On manufacturing/marketing incentives

Article Abstract:

Optimal incentive plans, based on the agency theory, are presented as a means to encourage production managers to act on behalf of the company, rather than in their own self-interest, to maximize residual returns. The optimal plan is structured in such a way that the owner operates the futures market: (1) in capacity, (2) in preparation for any value losses, and (3) with a plan that is best in its original form with the owner and the managers gaining from observable efforts, but with periodic complaints regarding stock levels from the production manager and the owner prone to influence. This model would benefit from a franchising system owing to the fact that risk neutrality exists for all involved. Lincoln Electric Co is an example of this incentive plan.

Electric services, Welding apparatus, Motors and generators, Management, Usage, Electric utilities, Marketing management, Franchises, Agency theory, Lincoln Electric Co.

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Investing in reduced setups in the EOQ model

Article Abstract:

The standard EOQ (economic order quantity) model is revised to reflect investment cost savings introduced by changing manufacturing setup levels, and these savings are calculated on a per-unit basis in terms of amortization. In general, the revisions to the EOQ model may be stated as minimization problems involving the total of both a convex and a concave function. Practical applications of the mathematical models developed are discussed in terms of U.S. and Japanese manufacturing practices. Optimal lot sizes for production and inventory control are also related to sales rates, and it is demonstrated that a critical sales rate level must be reached before investment in reducing manufacturing setup costs should be considered.

Economic aspects, Factory orders, Inventory control, Materials management

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Setup reduction and increased effective capacity

Article Abstract:

The popular just-in-time and zero inventory control systems require a reduction in setup times on production lines. This setup time reduction can be used to either reduce lot sizes or overtime. A simple model, using an economic-order-quantity environment with unchanging demand rates, projects optimal setup time reductions and optimal overtime.

Methods, Just in time inventory systems, Just in time systems

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