Total Cost Model Research Articles

Cost-optimization modelling for fresh food quality and transportation

Purpose – All along the length of the supply chain, fresh food firms face the challenge of managing both product quality, due to the perishable nature of the products, and product cost. The purpose of this paper to develop a method to assist logistics managers upstream in the fresh food supply chain in making cost optimized decisions regarding transportation, with the objective of minimizing the total cost while maintaining the quality of food products above acceptable levels. Design/methodology/approach – Considering the case of multiple fresh food products collected from multiple farms being transported to a warehouse or a retailer, this study develops a total cost model that includes various costs incurred during transportation. The practical application of the model is illustrated by using several computational intelligence approaches including genetic algorithms (GA), fuzzy genetic algorithms (FGA) as well as an improved simulated annealing (SA) procedure applied with a repair mechanism for efficiency benchmarking. The authors demonstrate the practical viability of these approaches by using a simulation study based on pertinent data and evaluate the simulation outcomes. Findings – The application of the proposed total cost model was demonstrated using three approaches of GA, FGA and SA with a repair mechanism. All three approaches are adoptable; however, based on the performance evaluation, it was evident that the FGA is more likely to produce a better performance than the other two approaches of GA and SA. Practical implications – This study provides a pragmatic approach for supporting logistics and supply chain practitioners in fresh food industry in making important decisions on the arrangements and procedures related to the transportation of multiple fresh food products to a warehouse from multiple farms in a cost-effective way without compromising product quality. Originality/value – This study extends the literature on cold supply chain management by investigating cost and quality optimization in a multi-product scenario from farms to a retailer and, minimizing cost by managing the quality above expected quality levels at delivery. The scalability of the proposed generic function enables the application to alternative situations in practice such as different storage environments and transportation conditions, etc.

Economic design of the upper-sided synthetic chart with measurement errors

Considering a quadratic Taguchi loss function for poor quality products, as well as measurement errors in the process characteristic, this paper proposes an economic model for the upper-sided synthetic chart allowing multiple measurements for each sample item. The steady-state ARL of this chart is computed using a Markov chain method and the optimal number of measurements are obtained through the minimisation of the total cost model. For the proposed economic and economic statistical model, numerical examples are presented to evaluate the effect of measurement errors on the upper-sided synthetic chart. Finally, the sensitivity analyses of the optimal chart parameters and the cost of the upper-sided synthetic chart are also investigated using different input parameter values. All the above results are verified through a wide range of the input parameter values. Two illustrative examples are also provided.

Renewable resources portfolio optimization in the presence of demand response

Demand response is viewed as a practical and relatively low-cost solution to increasing penetration of intermittent renewable generation in bulk electric power systems. This paper examines the question of what is the optimal installed capacity allocation of renewable resources in conjunction with demand response. We introduce an integrated model for total annual system cost that can be used to determine a cost-minimizing allocation of renewable asset investments. The model includes production, uncertainty, emission, capacity expansion and mothballing costs, as well as wind variability and demand elasticity to determine the hourly cost of electricity delivery. The model is applied to a 2024 planning case for British Columbia, Canada. Results show that cost is minimized at about 30% wind generation. We find that the optimal amount of renewable resource is as sensitive to installation cost as it is to a carbon tax. But we find the inter-hourly demand response magnitude is much less helpful in promoting additional renewables than intra-hourly demand elasticity.

Econometric modelling approaches in studies of the EU dairy sector

The model is a representation of the genuine situation and contains the most important factor relations, which makes modelling a sophisticated way of analyzing and solving the real case study problems. The models steam from the theory and are derived on the basis of given assumptions. In this paper we have treated two themes: Estimating Econometric model of average total cost milk and, modelling and analyzing the European milk and dairy market. The first part is a review of the support vector machine regression application to estimate the parameters of econometric models of the average total cost of milk on Estonian farms. The second part describes a decline in dairy commodity prices over the period from 2008 and 2009. However, the medium-term trend of prices is maintained at a level above those in the earlier part of this decade. Production in the EU is almost unchanged due to the milk quota which is revealed by AGMEMOD model.

