Production Cost Efficiency Research Articles

A Growth Accounting Analysis of Cost Efficiency in Milk Production for Six Northern States in the United States

This paper reports on the use of a growth accounting approach to calculate and decompose cost efficiency indices into technical change, regional competitive advantage stemming from spatial effects, and economies of size. Dairy farm data for Connecticut, Maine, Vermont, Michigan, New York and Pennsylvania for the years 1968, 1970, 1977, 1980 and 1988 are utilized in the analysis. The results show that technological change yielded a 1.8% average annual rate of cost reduction over the period studied. In addition, medium and large farms were, on average, 12% to 20% more efficient than small farms. Pennsylvania had a distinct competitive advantage (13.8%), while Maine exhibited a clear competitive disadvantage (−18.2%) in producing milk relative to New York.

Relationships Between Businesses and Marketing Research Firms: Impact of Partnering on Performance

Many firms are turning from discrete, arms-length, adversarial exchanges with a multitude of marketing research suppliers toward long-term, collaborative relationships with a smaller number of “partners.” Advocates of partnering believe that it is a way to reduce total costs and improve quality, while dissenting firms believe partnering can breed complacency. This article presents the results of a study that examines performance outcomes (product quality, service quality, cost efficiency, timeliness, and overall customer satisfaction) and the degree to which a client partners with its marketing research firms. Results indicate a relationship between partnering and increased performance in all five areas. Implications for managers include the possibility of better performance from research firms if the relationship is more collaborative in nature.

Patent Policy and the Direction of Technological Change

In this article we examine the interaction between firms' product and process innovation decisions, and the role patent policy can play in directing technological change toward a socially efficient mix of innovations. Product innovation is a variant on a pioneer's new product; process innovation improves upon the cost efficiency of production. In a model with heterogeneous consumers, we show that an entrant relaxes competition by trading off too much process innovation in favor of product innovation, relative to what the social planner would desire. This bias toward product innovation can be corrected through appropriate choice of patent breadths on product and process innovations.

Production ofMetarhizium anisopliaespores using nutrient‐impregnated membranes and its economic analysis

Metarhizium anisopliae spores were produced on nutrient‐impregnated membranes (NIMs). The NIM system involved wetting the membrane with a spore and nutrient suspension, followed by harvesting the spores produced after incubation. The cost efficiency of spore production was assessed for a range of nutrient sources and membrane types. Skim milk powder (20 g l‐1) was found to be the most cost‐effective nutrient source of the nine nutrients examined. Yield was 5.7 × 106 spores/cm2 after 28 days incubation on a paper membrane. Supplementation of the skim milk with either sucrose (2 g l‐1) or dextrose + KNO3 maximized yield. Superwipe, an absorbent fibrous material, was the most efficient of 16 membranes tested which ranged from fibreglass mesh to paper and cloth. A series of small pilot plants were built, but the cost efficiency of spore production decreased as the size of the membrane increased from 24 × 24 cm to 270 × 15 cm and up to 100 × 80 cm. Yield on the two smaller pilot plants was over 107spores/cm2, ...

Aggregation Biases and Economies of Scale in the Metropolitan Police Unit Production Function

