Showing papers on "Capacity utilization published in 2013"

Hydrogen Storage for Wind Parks: A Real Options Evaluation for an Optimal Investment in More Flexibility

Abstract: In this paper, we investigate the economic viability of hydrogen storage for excess electricity produced in wind power plants. To this end, we define two scenarios and use both Monte Carlo simulation and real options analysis. The use of hydrogen as a storage medium helps to increase capacity utilization of the wind parks; in the case of disconnection of the wind park (grid overload, grid stability considerations), the investor can also offer system-relevant services by producing reserve energy. It also allows temporal arbitrage, i.e. the purchasing of electrical energy at low spot market prices in order to generate hydrogen, and the selling of electricity that is generated from hydrogen at high spot market prices. Finally, system services can be offered in the form of minute reserve.

Excess Capacity and Pricing in Bertrand-Edgeworth Markets: Experimental Evidence

Abstract: We conduct experiments testing the relationship between excess capacity and pricing in BertrandEdgeworth duopolies and triopolies. We systematically vary the experimental markets between small amount of excess capacity (suggesting monopoly) and no capacity constraints (suggesting perfect competition). Controlling for the number of flrms, higher production capacity leads to lower prices. However, the decline in prices as industry capacity rises is less pronounced than predicted by Nash equilibrium, and a model of myopic price adjustments has greater predictive power. With higher capacities, Edgeworth-cycle behavior becomes less pronounced, causing lower prices. Evidence for collusion is limited and restricted to low-capacity duopolies.

Cyclical dynamics of airline industry earnings

Abstract: Aggregate airline industry earnings have exhibited large-amplitude cyclical behavior since deregulation in 1978. To explore the causes of these cycles we develop a behavioral dynamic model of the airline industry with endogenous capacity expansion, demand, pricing, and other feedbacks; and model several strategies industry actors have employed in efforts to mitigate the cycle. We estimate model parameters by maximum likelihood methods during both partial model tests and full model estimation using Markov chain Monte Carlo methods to establish confidence intervals. Contrary to prior work we find that the delay in aircraft acquisition (the supply line of capacity on order) is not a very influential determinant of the profit cycle. Instead we find that aggressive use of yield management—varying prices to ensure high load factors (capacity utilization)—may have the unintended effect of increasing earnings variance by increasing the sensitivity of profit to changes in demand. Copyright © 2013 System Dynamics Society Syst. Dyn. Rev. 29, 129–156 (2013) Additional supporting information may be found in the online version of this article at the publisher's web-site.

Power System Simulation Model Based on Probability Analysis

Abstract: By virtue of the vital nature of electric power, both to our economic and personal well being, a power system is expected to supply electrical energy as economically as possible, and with a high degree of quality and reliability. The developing countries in general place higher reliability standard on the performance of electricity supply. However, there has been no significant study in the context of the Nigeria power sector to power system simulation model based on probability analysis the technical appraisal of the state power systems in general is confined to examining the Plant Load Factor (PLF) as a measure of capacity utilization only. The present study is a modest attempt to evaluate the reliability of the Nigeria power system in the framework of a theory-informed methodology power system simulation model based on probability analysis.

Manufacturing Performance in Nigeria: Implication for Sustainable Development

Abstract: The study examined manufacturing performance for sustainable economic development in Nigeria, while the specific objectives are as follows: i) to look at the growth rate and contribution of manufacturing to GDP. ii) to examine trend in both manufacturing and employment. iii) to determine the structure of capacity utilization. iv) to determine factors infl uencing manufacturing performance. Panel data analysis was used on secondary data from 1980 -2008 that was extracted from CBN Statistical Bulletin. The results indicate positive relationship between manufacturing and each of capacity utilization and import as 1 percent change in capacity utilization and import lead to 43081 and 3.8 percent change in manufacturing respectively. However, there is a negative relationship between manufacturing and each of investment, exchange rate, and export. A 1 percent change in investment, exchange rate and export lead to 0.04, 12729, 0.3 percent reduction in manufacturing respectively. The t-values for investment, capacity utilization and import were used to test the hypothesis that each coefficient is different from 0. Th is is rejected; since the tvalue are lower than 1.96 (at 95% confidence level). This showed that investment, capacity utilization and import were major determinants of manufacturing performance for the period. The study concludes that the key to reversing the poor performance of Nigerian manufacturing is to provide incentives for firms to become more export oriented.

The (Normal) Rate of Capacity Utilization at the Firm Level

Abstract: This paper examines the endogeneity (or lack thereof) of the rate of capacity utilization in the long run at the firm level. The cost minimizing firm has an incentive to increase the utilization of its capital if the rate of the returns to scale decreases as its production increases. The theory of production provides justification for this kind of behavior of economies of scale. In that way the desired rate of utilization becomes endogenous to variations in demand.

