Showing papers on "Capacity utilization published in 2016"
Posted Content•
TL;DR: A number of alternative measures of industrial capacity utilization are periodically calculated and published; the 1980 Economic Report of the President, for example, contains three series, that by the Federal Reserve Board, the U.S. Department of Commerce (Bureau of Economic Analysis) and the Wharton School of Finance.
Abstract: Measures of industrial capacity utilization (hereafter, CU) have been used extensively in helping to explain changes in the rate of investment, labor productivity and inflation. The CU measures have also been used to obtain indices of capital in use, as distinct from capital stock in place. A number of alternative measures of CU are periodically calculated and published; the 1980 Economic Report of the President, for example, contains three series, that by the Federal Reserve Board, the U.S. Department of Commerce (Bureau of Economic Analysis) and the Wharton School of Finance. Other publicly available series are those prepared by McGraw-Hill Publishing Company, the U.S. Department of Commerce (Bureau of the Census), and Rinfret-Boston Associates, Inc. Although a host of CU measures is publicly available, it is not at all clear how one should interpret changes over time in each measure or variations among them. A principal reason underlying these interpretation problems is that the crucial link between underlying economic theory and the constructed measure of CU is weak. One way in which this issue has manifested itself in the policy domain over the last five years has been with respect to the uncertain effects of dramatic increases in energy prices on capacity output and on CU. Each of the CU measures noted above is computed in such a way that explicitly ignores any role for energy prices. Yet several times during the last decade, though growth to apparently high rates of CU had taken place, investment and average labor productivity were much lower than expected, and the rate of price increase much greater. In brief, during the last decade the explanatory power of alternative CU measures has dropped sharply. Some have conjectured that post-OPEC energy price increases may have brought about major changes in the U. S. economy so that old quantitative relationships between measured CU and investment, labor productivity, and price inflation may have been altered substantially. In order to assess effects of changes in PE on CU, a re-examination of the notion and measurement of CU is needed, based on the framework of the economic theory of the firm. That is the focus of this paper.
181 citations
TL;DR: In this article, the Harrodian principle of dynamic instability is shown to be tamed by the presence of autonomous consumer expenditures in a non-capacity economy, and the authors provide a simple proof of this.
Abstract: Neo-Kaleckian models of growth and distribution have been highly popular among heterodox economists. Two drawbacks of these models have, however, been underlined in the literature: first, the models do not usually converge to their normal rate of capacity utilization; second, the models do not include the Harrodian principle of dynamic instability. Some Sraffian economists have long been arguing that the presence of non-capacity creating autonomous expenditures provides a mechanism that brings back the model to normal rates of capacity utilization, while safeguarding the main Keynesian message and without going back to classical conclusions. The present article provides a very simple proof of this, showing within a neo-Kaleckian model that the Harrodian principle of dynamic instability gets tamed by the presence of autonomous consumer expenditures.
135 citations
TL;DR: In this paper, the authors consider optimal capacity investment decisions under uncertainty taking a real options approach, and find that the flexible firm invests in higher capacity than the inflexible firm, where the capacity difference increases with uncertainty.
64 citations
TL;DR: An MILP formulation is developed including surrogate models based on the detailed NLP steady state models that solves the tradeoffs between investment and production capacity for underused capacity in production facilities that store solar or wind energy in the form of chemicals.
53 citations
TL;DR: In this paper, the feasibility and potential benefits of coordinated cross-border strategic reserves to safeguard electricity supply and aid the energy transition in Germany and neighboring countries at large are discussed, and the authors argue that strategic reserves have specific advantages compared to other capacity mechanisms in the context of European energy transition.
45 citations
TL;DR: Based on the data for thirteen low-cost carriers around the world for the year 2010, an input-oriented data envelopment analysis model is used to estimate the physical capacity utilization and cost gap between actual and global long-run minimum costs.
