COST OF IDLE CAPACITY AS A PRODUCT COST IN A MATHEMATICAL MODEL

摘要

We present an elaborate numerical example of a manufacturing industry or corporation facing demand fluctuations to illustrate the cost of idle capacity in manufacturing. We show that given demand fluctuations, such as the business cycle, significant cost of idle capacity in manufacturing is not only ordinary and necessary but desirable! We recommend that manufacturing firms in the United States increase the outsourcing of major parts and components to increase flexibility of output rates. Outsourcing has been rising in recent years with advances in telecommunications technology. Manufacturers today can depend on getting needed parts "just in time" from outside suppliers without maintaining inventories of parts or capacity to produce parts.