Capacity and Capacity Utilization in Fishing Industries

Abstract: Excess capacity of fishing fleets is one of the most pressing problems facing the world's fisheries and the sustainable harvesting of resource stocks. Considerable confusion persists over the definition and measurement of capacity and capacity utilization in fishing. Fishing capacity and capacity utilization, rather than capital (or effort) utilization, provide the appropriate framework. This paper provides both technological-economic and economic definitions of capacity and excess capacity in fishing and illustrates the technological-economic approach through a case study using Data Envelopment Analysis.

Critical elements in implementations of just-in-time management: empirical study of cement industry in Pakistan

Abstract: In recent years, inventory management is continuous challenge for all organizations not only due to heavy cost associated with inventory holding, but also it has a great deal to do with the organizations production process. Cement industry is a growing sector of Pakistan’s economy which is now facing problems in capacity utilization of their plants. This study attempts to identify the key strategies for successful implementation of just-in-time (JIT) management philosophy on the cement industry of Pakistan. The study uses survey responses from four hundred operations’ managers of cement industry in order to know about the advantages and benefits that cement industry have experienced by Just in time (JIT) adoption. The results show that implementing the quality, product design, inventory management, supply chain and production plans embodied through the JIT philosophy which infect enhances cement industry competitiveness in Pakistan. JIT implementation increases performance by lower level of inventory, reduced operations & inventory costs was reduced eliminates wastage from the processes and reduced unnecessary production which is a big challenge for the manufacturer who are trying to maintain the continuous flow processes. JIT implementation is a vital manufacturing strategy that reaches capacity utilization and minimizes the rate of defect in continuous flow processes. The study emphasize the need for top management commitment in order to incorporate the necessary changes that need to take place in cement industry so that JIT implementation can take place in an effective manner.

Export Growth, Capacity Utilization, and Productivity Growth: Evidence from the Canadian Manufacturing Plants

Abstract: Aggregate labor and multifactor productivity growth slowed substantially post-2000 in the Canadian manufacturing sector. To examine the source of the decline, this paper proposes a decomposition method that delves deeper into the two micro-components of aggregate productivity growth: a within-plant component and a between-plant component. The decomposition builds on earlier work by Jorgenson and his collaborators that decomposes aggregate productivity growth into its industry components, but applies it to the plant level and introduces non-neoclassical features of the plant-level economic environment. It finds that the preponderance of the aggregate labor and multifactor productivity growth slowdown is due to the pro-cyclical nature of productivity growth arising from capacity utilization. Almost all of the aggregate productivity growth slowdown is driven by exporters, as exporters experienced large declines in labor productivity growth in the post-2000 period as a result of large declines in their capacity utilization.

Economic growth and income distribution with heterogeneous preferences on the real exchange rate

Abstract: We present a dynamic model of capacity utilization and growth which takes into due account the joint determination of the international competitiveness (measured by the real exchange rate) and functional income distribution. It follows that how distribution, capacity utilization and growth vary with the real exchange rate depends on the cause of change in the latter (nominal exchange rate or markup). Over the medium run, the nominal exchange rate (markup) changes when the actual real exchange rate differs from the level preferred by the government (capitalists). While there is a medium-run equilibrium in which capitalists and the government come to share a preferred real exchange rate, the economy may not converge to it. In fact, when the government is primarily concerned with preserving workers’ share in income when manipulating the nominal exchange rate, a limit cycle obtains: the economy experiences endogenous cyclical fluctuations in the real exchange rate, distribution, capacity utilization and growth that resemble the experience of several developing countries. Thus, growth regressions featuring the real exchange rate should include distribution in the vector of control variables, which has not been the case.

Revenue management with flexible products: The value of flexibility and its incorporation into DLP- based approaches

Abstract: A major benefit of flexible products is that they allow for supply-side substitution even after they have been sold. This helps improve capacity utilization and increase the overall revenue in a sto-chastic environment. As several authors have shown, flexible products can be incorporated into the well-known deterministic linear program (DLP) of revenue management’s capacity control. In this paper, we show that flexible products have an additional “value of flexibility” due to their supply-side substitution possibilities, which can be captured monetarily. However, the DLP-based approaches proposed so far fail to capture this value and, thus, steadily undervalue flexible products, resulting in lower overall revenues. To take the full potential of flexible products into account, we propose a new approach that systematically increases the revenues of flexible products when solving the DLP and performing capacity control. A mathematical function of variables available during the booking horizon represents this artificial markup and adapts dynamically to the current situation. We determine the function’s parameters using a standard simulation-based optimization method. Numerical experiments show that the benefits of the new approach are biggest when low value demand arrives early. Revenues are improved by up to 5% in many settings.