Hospitalization cost after spine surgery in the United States of America

The objective of this study was to develop and validate a predictive model of hospitalization costs after spine surgery. Several initiatives have been put in place to minimize healthcare expenditures but there are limited data on the magnitude of the contribution of procedure-specific drivers of cost. We performed a retrospective cohort study involving 672,591 patients who underwent spine surgery and were registered in the National Inpatient Sample from 2005–2010. The cohort underwent 1:1 randomization to create derivation and validation subsamples. Regression techniques were used for the creation of a parsimonious predictive model of total hospitalization cost after spine surgery. Included were 356,783 patients (53.1%) who underwent fusions, and 315,808 (46.9%) non-fusion surgeries. The median hospitalization cost was $14,202 (interquartile range $4772–23,632). Common drivers of cost identified in the multivariate analysis included the length of stay, number of admission diagnoses and procedures, hospital size and region, patient income, fusion surgery, acute renal failure, sex, and coagulopathy. The model was validated in an independent cohort and demonstrated a final coefficient of determination that was very similar to the initial model. The predicted and observed values in the validation cohort demonstrated good correlations. This national study quantified the magnitude of significant drivers of hospitalization cost after spine surgery. We developed a predictive model that can be utilized as an adjunct in the cost containment debate and the creation of data driven policies.

Cost–benefit assessment and implications for service pricing of electric taxies in China

This paper presents a methodology to assess the cost–benefit and develop the service pricing strategy of electric taxies in Shanghai, China. There are 4 kinds of electric taxi models being structured. The total life cycle cost model for cost–benefit assessment is developed with consideration of purchase cost, usage cost, and other operation cost. Three scenarios are defined, including gasoline price increasing, electricity price increasing, and battery cost decreasing. Then the service pricing model is proposed. The results indicate that the profitability of battery-swapping model is higher than that of the charging model. The taxi models with longer driving range have greater profitability than those with shorter driving range. With annually increasing rate of 8% of gasoline price, the electric taxi will obtain the same profit with the gasoline taxi in 5years. With annually increasing rate of 20% of electricity price, the service price of electric taxies will rise by 1%. When the battery cost decreases by 49%, the service price of electric taxies will be 4% lower than that of gasoline taxies.

Economic design of the life test with a warranty policy

Considering a warranty policy, an optimal truncated life test procedure is developed for the generalized exponential distribution. A total cost model, which involves the costs of testing, experimental time, lot acceptance or rejection, and the warranty, is adopted to establish the loss function of Bayesian decision method. A proper sample size of life test and an acceptance number of threshold are determined to minimize the expected total cost for lot decision. An example regarding the lifetime quality of integrated circuit products is used to demonstrate the proposed method. Numerical results have shown that the proposed method is beneficial for the reduction of expected total cost.

Research on Characteristics of Airline Network based on Passenger Flow

To reflect the scale-free characteristics of airline network, generated n city nodes randomly while the degree distribution exponent is located between 1 and 3, by constructing network edges between nodes, calculating the passenger flow of each network edge, building the relationship of fares to node distance and aircraft type to node type, we give the mathematical model of airline network revenue, total cost and total profit. Finally, we simulate the airline network profit model and analyze the experimental results, which show that: under the influence of the total number of nodes, the num- ber of hub nodes, the capacity of the hub node and fares, the airline network profit changes in a certain regularity with the change of passenger flow. This paper allows the node among network not connect itself and repeated, a node connects to the others randomly according to the node degree value, as a result, there is no isolated node and no redundant degree value of each node. By constructing the relationship between fares and airline distance, airline passenger flow and airline distance, airplane type and node type, we research airline network profit changes with the change of airline passenger flow under the influence of the total number of nodes n, the capacity of the hub node, it will reflect the economic characteristics of air- line network and it is important for the airline to improve the efficiency of transportation, to reduce the transportation cost and to optimize the network design.

Developments of CO2-emissions and costs for small electric and combustion engine vehicles in Germany

Electric vehicles have the potential to lower emissions in the mobility sector, but especially high costs might hinder their market development. This paper aims to access environmental and economic impacts and potentials by comparing CO2-emissions and costs of small vehicles. Considering actual data it is analysed, if and under which conditions electric vehicles are financially competitive for private consumers and under which conditions emissions can be saved. For this, a multiple-stage approach is focusing on (1) emissions during production and operation, (2) private costs and (3) external costs of emissions. A model of total cost of ownership is applied for the analysis of private and external costs.Results show that emissions of electric vehicles exceed emissions of combustion engine vehicles in the production phase, but electric vehicles cause fewer emissions during operation. Total emissions can be saved by electric vehicles even with low annual driving distances (2500–5500km/a today). Results highly depend on the form of electricity production.Today, private costs of electric vehicles exceed the costs of combustion engine vehicles. Due to cost decreases electric vehicles can gain financial advantages in the future. External costs are high, especially for combustion engine vehicles (up to 15% of private costs), but in none of the considered cases high enough to give electric vehicles a financial advantage today. This picture will change in the future.

