Congestion and Complexity Costs in a Plant with Fixed Resources that Strives to Make Schedule

Kannan, Sethuraman; S, Lovejoy William

Congestion and Complexity Costs in a Plant with Fixed Resources that Strives to Make Schedule

Sethuraman Kannan and Lovejoy William S

No WP1999-05-03, IIMA Working Papers from Indian Institute of Management Ahmedabad, Research and Publication Department

Abstract: Current thinking traces complexity costs to the imposition of time on resources, which essentially reduces complexity issues to the more standard congestion issues familiar from queuing logic. This logic is correct in many instances, but cannot explain the phenomenon of making schedule. In a firm that makes schedule, orders are always with potential quality effects. Hence, time and quality are substitutes, a feature that we recognize explicitly in our definition of the firm’s capacity. In our mode, production yields are not exogenous parameters, but endogenously determined by workers responding to schedule pressures. The model reveals the close relationships among the firm’s workforce policies, the integrity of the inspection systems, and the cost performance of the firm as its volume and/or product line expands. Whereas the time effects of complexity will only have cost effects in congested facilities, quality effects are always present. Also in contrast to time effects, quality effects of complexity can be present in non-bottleneck workstations. Hence, the quality consequences of complexity can be as or more important than the time consequences.

Date: 1999-05-03
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