31 citations
Posted Content•
TL;DR: In this article, the Harrodian principle of dynamic instability is shown to be tamed by the presence of autonomous consumer expenditures in a non-capacity economy, and the authors provide a simple proof of this.
Abstract: Neo-Kaleckian models of growth and distribution have been highly popular among heterodox economists. Two drawbacks of these models have, however, been underlined in the literature: first, the models do not usually converge to their normal rate of capacity utilization; second, the models do not include the Harrodian principle of dynamic instability. Some Sraffian economists have long been arguing that the presence of non-capacity creating autonomous expenditures provides a mechanism that brings back the model to normal rates of capacity utilization, while safeguarding the main Keynesian message and without going back to classical conclusions. The present article provides a very simple proof of this, showing within a neo-Kaleckian model that the Harrodian principle of dynamic instability gets tamed by the presence of autonomous consumer expenditures.
26 citations
TL;DR: In this paper, the authors provide a framework to jointly optimize safety stock, excess capacity and diversification in a periodic review infinite horizon setting, and in particular examine how one can reduce inventory and capacity investments through proper diversification strategies.
Abstract: Firms mitigate uncertainty in demand and supply by carrying safety stock, planning for excess capacity and diversifying supply sources. In this study, we provide a framework to jointly optimize these three levers in a periodic review infinite horizon setting, and in particular we examine how one can reduce inventory and capacity investments through proper diversification strategies. Observing that a modified base-stock inventory policy is optimal, we find that the capacity-diversification problem is well behaved and characterize the optimal mix of safety stock, excess capacity and extra number of supply sources. We find that higher supply uncertainty results in higher safety stock, more excess capacity, and higher diversification. But safety stock and diversification are non-monotonic in demand uncertainty. Our results can be extended to situations in which suppliers are heterogeneous, and can be used to develop effective heuristics.
24 citations
TL;DR: In this article, the authors determined the drivers behind the utilization of a vessel's cargo-carrying capacity on individual voyages based on maritime economic theory and proposed that capacity utilization is dependent on the distance sailed, the fuel price and the value of the cargo.
Abstract: The objective of this paper is to determine the drivers behind the utilization of a vessel’s cargo-carrying capacity on individual voyages. Based on maritime economic theory we propose that a vessel’s capacity utilization - defined as the ratio of cargo size divided by DWT - should be positively correlated with freight rates, as poor market conditions will force vessels to compete for lower-than-optimal stem sizes. Furthermore, we propose that capacity utilization is dependent on the distance sailed, the fuel price and the value of the cargo. Using a unique data set sourced from port agent lineup reports and covering nearly 10,000 individual shipments of iron ore from Brazil between 2009 and 2014 we estimate a multiple regression model consisting of macroeconomic, route-specific and vessel-specific determinants. Our empirical results suggest that vessel-specific determinants (DWT) dominate the impact of general market conditions, with smaller vessels typically having lower capacity utilization. The impact of freight market conditions conforms to our a priori expectations. Our findings and modeling approach contributes to maritime environmental policymaking by enabling more accurate bottom-up estimation of emissions. The research is also crucial for improved modeling of real vessel earnings and tonne-mile demand based on observations of global ship movements from AIS data.
23 citations
TL;DR: In this paper, the authors investigate the relationship between quota enforcement, compliance, and capital accumulation in ITQ regulated fisheries and show that more capacity increases illegal extraction, while a well-functioning quota market partially alleviates this effect.
Abstract: We investigate the relationship between quota enforcement, compliance, and capital accumulation in ITQ regulated fisheries. Overextraction and overcapacity represent two of the main fisheries management challenges, and we aim to model and analyze the two jointly. In a stylized resource model, quota violating and complying firms invest in capital, buy quotas, and choose their harvest. We show that in the short run, more capacity increases illegal extraction, while a well-functioning quota market partially alleviates this effect. We also show how tougher enforcement yields a double benefit by directly improving compliance and indirectly reducing incentives to invest in capacity, which improves future compliance. Our analysis thus contributes to the literature on market-based management of renewable resources.