Cambridge and neo-Kaleckian growth and distribution theory: comparison with an application to fiscal policy

Abstract: This paper compares Cambridge and neo-Kaleckian growth theory. Both are members of the post-Keynesian approach to growth and distribution, but the Cambridge model is a hybrid of Keynesian and classical features whereas the neo-Kaleckian model is Keynesian. The Cambridge approach assumes full capacity utilization, while the neo-Kaleckian approach assumes variable capacity utilization. The two theories rely on fundamentally different theories of income distribution. The Cambridge model has a class structure of saving that generates Pasinetti’s (1962) theorem regarding irrelevance of worker saving for steady-state growth and distribution. That class structure can be included in the neoKaleckian model, generating a variant of the Pasinetti result whereby steady-state capacity utilization is independent of worker saving. Fiscal policy has similar growth effects in the two models, albeit via very different mechanisms. Both models suffer from lack of attention to the labor market.

A two-stage stochastic programming approach for new tape-out allocation decisions for demand fulfillment planning in semiconductor manufacturing

Abstract: Demand fulfillment and capacity utilization directly affects customer satisfaction, market growth, and the profitability of the company in the semiconductor industry. These characteristics boost the significance of allocating various customer demands to a number of wafer fabrication facilities (fabs) with different capacity configurations. Before volume production, the introduction of new semiconductor product, namely new tape-out (NTO), requires extremely sophisticated and lengthy qualification with high-cost masks and pilot runs in the qualified fabs. Thus, the NTO allocation will affect future product mix of the qualified fabs, and the flexibility to fulfill the volume demands of the allocated NTOs in the corresponding fabs. This research aims to construct a two-stage stochastic programming (2-SSP) demand fulfillment model. The first stage considers NTO allocation decisions to a number of qualified fabs before the corresponding demand volume is realized. The second stage allocates the capacity to fulfill demand requirements based on the results of four options of capacity reconfiguration: (1) qualifying a product to more than one fab (share); (2) physically transferring a set of masks for a product from one fab to another, where a requalification is required (transfer); (3) moving tools from under-loaded fabs to over-utilized fabs (backup); and (4) utilizing different technologies to capacity inside a fab to support the technology with insufficient capacities (exchange). Both the share and transfer options require long lead time for qualification, whereas the backup and exchange options can be accomplished within a planned timeframe. A numerical study based on real settings is conducted to estimate the validity of the proposed 2-SSP model via values of stochastic solution (VSS) and expected values of perfect information (EVPI). The results showed the benefits of adopting 2-SSP models, especially in an environment with high-demand fluctuation. Furthermore, the proposed 2-SSP can provide near-optimal solutions similar to those of deterministic models with perfect information.

Beyond make-or-buy: cross-company short-term capacity backup in semiconductor industry ecosystem

Abstract: Since the uncertainty involved in demand forecast is increasingly amplified with the forecast lead-time, high-tech companies often suffer the risks of oversupply and shortage of capacity that will affect the profitability and growth. High-tech industries including semiconductor and TFT-LCD industries are capital-intensive, in which the capacity plan and corresponding capital investment decisions are critical due to demand fluctuation. Once the capacity is planned, the company may suffer the risks of either low capital-effectiveness due to low capacity utilization and capacity oversupply, or poor customer satisfaction caused by the capacity shortage. Most of the existing studies focused on solving the long-term capacity shortage issue through optimizing the capacity investment plan, or medium-term capacity plan to allocate demands among the wafer fabrication facilities (fabs) to balance the loading and product mix. Focusing on a real setting, this study proposed a systematic decision method to analyze short-term solutions of cross-company capacity backup between the companies in the semiconductor industry ecosystem. In particular, a game theory and decision tree analysis model was developed to support this decision. A case study was conducted with real data of semiconductor manufacturing companies in Taiwan for validation. The results have demonstrated practical viability of this approach. The approach suggested has been implemented in this company.

