Modelling and determining the technical efficiency of a surface coal mine supply chain

Abstract

Determining the efficiency of a surface coal mine operation is an essential activity, which can help in deciding on the optimal use of input resources, including effective capital allocation, in generating a desired quantity of coal of a specific quality. Mines operate today in challenging conditions, with diminishing reserves of high-quality coal, remote location of new coal deposits, infrastructure problems, environmental legislation, and the effects of climate. All these have an impact on the performance of a mine. Given such challenges, a company has to be technically efficient compared to other existing coal producers in order to generate profits. It can use the measurement of its efficiency to evaluate its productivity, benchmarking this against the best-performing mines and determining optimal variables in order to minimize slack and achieve the desired outputs. This paper discusses the use of Data Envelopment Analysis (DEA) in evaluating the efficiency of a surface coal mine supply chain for the coal export market. The supply chain is considered to be composed of subprocesses that are modelled as a multistage system. Numeric examples will be used to illustrate the application of DEA.