DEA-VRS ANALYSIS OF TECHNICAL EFFICIENCY IN LOCAL FURNITURE SMES

Abstract

This study addresses the limited empirical research on the technical efficiency of small and medium-sized furniture enterprises (SMEs) in Indonesia, particularly in Bireuen Regency, where the sector plays a vital role in regional economic development yet faces persistent challenges of capital constraints, skilled labor shortages, and volatile raw material supplies. The purpose of this research is to measure the level of technical efficiency of local furniture SMEs and to identify both internal and external determinants influencing performance. Using a census approach, data were collected from 287 active enterprises through surveys, interviews, and secondary sources. Technical efficiency was analyzed with Data Envelopment Analysis (DEA) under a Variable Returns to Scale (VRS) model, enabling the evaluation of multiple input-output relationships. The findings reveal that 56.6% of enterprises operate efficiently, while 43.4% remain inefficient due to excessive investment, overuse of raw materials, and suboptimal labor utilization. External factors such as access to financing, wood supply chain stability, workforce skills, and supportive government policies were found to significantly influence efficiency outcomes. The study concludes that improving access to microfinance, strengthening sustainable wood supply chains, enhancing labor training, and implementing targeted policy support are critical strategies to enhance the competitiveness and sustainability of local furniture SMEs.