The Acquisition of Automation Subject to Diminishing Returns

In this paper, it is assumed that the purchase of automation has the effect of reducing the per unit production and in-process inventory costs. The optimal dynamic mix of automation and manual output is derived to minimize the cost incurred over the planning horizon due to (1) deviating from the fut...

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Bibliographic Details
Published in:IIE transactions Vol. 17; no. 2; pp. 147 - 156
Main Author: Gaimon, Cheryl
Format: Journal Article
Language:English
Published: Norcross Taylor & Francis Group 01.06.1985
Taylor & Francis Ltd
Subjects:
Automation
Cost reduction
Mathematical analysis
Operations research
Production costs
Productivity
ISSN:0740-817X, 2472-5854, 1545-8830, 2472-5862
Online Access:Get full text
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Summary:In this paper, it is assumed that the purchase of automation has the effect of reducing the per unit production and in-process inventory costs. The optimal dynamic mix of automation and manual output is derived to minimize the cost incurred over the planning horizon due to (1) deviating from the future goal levels of output, (2) production, (3) inventory, (4) changing the level of manual output, and (5) acquiring automation. The cost of purchasing automation and the effectiveness of automation on reducing the per unit. production and in-process inventory costs are expressed as functions of time to include the impact of learning or anticipated technological advancement. Furthermore, the effectiveness of automation on reducing the per unit production and in-process inventory costs is assumed to decrease as the level of automation held by the organization increases due to diminishing returns. We show that it is rarely optimal to increase automation without simultaneously modifying the level of manual output. In addition, a numerical solution algorithm is presented to compute the optimal times and levels of changes in automation and manual output.
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ISSN:0740-817X
2472-5854
1545-8830
2472-5862
DOI:10.1080/07408178508975285