Empirical validation of an activity-based optimization system
We present an optimization model for steel manufacturing, whose objective function depends on activity-based costing (ABC). The constraints describe the capacity and the material balance, the product-dependent yield and the electrical balance, for all the activities of the plant. For the model to be reliable, one should validate that it accurately expresses the objective function of the user, and that it defines with precision the constraints that determine the feasible solutions. We validate the cost estimation by empirically testing how accurately it can predict future expenditures. We validate the constraints by comparing the polyhedron they generate with the production possibility set obtained with data envelopment analysis (DEA). We show the model implemented and validated in a Chilean steel manufacturer. The tests prove the model reliable enough for defining the product mix, and for evaluating investments and sourcing alternatives.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Homburg, Carsten, 2005. "Using relative profits as an alternative to activity-based costing," International Journal of Production Economics, Elsevier, vol. 95(3), pages 387-397, March.
- repec:bla:joares:v:36:y:1998:i:1:p:129-142 is not listed on IDEAS
- E. Grifell-Tatjé & C. A. K. Lovell, 1999.
"Profits and Productivity,"
INFORMS, vol. 45(9), pages 1177-1193, September.
- C. A. Knox Lovell & E. Grifell-Tatjé, 1996. "Profits and Productivity," Center for Financial Institutions Working Papers 97-18, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
- Goutam Dutta & Robert Fourer, 2001. "A Survey of Mathematical Programming Applications in Integrated Steel Plants," Manufacturing & Service Operations Management, INFORMS, vol. 3(4), pages 387-400.
- Boons, Arnick N. A. M., 1998. "Product costing for complex manufacturing systems," International Journal of Production Economics, Elsevier, vol. 55(3), pages 241-255, August.
- George B. Kleindorfer & Liam O'Neill & Ram Ganeshan, 1998. "Validation in Simulation: Various Positions in the Philosophy of Science," Management Science, INFORMS, vol. 44(8), pages 1087-1099, August.
- Fourer, Robert & Dutta, Goutam, 2000. "A Survey of Mathematical Programming Applications In Integrated Steel Plants," IIMA Working Papers WP2000-06-01, Indian Institute of Management Ahmedabad, Research and Publication Department.
- Singer, Marcos & Donoso, Patricio & Poblete, Francisco, 2002. "Semi-autonomous planning using linear programming in the Chilean General Treasury," European Journal of Operational Research, Elsevier, vol. 140(2), pages 517-529, July.
- Tang, Lixin & Liu, Jiyin & Rong, Aiying & Yang, Zihou, 2001. "A review of planning and scheduling systems and methods for integrated steel production," European Journal of Operational Research, Elsevier, vol. 133(1), pages 1-20, August. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:eee:proeco:v:113:y:2008:i:1:p:335-345. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.