Using Data Envelopment Analysis to explore productivity benchmarking in the New Zealand harvesting sector

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Obi F
Visser, Rien

Executive Summary: A benchmarking system developed by Forest Growers Research Ltd., and managed by the University of Canterbury, School of Forestry has been recording cost and productivity for plantation forest harvesting operations in New Zealand over 10 years (2009 – 2018) with over 1500 unique entries. This report details a study using the benchmarking database, whereby the pattern and sources of productivity changes are investigated using the Data Envelopment Analysis (DEA) method. This is known as the DEA-based Malmquist non-parametric frontier technique. The study measures productivity changes in the forest harvesting sector in New Zealand. Productivity growth reflects how well an industry has been able to increase its output, while minimising or keeping inputs constant. This consequently increases the competitiveness of the sector. Using the Malmquist Total Factor Productivity (TFP) index that measures productivity (the ratio of output to input), the study shows that productivity growth in New Zealand harvesting was positive, growing at an average rate of 1.7% per annum over the study period. The index is decomposed into two other productivity change measures, an efficiency change index and a technology change index, in order to better understand the causes of change in relative performance. Efficiency change relates to how well a business or organisation has been able to efficiently manage its inputs to produce outputs. A technology change (or frontier shift) is where the business or organisation has adopted or utilised improved technologies, and therefore the best practice frontier moves upwards. Productivity is driven by two components; (1) the technology deployed and (2) the efficiency of the technology. The study indicates that the sector experienced productivity growth over the 10-year period primarily as a result of technological progress rather than efficiency growth. The contribution to the overall output (system productivity) growth from technology change ranged from 1.4 to 26%, while that from efficiency gain ranged from 7.3 to 19%. Technological gain was therefore the most important driver of TFP growth in the sector rather than efficiency improvement. The results of the study show that the productivity growth in the industry was mainly as a result of improved technologies, however, efficiency of the technologies lag. There is potential for increasing efficiency of existing technologies, increasing output while using or reducing current input levels, which should be the focus of the industry in order to achieve sustainable growth in productivity.

Obi F, Visser R (2019). Using Data Envelopment Analysis to explore productivity benchmarking in the New Zealand harvesting sector.
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ANZSRC fields of research
Fields of Research::30 - Agricultural, veterinary and food sciences::3007 - Forestry sciences
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