenarios for each port. As shown in Table 5, Manila is identified as efficient only under the Manila scenario and inefficient under other scenarios with efficiency no higher than 0.190553. As a whole, Manila is not as good as we perceived

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with DEA-CCR. Therefore, the DEA/TOPSIS model has a number of advantages over the DEA-CCR method. Those merits in DEA method has been retained while more complete ranking with more accurate ratio is accessible. Table 5 Efficiency of Tanjung Pelepas and Manila with CCR weights favorable to different ports
Ports
Singapore Guangzhou Shenzhen Xiamen Hong Kong Ningbo Shanghai Kaohsiung Tianjin Busan Tanjung Pelepas Laem Chabang Port Klang Tokyo Qingdao Tanjung Priok Keelung Manila Taichung Yokohama

Tanjung Pelepas
0.461554 0.461554 0.461554 0.484094 0.461554 0.615764 0.654315 0.34055 0.340548 0.484094 1 0.461554 0.40748 0.334854 1 0.408125 0.09435 1 0.409836 0.341102

Manila
0.070862 0.070862 0.070862 0.059741 0.070862 0.038092 0.04394 0.188378 0.18837 0.059741 0.091839 0.070862 0.086225 0.168638 0.092537 0.085825 0.121509 1 0.085318 0.190553

Manila Port and Tanjung Pelepas Port are much less ranked in DEA/TOPSIS in spite of their higher rank in DEA-CCR which implies some improvements must be done by their managers. For example, the efficiency of Manila Port under Ningbo scenario is 0.038092. The peer ports of Ningbo scenario are Shenzhen, Xiamen, Hong Kong, and Ningbo. Therefore, Manila Port may regard these ports as his benchmark of the improvement. The smallest efficiency of Tanjung Pelepas Port is 0.09435 under Keelung scenario whose peer port is Guangzhou Port. Hence Tanjung Pelepas Port may treat Guangzhou Port as the benchmark of the improvement. 5. SUMMARY AND CONCLUSIONS A new procedure based on the modified DEA, called DEA/TOPSIS, is proposed. The DEA/TOPSIS, which is composed of DEA and TOPSIS, is a two-stage approach proposed to rank DMUs based on the synergy of DEA and TOPSIS. The DEA/TOPSIS approach has been successfully applied to the evaluation of operating efficiency for the top 20 Asian

Proceedings of the Eastern Asia Society for Transportation Studies, Vol.6, 2007

international container ports. The technique offers a significant alternative to the conventional evaluation approach for extracting efficiency information from the samples observations. This study has demonstrated that DEA/POSIS provides a promising method for evaluating relative port efficiency. The DEA technique is useful in resolving the measurement of port efficiency because the calculations are non-parametric, and can handle more than one output without requiring an explicit a priori determination of relationships between output and inputs, as is required for conventional estimation of efficiency using assumed functions. Although DEA is based on the comparison of the efficiency of international container ports, whereby the weights that aggregate the various resources and products used are determined by the data and are not established arbitrarily in advance. There is a major problem in applying DEA. DEA/TOPSIS can be a promising and easily adaptable approach for obtaining the efficiency ratios. The precise ranking regarding the efficiency ratios for some of the ports may not be accessible while this problem can be easily resolved by DEA/TOPSIS model, for which an overall order is feasible. In the present study, several efficiency ratios of the DMUs have been estimated to be ones (which are determined efficient), and therefore, not precisely distinguishable (all with ranking 1). This problem can be resolved by incorporating the TOPSIS. Using the results obtained from the DEA/TOPSIS method, they can be distinguishable (or comparable). Furthermore, the inefficient DMUs can now be ranked more accurately using the results from the DEA/TOPSIS method. The DEA//TOPSIS efficiency ratings can be a useful tool for port managers or regulators, highlighting the status of the operating efficiency and providing a deeper insight into port performance. DEA/TOPSIS model analysis can be of great significance and value to the managerial decisions of ports and to the strategic decisions of port authorities. Performance evaluation for shipping industry can be made more comprehensive if efficient, financial and other ratios are considered. At the same time, the ports weaknesses can be detected, leading the way to improve potential improvements. REFERENCES Ali, A. I., Lerme, C. S., and Seiford, L. M. (1995) Components of efficiency evaluation in data envelopment analysis, European Journal of Operational Research, Vol. 80, pp. 462-473. Banker, R. D., Charnes, A., Cooper, W.W. (1984) Some models for estimating technical and scale inefficiencies in data envelopment analysis, Management Science, Vol.30, No.9, pp.1078-1092. Bowlin W. F. (1987) Evaluating the efficiency of U.S. air force real-property maintenance activities, Journal of the Operational Research Society, Vol.38, No.2, pp.127-35. Charnes, A., Cooper, W. W., and Rhodes, E. (1978) Measuring the Efficiency of Decision Making Units, European Journal of Operational Research, Vol.2, No.6, pp.429-444. Deng H., Yeh C.-H., and Willis, R. J. (2000) Inter-company comparison using modified TOPSIS with objective weights, Computers & Operations Research, Vol. 27, pp. 963973. Hwang C.-L. and Yoon, K.-S. Multiple attribute decision making: methods and applications. New York: Springer, 1981. Lee, H.-S., Chou, M.-D., and Kuo, S.-K. (2005) Evaluating port efficiency in Asia Pacific

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region with recursive data envelopment analysis, Journal of the Eastern Asia Society for Transportation Studies, No.6, pp.544~559. Tongzon, J. (2001) Efficiency measurement of selected Australian and other international ports using data envelopment analysis, Transportation Research Part A, Vol.35, pp.113128. Roll, Y. and Hayuth Y. (1993) Port performance comparison applying data envelopment analysis, Maritime Policy and Management, Vol. 20, No. 2, pp.153 - 161. Tongzon, J. L. (1995) Determinants of port performance and efficiency, Transport Research A, Vol. 29, No. 3, pp. 245-352. Tsai, W.-H. (1994) Comparison of the Operational Efficiency for the International Container Ports in Taiwan: Application of the Data Envelopment Analysis Method, Masters thesis, Department of Business Management, National Sun Yat-Sen University. (in Chinese) Tseng, L.-A. (2004) Operational Performance Analysis for the International Container Ports-Comparison of SFA and DEA Approaches, Masters thesis, Department of Logistics Management, National Kaohsiung First University of Science and Technology. (in Chinese) Wang, T.-F., Song, D.-W., and Cullinane, K. (2003) Container port production efficiency: a comparative study of DEA and FDH approaches, Journal of the Eastern Asia Society for Transportation Studies, No.5, pp.698~713. Wang, T.-F. and Cullinane, K. (2004) The relationship between privatization and DEA estimates of efficiency in the container port industry, Proceedings of ICLSP, pp.625-646.