I. Introduction There may be aggregation biases related to scale when police unit size is measured by the jurisdictional population of the metropolitan police unit. Aggregation biases occur when there are different police production functions for different sizes of police units.(1) The real police production function could be nonhomogeneous. Consequently, changes in the measured cost efficiency of police production may be due to changes in technology,(2) cost may not be continuous or, equivalently, production functions, may shift.(3) Different size related community characteristics may lead to the use of different police technologies. To address the aggregation bias problem, this analysis provides an empirical test for the existence of different production functions related to changes in the scale of metropolitan police units. The literature indicates that police production is commonly related to some measure of the risk of criminal sanction, such as the probability of apprehension, conviction, and/or punishment. To this extent, crime clearance rates -- the ratio of crimes cleared by arrest or other exceptional means to crimes detected and reported -- are readily available data. Moreover, crime solutions -- as measured by-clearance rates -- appear to represent a significant portion of police objectives, as well as to serve as a proxy for risk production. The approach taken in this paper is similar to that of other studies and considers aggregate crime clearance rates as an intermediate police output that is determined by a risk-production function. Final output is the aggregate reported crime rate -- the ratio of detected and reported crimes to population in a metropolitan police jurisdiction -- and is determined by a supply of offense function. Since all crime and clearance rates are aggregate measures, this avoids the problem of assuming functional separability with respect to each crime category. In fact, the results of Darrough and Heineke (1978) indicate that the assumption of functional separability in the police production function is invalid. Review of Prior Literature Recent studies have found economies of scale among police units by using more sophisticated methods and by controlling for differences in output quality (See, for example, Gebelein, 1973; Scicluna, Foot, and Bird, 1981; Darrough and Heineke, 1978; and Chapman, Hirsch, and Sonenblum, 1975). Findings such as these suggest that police units should be consolidated based upon gains in economic efficiency due to scale. If, however, there are aggregation biases in the data, the apparent economies of scale may be incorrect. Moreover, consolidation, based upon the assumption of a homogeneous police production function, may result in the use of technologies that do not fit a community's needs. External factors such as differences in the crime mix, laws and regulations concerning police behavior, funding and training levels, the availability of different types of training, the degree of police-citizen cooperation, urban versus rural location, and the degree of geographic dispersion of the police unit's jurisdiction may lead to the use of different police production technologies. Moreover, particular external technology affecting factors may be related to the jurisdictional size of the police unit's population, such as: a large population as opposed to a small one may be characterized by an urban location, less geographical dispersion, less police-citizen cooperation, more restrictions on police behavior, and a crime mix involving a greater percentage of violent crimes. It may be that a community's size determines, or at least influences, the police unit production function. In addition to the possible influence of external factors on police technology, different size related police production functions may be suggested by the literature. For example, Parks and Ostrom (1982) estimate a police production function for the outputs of arrests for serious crimes and response capacity. …

An analysis of production cost inefficiency

This research empirically investigates the presence of production cost inefficiencies associated with non-optimal operating conditions. A model is developed which allows for the possibility that firms might be temporally constrained in their production decisions due to a quasi-fixed capital stock. The context of the study is the household goods motor carrier industry in the post-deregulatory period. The analysis employs a technique capable of quantifying excess per unit costs and decomposing this magnitude according to its determinants. Specifically, it identifies and measures three types of inefficiency at the firm level: short-run capital inefficiency, capital-induced variable input inefficiency, and X-inefficiency.

Lasting improvements in manufacturing performance: In search of a new theory

AbstractIs there a way to avoid trading off one capability for another in manufacturing? The prevailing wisdom says no. But some manufacturers seem to have been able to defy that: compared to their competitors, they have better quality, are more dependable, respond faster to changing market conditions and in spite of all that, achieve lower costs. How can this be explained?Our aim here is to provide an explanation. We contend that the nature of the trade‐offs among manufacturing capabilities is more complex than has been assumed. Depending on the approach taken for developing each capability, the nature of the trade‐offs change. In certain cases not only can trade‐offs be avoided altogether, but in fact one capability would enhance another. They become cumulative. Moreover, when a capability is developed in this way, it is likely to be more lasting and less fragile than if it were developed at the expense of other capabilities.We go on to suggest a model which shows how this can be done: To build cumulative and lasting manufacturing capability, management attention and resources should go first toward enhancing quality, then—while the efforts to enhance quality are further expanded—attention should be paid to improve also the dependability of the production system, then—and again while efforts on the previous two are further enhanced—production flexibility (or reaction speed) should also be improved, and finally, while all these efforts are further enlarged, direct attention can be paid to cost efficiency. We use data from 1988 European Manufacturing Futures Survey (167 respondents) to test and illustrate our model.While we cannot “prove” our model, nevertheless, we believe there is enough evidence for a critical reexamination of traditional managerial approaches for improving manufacturing performance. For example, except for the cases when there are obvious slacks in the production system, the belief that costs can come down quickly and lastingly needs to be questioned. Lasting cost efficiency in production can be achieved only through improvements in other capabilities.

