Analyzing Trade-Offs Between Machine Investment and Utilization

David J. Vander Veen and William C. Jordan
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David J. Vander Veen: Operating Sciences Department, General Motors Research Laboratories, Warren, Michigan 48090-9055
William C. Jordan: Operating Sciences Department, General Motors Research Laboratories, Warren, Michigan 48090-9055

Management Science, 1989, vol. 35, issue 10, 1215-1226

Abstract: Analyzing machine investment opportunities from a systems perspective requires an understanding of interdependencies between machine investment and utilization decisions. Machine investment decisions involve determining the number of machines to purchase and their types. Machine utilization decisions involve determining part allocations and production cycles. Interdependencies between these decisions result in trade-offs between investment and operating costs. This paper develops an analytical approach for studying machine investment opportunities in a broad systems context. It begins with a discussion of the interdependencies between investment and utilization decisions. The focus of this research and a review of existing literature related to machine investment decisions are then discussed. Next a mathematical model that quantifies these interdependencies is formulated. The paper ends with a simple example that demonstrates the usefulness of the model and highlights the importance of using a systems approach. The main contribution of this work is the simultaneous consideration of trade-offs between machine investment and utilization decisions.

Keywords: facilities/equipment planning; production inventory; operating characteristics; machine investment; cost/benefit analysis (search for similar items in EconPapers)
Date: 1989
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