18 citations
TL;DR: In this article, the role of trade openness in relation with the cycle was studied as a determinant of company margin rate in French manufacturing firms, showing that high import rates are limiting this procyclicality: when capacities are tight, domestic producers may not be able to serve demand, but foreign producers may substitute for them if they are already present on the market as reflected by the level of import rates.
Abstract: Using three datasets of French manufacturing firms, this article studies the role of trade openness, in relation with the cycle, as a determinant of company margin rate. Margin rates increase as capacity utilization tightens (and vice versa), reflecting the procyclicality of margin rates. However, high import rates are limiting this procyclicality: when capacities are tight, domestic producers may not be able to serve demand, but foreign producers may substitute for them if they are already present on the market as reflected by the level of import rates.
Patent•
04 Aug 2016
TL;DR: In this article, a method for improving the capacity utilization of a low-voltage network using a communications network between components of the lowvoltage networks was proposed, where controlled components (4, 6-11) supplying a central computer with network data, and the central computer producing a network condition prognosis and a utilization analysis of the individually controlled components from these network data.
Abstract: The invention relates to a method for improving the capacity utilization of a low-voltage network (1, 2) using a communications network (13) between components of the low-voltage network, - controlled components (4, 6-11) supplying a central computer (12) with network data, - said central computer (12) producing a network condition prognosis and a utilization analysis of the individually controlled components (4, 6-11) from these network data and comparing the individually controlled components (4, 6-11) in relation to the network condition prognosis and the utilization analysis, - the individually controlled components (4, 6-11) that could change their capacity utilization being asked to perform a load distribution.
TL;DR: In this article, structural constraints and excess capacity of manufacturing firms are compared in an international comparison of the manufacturing firms, which has been published in final form at Wiley Online Library 10.1111/dpr.12168.
Abstract: This is the peer reviewed version of the following article: ‘Structural constraints and excess capacity: An international comparison of manufacturing firms’, which has been published in final form at Wiley Online Library 10.1111/dpr.12168 . Under embargo. Embargo end date: 22 July 2018. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.
TL;DR: In this paper, the authors investigated determinant factors of total factor productivity (TFP) growth for the Japanese manufacturing industry to recommend policies that will be effective in improving the overall productivity of the Japanese economy.
Abstract: I. INTRODUCTION The Japanese economy has tried to recover its competitiveness, which deteriorated significantly due to the great appreciation of the Japanese yen after the global economic depression, originating from the U.S. mortgage and ensuing Euro debt crises. Currently, the Japanese government continues to apply expansionary monetary and fiscal policy to stimulate the economy through inflation, while pursuing structural reform to boost private investment. The strategy acknowledges that the success of the Japanese economy hinges on the competitiveness of its industrial sector in the long run, regardless of the short-run expansionary policy. In this regard, this study attempts to provide additional insight by estimating a model that includes embodied technical progress, externality effects, and openness and trade, along with other control factors, such as sources of productivity growth. This study investigates determinant factors of total factor productivity (TFP) growth for the Japanese manufacturing industry to recommend policies that will be effective in improving the overall productivity of the Japanese economy. Previous studies reported a considerable downturn in estimated TFP growth in the aftermath of the bubble in the 1990s and indicated that it was one of the main reasons for lagging Japanese economic growth (e.g., Fukao and Kwon 2006; Hayashi and Prescott 2002; Jorgenson and Nomura 2005; Okada 2005; Yoshikawa 2000). The argument is based generally on low estimates of TFP growth, which is measured as a residual of output growth after accounting for the contribution of factor input shares. From its construction, TFTP is intended to measure disembodied technical progress (i.e., Flicks-neutral technical change). In empirical application, however, the changes in the quality of factor inputs are hard to calculate and often omitted, without reflecting embodied technical progress correctly. So, the measured TFP is likely to include a bias, resulting from unaccounted embodied technical progress (Jorgenson and Griliches 