Chapter 9 Moving frontier analysis: An application of Data Envelopment Analysis for competitive analysis of a high-technology manufacturing plant

Competitive analysis of plants is fundamental to enhancing the competitiveness of manufacturing firms. Moving Frontier Analysis (MFA), proposed in this paper, is a new application of Data Envelopment Analysis (DEA) to conduct competitive analysis of a high-technology manufacturing plant. The development and application of MFA was done in collaboration with the management of a US merchant semiconductor manufacturing firm. A wafer fabrication plant of the firm served as the research site for this study. MFA provides a means to determine (i) the gap between a plant's best performance and the best of competition, and (ii) whether or not it will be possible to close this performance gap, and if so, the time it will take to do so. From an implementation standpoint, competitive analysis using MFA can be conducted even if (i) accurate and detailed data on comparable plants of competitor companies are not available, and (ii) the operations of competitors' plants are dynamically changing. An application of MFA for conducting competitive analysis of the wafer fabrication plant is presented. This application illustrates how MFA makes it possible to estimate (i) the unit cost of production for the best of competitors' plants using aggregate operational information on industry best practices, and (ii) the time it will take for the plant's unit cost of production to catch up with the best of competition using the technologies in operation.