Learning Curves, Production Rate, and Program Costs
AbstractThis paper deals with a model of the firm engaged in production to order. Models of this situation frequently conclude that the size of the order and production rate each influence the costs of production. Despite this fact, empirical work on production costs focus almost exclusively on either production rate or the size of the order as explainers of variations in costs. In this paper, a model is developed which is consistent with both these facts. The model permits production rate to be a decision variable in the manufacturer's production planning. The model is solved for an optimal production plan which requires production rate to change throughout the life of the program. The planning situation, where alternative order sizes are considered, is then contrasted with the production situation, where unit costs are related to cumulative output given a production plan. This approach provides guidance for the use of data on past programs in the estimation of cost functions and the evaluation of future production plans.
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Bibliographic InfoArticle provided by INFORMS in its journal Management Science.
Volume (Year): 25 (1979)
Issue (Month): 4 (April)
production/scheduling; production/scheduling: work studies and learning;
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- Benkard, C. Lanier, 2000. "A Dynamic Analysis of the Market for Wide-Bodied Commercial Aircraft," Research Papers 1636, Stanford University, Graduate School of Business.
- C. Lanier Benkard, 1999. "Learning and Forgetting: The Dynamics of Aircraft Production," NBER Working Papers 7127, National Bureau of Economic Research, Inc.
- Li, Haitao & Womer, Keith, 2012. "Optimizing the supply chain configuration for make-to-order manufacturing," European Journal of Operational Research, Elsevier, vol. 221(1), pages 118-128.
- Battaïa, Olga & Dolgui, Alexandre, 2013. "A taxonomy of line balancing problems and their solutionapproaches," International Journal of Production Economics, Elsevier, vol. 142(2), pages 259-277.
- C. Lanier Benkard, 2000. "Learning and Forgetting: The Dynamics of Aircraft Production," American Economic Review, American Economic Association, vol. 90(4), pages 1034-1054, September.
- Nadeau, Marie-Claude & Kar, Ashish & Roth, Richard & Kirchain, Randolph, 2010. "A dynamic process-based cost modeling approach to understand learning effects in manufacturing," International Journal of Production Economics, Elsevier, vol. 128(1), pages 223-234, November.
- Sengupta, Jati K., 2000. "Quality and efficiency," Economic Modelling, Elsevier, vol. 17(2), pages 195-207, April.
- C. Lanier Benkard, 2000. "A Dynamic Analysis of the Market for Wide-Bodied Commercial Aircraft," NBER Working Papers 7710, National Bureau of Economic Research, Inc.
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