1972). As a result, not only does the TFP fail to measure productivity growth accurately but the influence of technical progress on output growth is also misrepresented. In fact, recent empirical studies confirm that a large proportion of TFP growth is explained by embodied technical progress. For example, Castiglionesi and Ornaghi (2013) showed that TFP growth is driven entirely by embodied technical progress for Spanish manufacturing firms. Greenwood, Hercowitz, and Krusell (1997) reported investment-specific technical change accounts for approximately 60% of the postwar productivity growth of the United States. Tokui, Inui, and Kim (2008) suggested that embodied technical change would reduce TFP growth by about 0.4%-0.8% for the Japanese manufacturing industry for the period 1997-2002. These studies underscore the importance of an empirical framework that can capture the influence of embodied technical change when investigating the sources of TFP growth. In another strand of studies on TFP, researchers generally assume constant returns to scale (CRS), perfect competition, and full employment of factor inputs in estimations. However, the measured TFP fails to provide true technology shocks if one of the assumptions is violated. For instance, previous studies have reported that cyclical factor utilization is the most likely cause of the mismeasurement of technology shocks (Basu 1996; Burnside and Eichenbaum 1994; Paquet and Robidoux 2001; Sbordone 1996). Other studies have found that market power and increasing returns to scale (IRS) generate procyclical bias in the measured TFP (Caballero and Lyons 1992; Hall 1988). Thus, technology shocks can be better estimated by eliminating the effects of markup and IRS from TFP growth, and allowing for capacity utilization if there exist IRS, imperfect competition, and variable capacity utilization. …
TL;DR: The shortest processing time (SPT) rule is used as the lever to reconsider the integer-ratio distribution policy so that a smooth production schedule can be achieved for the integrated inventory model.
11 Apr 2016
TL;DR: In this article, the authors propose an ontology-based approach for data sharing in a complex environment, which can lower the semantic barriers between organizations and enable IT infrastructures to support new business relations faster at lower cost.
Abstract: Supply visibility is a prerequisite for increased capacity utilization, avoiding unnecessary bottlenecks, supply chain resilience, and compliance. Capacity utilization is both on the level of transport means such as trucks, trains, and barges, as well the optimal usage of the underlying infrastructure. Hubs like terminals, railway stations, locks in inland water-ways, and warehouses, have to accommodate a potential large number of transport means and cargo thus increasing turnaround times and delays. Utilizing infrastructure, capacity, distribution, and movement data in planning is commonly denominated as synchromodal planning. Supply chain resilience implies predictive actions on handling exceptions like accidents and (major) incidents. Compliance implies timely access to data to assess potential risks and take corrective measures. In such a complex environment, data sharing has to be configured dynamically. Semantics is a prerequisite to address these issues. It requires the support of an infrastructure. To enable, to increase, and to improve the level of coop-eration between enterprises, the ability to share data between organizations is crucial. Ontologies can lower the semantic barriers between organizations and enable IT infrastructures to support new business relations faster at lower cost.
TL;DR: It is shown that in most situations, taking spot markets into account at design level reduces the total costs, not just from the benefit of selling excess capacity, but also from changes in the design of the service network itself.
TL;DR: This paper developed a dynamic model, incorporating quasi-malleable capital, race to fish and invest behaviors and myopic expectations, in which the level of excess capacity is endogenously determined.
Abstract: Understanding the process whereby fishing capital accumulates and excess capacity emerges, particularly in fisheries where incentives for race to fish and race to invest are present, and where capital is not perfectly malleable, remains an important topic. We develop a dynamic model, incorporating quasi-malleable capital, race to fish and invest behaviors and myopic expectations, in which the level of excess capacity is endogenously determined. We show the importance of capital malleability, and of other biological and economic conditions, in determining the existence and strength of persistent equilibrium excess capacity in the fishery. We also highlight a link between the state of the fishery at the time race behavior emerges and the resultant level of excess capacity. Our results have implications for both the management of excess capacity and the use of empirical measures of excess capacity as performance indicators in fisheries where race behaviors are present.
