Efficiency of Milk Processing Companies – Parametric and non-Parametric Approaches

Abstract

In the paper, the authors considered estimation of efficiency, which measures the ability of a company to obtain the maximum output from given inputs. The comparison of results obtained by using two approaches: parametric (on the example of the SFA method, Stochastic Frontier Analysis) and non-parametric (on the example of the DEA method, Data Envelopment Analysis) has been carried out. Data from the companies of a key food processing sector in Poland, namely the milk processing sector, was used in the paper. This sector was chosen due to the large size of the sample, as well as the strategic importance and significant contribution to the production of the entire agri-food sector. Furthermore, with respect to the milk processing sector there are no comparative analyzes carried out, which justifies the need for their conduction. The analysis covered the period 2006-2011, the sample included from 103 up to 160 enterprises (depending on the analyzed year).
Basing on the conducted analysis it was claimed that the integral use of the SFA and the DEA methods– combining advantages of both methods – allows preserving the analogy when comparing the results and formulating reliable conclusions.