Models for first-pass FMS investment analysis

Abstract

Abstract. Consider a finn that could choose either an inexpensive product-specific (dedicated) facility or a costly flexible facility, or a combination of the two, in order to satisfy demand for two product groups. Flexible technology offers benefits of scale and scope economies. However, it may have added operational costs due to the need to have excess capacity (to permit changeovers) and to maintain cycle stocks. As a consequence, the economic viability of flexible technology is significantly affected by the choice of the operating doctrine. This article presents firstpass decision models to help the finn choose the optimum sizes of facilities and the degree of flexibility for the flexible facility such that the contingent operational costs are simultaneously optimized. Two variations of the problem are considered. Whereas, the first applies to a situation in which the demand rates are constant and predictable, the second considers random demands. In each case, this study provides a formulation of the problem, structural results, and the sensitivity of the results to cost parameters. These resttlts have modest data and computational requirements, making them suitable for first-cut attempts at narrowing available choices.

John A. Buzacott and His Pioneering Contributions to Manufacturing and Service Systems

“…John spent 1979 -1980 at the International Institute of Applied Systems Analysis at Laxenburg near Vienna, Austria, working on a project on "scale in production systems," which resulted in an edited volume with the same title. Since then John has maintained an interest in the complexities of investment planning in manufacturing and process industries (Buzacott 1985;Buzacott and Chaouch 1988;Gupta, Gerchak, and Buzacott 1992;Gupta and Buzacott 1993;Chaouch and Buzacott 1994;Gardner and Buzacott 1999).…”