TL;DR: In this paper, the key drivers of demand for and supply of real private sector credit in Pakistan were investigated using both the equilibrium and disequilibrium econometric frameworks, specifically tackling the issue of lack of consistency and/or efficiency of joint estimators in the former via the three-stage least squares technique.
Abstract: This paper attempts to pin down the key drivers of demand for and supply of real private sector credit in Pakistan. I use both the equilibrium and disequilibrium econometric frameworks, specifically tackling the issue of lack of consistency and/or efficiency of joint estimators in the former via the three-stage least squares technique. On the demand side, I find that higher economic activity provides stimulus to credit whereas inflation dampens it. The stock market seems to play a dual role: as a source of alternative financing, a bullish market negatively impacts credit while, as an indicator of economic expectations, it provides a positive impetus. On the supply side, banks' lending capacity is found to be the major driver of credit while government borrowing has a crowding-out effect. Pakistan currently faces supply constraints, which might put an additional check on capacity utilization by firms, thus damaging growth prospects. The results have important policy implications.
TL;DR: In this paper, the authors set up a firm heterogeneity trade model and showed that given capital stock and productivity, export firms will have higher rates of capacity utilization and that firms with higher productivity are more likely to export.
Abstract: This paper first sets up a firm heterogeneity trade model and shows that given capital stock and productivity, export firms will have higher rates of capacity utilization. In addition, given capital stock and fixed export costs, firms with higher productivity are more likely to export. I then use the 2012 Chinese enterprise survey from the World Bank to empirically investigate the impact of participation in export on Chinese firms’ capacity utilization rate. The results show that on average, export firms have capacity utilization rate 1.55–2.01 percent higher than non-export firms, which amounts to 14.6–18.9 percent of the standard deviation of capacity utilization rate in the sample. I also find that firms with a larger part of shares owned by the government have lower capacity utilization. Stronger market competition leads to over-investment and therefore lower capacity utilization rate. Faced with more rigorous labor market regulation, firms will substitute capital for the use of labor, resulting in hi...
TL;DR: In this article, the authors apply a multivariate filter on a small macroeconomic model to derive estimates of Malta's potential output growth, the output gap and NAIRU, which are derived from a system that incorporates long-standing relationships in economic theory, such as the Phillips Curve and Okun's Law, while also allowing for hysteresis effects.
Abstract: This paper applies a multivariate filter on a small macroeconomic model to derive estimates of Malta’s potential output growth, the output gap and NAIRU. The unobservable variables are derived from a system that incorporates long-standing relationships in economic theory, such as the Phillips Curve and Okun’s Law, while also allowing for hysteresis effects. Given the structural changes in the Maltese economy, with a shift over the past decade from traditional industries such as manufacturing towards higher-value added and export-oriented services, the model replaces a common variable used in the literature, capacity utilization in manufacturing, with two foreign variables, demand and imported inflation. The inclusion of foreign variables is important since Malta is one of the most open economies in the world with a high degree of import content. The model is also able to account for the high degree of volatility manifested in the time series of very small open economies. The estimates from the multivariate filter are compared with those derived from alternative approaches. Despite the negative impact from the financial crisis of 2009, by 2014 potential output growth had already surpassed the pre-crisis growth rates. The crisis had no permanent impact on NAIRU. This performance is clearly at odds with that of other European economies and bodes well for Malta’s convergence process.
Journal Article•
TL;DR: In this article, the authors empirically investigated the determinants of capacity utilization in the Nigerian manufacturing sector between 1975 and 2008 using Cointegration and error correction model (ECM) to study the time series properties of the variables and to ascertain the existence of long-run relationship between capacity utilization and its determinant indicators.