Reduction of plasma loss to discharge chamber walls in a ring-cusp ion thruster

The plasma ion loss to the discharge chamber wall in a magnetic cusp ion thruster has a significant influence on the discharge performance expressed in terms of ion production cost and propellant utilization efficiency. A method is presented for improving discharge performance by confining the ions electrostatically in the discharge chamber; a set of ring-shaped electrodes that is biased positively with respect to the anode is installed in the regions enclosed by the cusp fields. 6 references.

Capturing judgments to clarify production strategy and policy

Recent years have brought a reawakening of the importance of shaping the operations function to support the broader strategy of each organization. Doing so, however, can be a complex, controversial, and highly subjective matter. Determining production's relationships to marketing, engineering, and finance requires executive-level judgments on the relative emphases among these policy areas. Other judgments about internal capabilities, external factors, and production policies are also involved. Assessing these relationships is a subjective process that is often subtle and usually hidden. For managers, these judgmental areas are sources of disagreement, confusion, and controversy in policy determination. Within this context, the authors applied a judgment-capturing process, called ProPol (Production Policy), to reveal and clarify managers' judgmental processes. The procedure uses correlational methods to identify where and how managers diverge from a common policy focus. The application settings were two executive development programs—one in manufacturing and the other in the public utility industry. Grouped into teams, the executives competed in week-long computer simulation games. ProPol was introduced to assist in clarifying their production policies and strategies. In the manufacturing setting, five general policy areas—marketing effort, cost efficiency of production, R&D effort, product pricing, and service flexibility—were identified as salient variables prior to the simulation. We sought to reveal managers' subjective views on the appropriate balance among these variables. The variables were scaled and embedded within questionnaires to present alternative strategy and policy postures within the context of the simulated organizations. From analyzing the resulting judgments, ProPol served the following purposes: (1) to reveal to each manager his own decision structure; (2) to permit intermanager comparisons of decision structures among team members; (3) to provide explicit bases for focused discussions on overall strategy agreement/disagreement within teams; and (4) to serve as the basis for determining a consensus strategy by each team. The managers' judgment processes were compared in terms of judgmental consistency, complexity, and espoused versus in-useimportances of the policy variables. Consistency, the amount of uniformity in the manager's decision structure, varied widely among team members and across teams. While some executives held firm, consistent views of policy-outcome relationships, others applied their structure inconsistently or shifted from one relationship structure to another in making their judgments. Judgmental complexity also varied widely within and across teams. The judgmental structures for most managers were simple linear relationships. Several, however, used more complex quadratic and interactive structures in relating the policy areas to overall effectiveness. Even when individuals were identically complex, however, they differed as to which policy variables were significant. Furthermore, although every manager espoused that all five variables were important, they were not all significantly used. The discovery of these discrepancies had a surprise affect: managers became aware of their personal inconsistencies and were stimulated toward understanding why they occurred. The group judgments, in contrast to the individuals, were more consistent and the espoused versus empirically-derived importances were more in agreement. This occurred from group interactions following individual feedback. The feedback clarified specific areas of policy agreement, provided a productive way for resolving basic policy differences, and facilitated the groups in clarifying their strategic directions. In the utility environment, executives participated in a decision-making simulation of a consumer-owned electric utility. As before, five key policy variables for this industry were chosen. Some of the five policy variables are indirectly related to operations (e.g., rate setting and employee relations), while others are more specifically related to operations (e.g., cost efficiency, dependability, and flexibility). Analyses of the judgments revealed characteristics similar to those in the manufacturing environment. Overall, however, utility executives displayed somewhat more complex judgment structures than did manufacturing executives. As a result, there seemed to be more common ground for intrateam policy agreement. For eight of the nine teams, the group consistency exceeded the average of their members' individual consistencies. Otherwise the various teams displayed diverse functional forms for their strategy and policy judgments, and they were relatively consistent in doing so. These results indicate that ProPol can help managers clarify specific directions for the production function. By doing so, a more focused production thrust, one that is clearly and explicitly articulated, will enhance any organization's competitive strategy and provide clear guidance for subsequent decisions.