Costs of production with different resource types

The following section introduces the main factors, influencing the investment and operation costs of different system and resource types. In order to compare the system types and illustrate their characteristics that important from capacity management perspective, Figures 3.2-3.4 are provided, based on the numerical results of a case study detailed in Section 3.5. Each point of these scatterplots corresponds to the evaluation of a given production scenario, representing a system configuration and an applied production plan.

Costs of system configuration applying heterogeneous resource pool

The general driver of capacity management is the need for staying competitive in a dynamic environment by keeping the production costs at the lowest possible level, while providing the desired production rate. In the analyzed problem, the objective is to minimize the total produc-tion costs, characterizing the operaproduc-tion of the assembly system during a certain period. When discussing system configuration and product-assembly system assignment, usually longer peri-ods are considered as these decisions raise operation-, as well as investment-related questions.

Therefore, the objective function of the system configuration model is the sum of various cost factors that are rather diverse when applying different resource types to perform the same tasks.

Figure 3.2 depicts the total costs realized in relation to three different system types, within a numerical study and each point of the chart corresponds to a given configuration. Although the correlations between total costs and capacity requirements show somewhat linear trends, very high deviations can be observed in case of the different configurations, mostly resulted by

25 3.1 Description of the production environment

the dynamic behavior of the system structures, especially those of the reconfigurable and flex-ible systems’. This phenomena is further investigated and detailed by the following analysis of investment and volume costs.

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Total cost [units]

Total capacity requirements [minutes]

Dedicated Flexible Reconfigurable

Figure 3.2. Comparison of the total costs in the three system types.

Investment costs mostly depend on the number of products exist in the portfolio, accord-ingly, if a new product is added to the portfolio, the necessary resources may need to be pur-chased. Analyzing the number of products and the related investment costs, it is seems that costs correspond to dedicated resources are higher than those of the other two, in case a certain number of assigned products is exceeded. It is resulted by the product-specific resources that should be purchased for each product, moreover, dedicated systems often have a higher degree of automation that also increases the purchase cost of the resources. On the contrary, flexible and reconfigurable resources can be shared among more different products, which means that the investment costs are in a nonlinear correlation with the number of the assigned product types.

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Investment cost [units]

Number of assigned product types Dedicated Flexible Reconfigurable

Figure 3.3. Comparison of investment costs in the three system types.

This assumption is justified by the results of a numerical study in Figure 3.3, illustrating that linear correlation between the number of assigned products and the investment costs is valid only for the dedicated systems with static structure. In contrast, when applying reconfigurable

3.1 Description of the production environment 26

and flexible system configurations (points of the chart) with dynamic structures, the amount of necessary resources, and therefore, the investments costs are in nonlinear correlation with the number of products.

Besides the investments, operation of production systems also entails significant costs. These operation costs mostly depend on the volume of the products that are assembled in a certain period. In the analyzed case, operation costs are composed of the followings: cost of setups, assembly operators (salaries) and latenesses. As products have different processing times, not the assembled volumes but rather the net, total capacity requirements should be analyzed when discussing the production rate related, changing volume costs. This total capacity requirement is the sum of manual operation times multiplied by the volume of products to be assembled.

Comparing the three system types, one can identify that assembling products in high volumes with dedicated resources is cheaper than with reconfigurable or flexible ones (Figure 3.4). The reason for this relies in the higher throughput of the lines, resulting in shorter makespan than e.g. producing the same volumes in a reconfigurable system. In addition, dedicated systems with automated resources require less human workforce than flexible and reconfigurable ones.

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Volume cost [units]

Total capacity requirements [minutes]

Dedicated Flexible Reconfigurable

Figure 3.4. Comparison of the volume-dependent costs in the three system types.

As a conclusion of the cost analysis, there is no rule of thumb to assign a singular product to one of the three resource types, but the correlations among a set of products’ assembly processes and resource usage need to be addressed to find the right balance among the amount of dedicated, flexible and reconfigurable resources. This can be achieved by formulating the system configuration problem in a multi-period optimization model, allowing for the time-to-time reassignment of the product to different resource types.

This periodic product-assembly system assignment and the related system configuration decisions entail that the resource pool is continuously adapted to the system architecture. There-fore, not only investment costs need to be considered, but there is often an opportunity for selling the unnecessary resources, e.g. when a product is switched from a dedicated to a reconfigurable system. In these cases, the book value of assets can be calculated by decreasing its previous period value with the depreciation rate over the useful lifetime of the asset (the residual value of asset is also considered in the end of its lifecycle), and it can be interpreted as a price, for which a resource can be sold (if this option exists) at a certain point of time.