Abstract: This study empirically investigated the determinants of capacity utilization in the Nigerian manufacturing sector between 1975 and 2008. The study used capacity utilization as the dependent variable while its determinants such as Real Manufacturing Output Growth Rate (MGDP), Real Interest Rate (INTR), Consumer’s Price Index (CPI), Fixed Capital Formation in Manufacturing Sector (CPF) and Electricity Generation on Rate(ELEGR)(Proxy for energy) were used as independent variables. Cointegration and Error Correction Model(ECM) were employed as the estimation techniques so as to study the time series properties of the variables and to ascertain the existence of long-run relationship between capacity utilization and its determinant indicators. Structured questionnaire was administered to assess the operational materials and the performance of the selected firms. The findings of the study revealed that there is positive relationship between consumer’s price index, Fixed capital formation in manufacturing sector and capacity utilization. The study also showed that there is negative relationship between Electricity Generation, Real Manufacturing Output Growth Rate and Capacity Utilization which resulted in low manufacturing productivity growth rate in Nigeria. Based on the findings, the study strongly recommended that government should make adequate provision of infrastructural facilities especially Electricity Generation to boost production. Keywords: Capacity Utilization, Real Manufacturing Output Growth Rate, Electricity Generation, Co-integration and Error Correction Mechanism and the use of descriptive survey type
Posted Content•
TL;DR: In this article, a continuous-time stock-flow consistent model for inventory dynamics in an economy with firms, banks, and households is proposed, where firms decide on production based on adaptive expectations for sales demand and a desired level of inventories.
Abstract: We propose a continuous-time stock-flow consistent model for inventory dynamics in an economy with firms, banks, and households. On the supply side, firms decide on production based on adaptive expectations for sales demand and a desired level of inventories. On the demand side, investment is determined as a function of utilization and profitability and can be financed by debt, whereas consumption is independently determined as a function of income and wealth. Prices adjust sluggishly to both changes in labour costs and inventory. Disequilibrium between expected sales and demand is absorbed by unplanned changes in inventory. This results in a five-dimensional dynamical system for wage share, employment rate, private debt ratio, expected sales, and capacity utilization. We analyze two limiting cases: the long-run dynamics provides a version of the Keen model with effective demand and varying inventories, whereas the short-run dynamics gives rise to behaviour that we interpret as Kitchin cycles.
TL;DR: In this paper, the authors test whether the profit share of GDP and capacity utilization affect capital accumulation in Brazil in the period 1950-2008 (in the sense of Granger causality).
Abstract: This article tests whether the profit share of GDP and capacity utilization affect capital accumulation in Brazil in the period 1950-2008 (in the sense of Granger causality). The methodology developed by Toda and Yamamoto (1995) is used to verify the Granger non-causality hypothesis. The results show that capacity utilization Granger-causes capital accumulation in the Brazilian economy and, also that the profit share of GDP does not Granger-cause the national investment-capital ratio. This corroborates the Kaleckian proposal based on the fundamental role of the accelerator, and suggests that the Brazilian economy can grow with either a concentration or a de-concentration of income, provided a suitable institutional arrangement is in place.
Posted Content•
TL;DR: In this article, the authors used an industry profit maximization model to conduct an ex-post impact assessment on the extent the rice milling sector in Nigeria has grown and improved its performance in producing high quality premium rice following major public sector interventions made under the Agricultural Transformation Agenda.
Abstract: We use an industry profit maximization model to conduct an ex-post impact assessment on the extent the rice milling sector in Nigeria has grown and improved its performance in producing high quality premium rice following major public sector interventions made under the Agricultural Transformation Agenda. Given challenges with the availability and qual-ity of data, this assessment looks at the changes between two periods, 2009 and 2013, and simulates the performance of the sector under different technology capacities and policy scenarios. We find that the government has been success-ful in expanding quality paddy production and milling capacity in the country along with an increase in capacity utilization in the medium and large-scale milling sub-sectors. As a result, the production of premium quality rice has increased by approximately 0.5 million metric tons between the two periods. Despite these gains, the industry did not see any overall increase in employment in the medium and large-scale sub-sectors. Further focus by the government on expanding the supply of high quality rice paddy, while maintaining high tariffs to keep the medium and large scale milling sector viable, may provide the best opportunity for Nigeria to reach its goal of self-sufficiency in rice production.