Decentralization, Local Government Capacity and Efficiency of Health Service Delivery in Uganda

Abstract: The study investigates the impact of decentralization and local government capacity on efficiency of health service delivery in Uganda applying qualitative analysis, and two stage Data Envelopment Analysis (DEA) on quantitative data covering a sample of 44 districts over the period 2008/09 and 2009/10. The results show that health institutions in about 31 districts out of 44 were technically efficient, while those in about 13 districts were technically inefficient under variable returns to scale (VRS), implying that health resources were not efficiently used in these institutions. Health institutions in 56.8 percent and 45.5 percent of the districts were operating at optimal scale in 2008/09 and 2009/10, respectively. Those in the remaining districts were scale inefficient, with a majority of them operating under decreasing returns to scale (DRS). Effective and accountable decentralized governance in the health sector in Uganda is typically constrained by weak capacity, particularly under-staffing at the districts levels. Policy recommendations include strengthening professional staffing in some districts to improve their capacity to deliver efficient health services; transfers of officials from districts with excess capacity to those with inadequate resources; and districts whose operations are characterized by increasing returns to scale should be considered for future expansion to consolidate their efficiency.

Medium-term multi-plant capacity planning problems considering auxiliary tools for the semiconductor foundry

Abstract: The foundry is an industry whose demand varies rapidly and whose manufacturing process is quite complicated. This paper explores issues on mid-term capacity planning in the foundry. First, issues on capacity planning of the foundry are categorized. Second, focusing on multi-site planning, an increment strategy for the number of auxiliary tools—“photo mask”—is proposed to increase the flexibility of production. The related decisions include how to allocate appropriately the forecast demands of products among multiple sites and how to decide on the production quantities of products in each site after receiving customer-confirmed orders. By constructing the mathematical programming model of capacity planning, the rates of capacity utilization and customer order fulfillment are found to be effectively enhanced by adding new masks to increase production flexibility. Furthermore, from the sensitivity analysis, the importance of customers is shown to influence significantly the amount of reserved capacity of customers. Increasing the number of certified factories is also an indirect way to increase capacity. For long life cycle products, the verification of products in multiple factories in order to increase capacity utilization rate effectively is suggested.

Operations method for providing wireless communication services

Abstract: The present invention is directed to an improved operations method for a wireless communication system. The improved business method, operations method, network and system of the present invention includes the steps of delivering cellular services to the mass market, reducing peak capacity, increasing overall capacity utilization, improving capital utilization, providing an “all-you-can-eat” pricing model, and designing capacity based upon where the users live, work, and play.

Accounting Performance and Capacity Investment Decisions: Evidence from California Hospitals

Abstract: Capacity decisions involve tradeoffs between the cost of capacity and the opportunity costs of lost sales. Accounting researchers posit that accounting performance provides sufficient information about these tradeoffs and thus can be used to formulate simple rules to assist capacity decisions. Empirical research has not examined the role of accounting information in capacity investment decisions at the department level in a multi-product firm in the presence of social costs. Empirical analyses using department-level data from California hospitals for the period 1998-2005 show that hospitals are more likely to make capacity investments in departments with high accounting performance. However, in the presence of demand variability, the association between accounting performance and capacity investment is attenuated because of the resulting increase in noise in accounting performance measures. Thus the weight on accounting performance as a decision tool for capital investments reduces when there is demand variability. Another factor that reduces the weight on accounting performance is capacity utilization. Higher capacity utilization can lead to turning away or rerouting of patients to other hospitals and negatively impacts reputation and quality of care, which increases the hospital’s social costs. Hence, hospitals do not require high accounting performance before investing in a department with high capacity utilization. This empirical evidence of the role of accounting performance in capacity investment decisions fills a gap in the capacity investment literature and furthers our understanding of the interactions between accounting performance and the operational determinants of firms’ capacity investment behavior.

Wage and profit-led growth: The limits to Neo-Kaleckian models and a Kaldorian proposal

Abstract: We argue that a fundamental difference between Post-Keynesian approaches to economic growth lies in their treatment of investment. Kaleckian-Robinsonian models postulate an investment function dependent on the accelerator and profitability. Some of these models rely on the importance of profitability, captured by the profit share, to make the case for profit-led growth. For their part, Kaldorian models place the emphasis on the accelerator. More important, investment is a derived demand; that is, it is ruled by the adjustment of capacity to exogenous demand, which, in turn, determines the normal level of capacity utilization. In our view, the Kaldorian approach is better equipped to deal with some of the issues relating income distribution to accumulation with effective demand in the long run. We develop a Kaldorian open-economy model to examine the conditions under which an increase in real wages can produce profit or wage-led growth, showing that the limit to a wage-led expansion is a binding external constraint. The role and limitations of wages as a determinant of growth are further examined through spectral techniques and cycle analysis for a subset of developed economies. The evidence indicates that real wages are positively related to growth, investment, and capacity utilization. It also highlights the role of finance in sustaining expansions, suggesting that debt-led growth should not be identified with profit-led growth.

