Water conservation is becoming a bigger challenge globally as the demand for water increases. Water losses are a concern for water supply service systems worldwide, particularly in developing nations. As a result, the problem of water losses, also identified as Non-Revenue Water (NRW), has become crucial to the administration of the water supply service. The current policy of the efficiency measurement by the service providers is impractical since NRW has been ignored as the undesirable product in the water supply system. Previously, there are many studies on measuring the efficiency of the water providers by using Data Envelopment Analysis (DEA). However, conventional DEA does not consider the undesirable output in efficiency measurement. The measurement model without the presence of undesirable outputs will have an unfair inaccurate result. Thus, Scale Directional Distance Function (SDDF) model will be applied in this study as an extension to the conventional DEA approach in measuring the efficiency of water supply providers of 14 states in Malaysia. The result displays that seven states which are Johor, Melaka, Pulau Pinang, Perak Perlis, Sabah, and Selangor achieved full efficiency score and the average efficiency score is 82.39%. In addition, this approach is able to establish target values for decreasing or extension of the outputs to make future improvements as well as to achieve full efficiency.