TL;DR: In this article, a simple macroeconomic model of debt-financed investment-led growth in the presence of interest rate rules is presented, and the effect of monetary policy in the form of an interest rate rule targeting capacity utilization is examined under this context.
Abstract: This article demonstrates the diverse dynamic possibilities arising out of a simple macroeconomic model of debt-financed investment-led growth in the presence of interest rate rules. We show possibilities of convergence to steady state, and growth cycles around it as well as various complex dynamics. We investigate whether, given this framework, the financial sector can provide endogenous bounds to an otherwise unstable system. The effectiveness of monetary policy in the form of an interest rate rule targeting capacity utilization is examined under this context.
TL;DR: In this paper, the authors argue that the central problem in advanced monopoly capitalism is not one of scarce resources clashing against innate, insatiable wants, but rather, it is one of an abundance of production clashing with saturated consumption and investment markets.
Abstract: The central problem in advanced monopoly capitalism is not one of scarce resources clashing against innate, insatiable wants. Rather, it is one of an abundance of production clashing against saturated consumption and investment markets. In order to absorb potential economic output and forestall excess capacity, business interests must continuously search for new markets to exploit or entice existing customers who stand ready to buy the latest product, iteration, or service, and to induce new investment. The key to business survival in a capitalist economy is continual expansion of market share and reach: grow or die.… The efforts applied to this relentless drive undermine the conventional wisdom of market-determined pricing—for were a competitive price system in place, the funds for these expenditures would not exist. As I will show, the resources and funds expended in this quixotic endeavor to grow can be broadly referred to as the "economic surplus."Click here to purchase a PDF version of this article at the Monthly Review website.
Dissertation•
01 Jan 2016
TL;DR: In this paper, the authors examined the productivity and capacity of operational processes in manufacturing firms and established a direct link between firm level capacity utilization and the causes of shop-floor productivity losses, constituting the foundation on which to build more knowledge of the effects on plant-level capacity utilization that come from realizing operational improvement potential.
Abstract: The operational level is where a company’s manufacturing strategy becomes reality and where customer orders are fulfilled through transforming raw materials into finished goods. The research presented here examines the productivity and capacity of operational processes in manufacturing firms. Though both terms are well established in industry, overall, there is ambiguity in their measurement and interpretation across the hierarchal levels of organizations, all the way to the national level. Similar ambiguity is also found in the academic field of operations management, in which much of the related research in recent decades has concentrated on narrow sets of problems, distant from actual shop floor operations.
As a result, many existing approaches to assessing the productivity and capacity of production systems either narrowly focus on certain functions of a production process or address them at such an aggregated level that there is insufficient detail to determine the root causes of production system losses. This leads to the risk that improvement potential at an operational level may be disregarded when strategic decisions are made, making it difficult to improve economic efficiency and preventing the sustainable utilization of a firm’s current manufacturing resources. The purpose of this research is accordingly to increase the understanding of the improvement potential of real operational processes by developing a framework for identifying and objectively measuring the relevant characteristics of real-life operational processes related to the improvement of shop floor operations. This research, which incorporates five empirical studies, builds on the theory of performance frontiers and on the body of industrial engineering knowledge.
The research illustrates how the analytical logic and structure of the framework can be applied in determining the overall productivity and capacity of firm operations from the micro level and up, by relying on first-order time data measured at the operational level. This establishes a direct link between firm level capacity utilization and the causes of shop-floor productivity losses, constituting the foundation on which to build more knowledge of the effects on plant level capacity utilization that come from realizing operational improvement potentials. The results are also intended to provide guidance for decision-making in manufacturing companies.
10 Jan 2016