Evaluating Capacity Utilization Options for US West Coast Container Ports

Abstract: As global trade continues to recover from the recent economic recession, US container port congestion experienced in the last decade will likely re-emerge. Yet there is limited research that examines network-wide port capacity in support of solutions for minimizing such congestion. To address this gap, we simulate the US West Coast container port network, quantifying the costs and benefits of different options to better utilize current port capacity across the entire network. We specifically assess both efficiency improvement and operational coordination options on historical and future container volumes. The results demonstrate the strength of efficiency as a means to alleviate future port congestion. However, the results also portray inequitable savings across different stakeholders as well as difficulty among these stakeholders in perceiving actual benefits. We discuss the impacts of these challenges on implementation of the capacity utilization options.

Cycles of demand and distribution and monetary policy in the U.S. economy

Abstract: The role of monetary policy on the cyclical behavior of the labor share and capacity utilization in the US economy is studied empirically. Previous estimation results remain robust; the inclusion of the rate of interest does not alter the underlying specification of the distributive demand regime. Next, the role of monetary policy on net borrowing flows for four institutional sectors are analyzed. Interest rate effects appear most important for households. Based on this finding, implications for countercyclical stabilization policy are spelled out. (author's abstract)

A Close Look into Research Studies on Capacity Utilization in India and Abroad

Abstract: Capacity utilization as measures of performance indicators of an industry has a long history of research. Every industry is endlessly in a course of self-appraisal and in search of tools for measuring its own current performance in comparison with the various targets, past achievements and operative capacity. Manufacturing capacity utilization is such a key indicator of economic performance which explains changes in investment, inflation, long-run output growth etc. This article tries to overview the studies undertaken on capacity utilization in India and abroad so far to find the gap existed for further empirical research. This research review gives closer and analytical insight into the capacity utilization and may provide an answer in future to the prospective researchers to the debate of whether liberalization has significantly contributed to the improvement in industrial growth and performance or not, amidst the shift in paradigm from “state-intervention-cumimport substitution” to that of “liberalization-cum-export led-growth”.

Mammalian Cell Culture Capacity for Biopharmaceutical Manufacturing

Abstract: With worldwide sales of biopharmaceuticals increasing each year and continuing growth on the horizon, the manufacture of mammalian biopharmaceuticals has become a major global enterprise. We describe the current and future industry wide supply of manufacturing capacity with regard to capacity type, distribution, and geographic location. Bioreactor capacity and the use of single-use products for biomanufacturing are also profiled. An analysis of the use of this capacity is performed, including a discussion of current trends that will influence capacity growth, availability, and utilization in the coming years.

Bertrand-Edgeworth Competition in an Almost Symmetric Oligopoly

Abstract: We analyze a Bertrand-Edgeworth game in homogeneous product industry, under effcient rationing, constant marginal cost until full capacity utilization, and identical technology across firms. We solve for the equilibrium and establish its uniqueness for capacity configurations in the mixed strategy region of the capacity space such that the capacities of the largest and smallest firm are sufficiently close.

Hydrogen Storage for Wind Parks - A Real Options Evaluation for an Optimal Investment in More Flexibility

Abstract: In this paper, we investigate the economic viability of hydrogen storage for excess electricity produced in wind power plants. To this end, we define two scenarios and use both Monte Carlo simulation and real options analysis. The use of hydrogen as a storage medium helps to increase capacity utilization of the wind parks; in the case of disconnection of the wind park (grid overload, grid stability considerations), the investor can also offer system-relevant services by producing reserve energy. It also allows temporal arbitrage, i.e. the purchasing of electrical energy at low spot market prices in order to generate hydrogen, and the selling of electricity that is generated from hydrogen at high spot market prices. Finally, system services can be offered in the form of minute reserve.

Sources of value creation through private equity-backed mergers and acquisitions : the case of buy-and-build strategies

Abstract: This article documents a new value creation function of private equity investors who carry out buy-and-build strategies. Buy-and-build strategies constitute an initial acquisition of a firm, serving as a “platform”, by a private equity investor and follow-on private equity-backed acquisitions (“add-ons”). The investor merges the platform and add-ons into a single entity. Additionally to the selection of well performing firms by the investors prior to the transaction, we identify value-enhancing potentials which private equity investors explore through buy-and-builds. The investors bring together platforms with lower capacity utilization and lower returns, and add-ons with higher utilization and higher returns in order to allocate resources and capacity more efficiently and to improve firms’ performance. However, the buy-and-build strategies only have a positive impact on the profitability of firms with increasing industry adjusted utilization. Consequently the more efficient deployment of assets for the generation of sales drives the improved performance after buy-and-builds.