On Convergence of Value Iteration for a Class of Total Cost Markov Decision Processes

We consider a general class of total cost Markov decision processes (MDP) in which the one-stage costs can have arbitrary signs, but the sum of the negative parts of the one-stage costs is finite for all policies and all initial states. This class, which we refer to as the general convergence (GC) total cost model, contains several important subclasses of problems, e.g., positive costs problems, bounded negative costs problems, and discounted problems with unbounded one-stage costs. We study the convergence of value iteration for the (GC) model, in the Borel MDP framework with universally measurable policies. Our main results include (i) convergence of value iteration when starting from certain functions above the optimal cost function; (ii) convergence of transfinite value iteration starting from zero, as well as convergence of ordinary nontransfinite value iteration for finite control or certain finite state (GC) problems, in the special case where the optimal cost function is nonnegative; and (iii) partial convergence of value iteration starting from zero, for a subset of initial states. These results extend several previously known results about the convergence of value iteration for either positive costs problems or (GC) total cost problems.

An integrated production-inventory model with backorder and lot for lot policy in fuzzy sense

In this paper, an inventory model for two-stage supply chain is investigated in the fuzzy sense. A supply chain with single vendor and single buyer is considered. We assume that shortage as a backorder is allowed for the buyer and the vendor makes the production set up every time the buyer places an order and supplies on a lot for lot basis. The decision variables are fuzzy order quantity and fuzzy shortage quantity which are expressed as triangular fuzzy numbers. After developing the mathematical model for the joint total relevant cost in fuzzy sense, its membership function is calculated and then defuzzified with the centroid method. The proposed model is solved and the amount of joint total relevant cost function in fuzzy sense is compared with the crisp one.

Applying Total Quality Management Cost Model in Drug Intervention Programme

Applying Total Quality Management Cost Model in Drug Intervention Programme

The Problem of Optimal Delivery Sizes in the Logistics System of a Manufacturing Enterprise

When determining the optimal size of the deliveries of a product to a warehouse, one should consider not just a single factor such as warehousing or the cost of keeping inventory, but also other factors such as the cost of ordering or transportation. The factors to be considered in such a decision become more complex when the situation involves several products or an entire distribution system that might consist, for example, of one or more central warehouses, as well as regional or local warehouses or distribution centers. This paper addresses the problem of optimizing logistics decisions in a two-level inventory management system, taking into consideration also the transportation costs involved. Using a Polish chemical manufacturing company as the case study, the author developed a model of total costs for the distribution network and, for simulation purposes, applied a computer program as a virtual model of the production company and its logistics system. The model is very detailed because it reproduces logistics processes on daily basis.

Computers & Industrial Engineering

The form postponement (FP) strategy is an important strategy for manufacturing firms to utilize to achieve a quick response to customer needs while keeping low inventory levels of finished products. It is an important and difficult task to design a supply chain that uses FP strategy to mitigate the conflict between inventory level and service level. To this end, we develop a two-stage tandem queuing network to model the supply chain. The first stage is the manufacturing process of the undifferentiated semi-finished product, which is produced on a Make-To-Stock basis: the inventory is controlled by base-stock policy. The second stage is the customization process based on customers’ specified requirements. There are two types of order: ordinary order and special order. The former can be met by customizing from semi-finished product, while the latter must be entirely customized beginning from the first stage. The customer orders arrive according to a Poisson process. We first derive the inventory level and fill rate, and then present a total cost model. It turns out that the model is intractable due to the Poisson distribution in the objective function. To analytically solve the problem, we use normal distribution as an approximation of the Poisson distribution, which works well when the parameter of the Poisson distribution is quite large. Finally, some numerical experiments are conducted and managerial insights are offered based on the numerical results.

Financial Measures for Electric Vehicles:Supporting the Integration of Renewable Energy in the Mobility Sector in Germany

Electric vehicles (EV) are able to support the transition of sectors towards sustainability. The operation of these vehicles with renewable energies saves local and global emissions. Furthermore, fluctuating renewable energies can be integrated in existing energy systems by using electric vehicles for grid services. Thus, implementation of advantages requires market establishment of electric vehicles. The article provides a review on potentials of market development by comparing and studying costs of electric and conventional vehicles as well as effects of financial measures on costs of EV. These cost comparisons are based on market data and predictions of cost developments for private consumers in Germany. Costs are analysed by an economic model of Total Cost of Ownership (TCO), aiming to display financial proportionality between vehicles in different years of acquisition (2010 to 2030). In a further step, external financial measures are analysed and integrated in the cost model as one possibility to enhance and secure the market introduction. Findings demonstrate that higher costs of acquisition of electric vehicles cannot be compensated by lower costs of operation. While mobility costs of conventionally vehicles stay constant or even increase during the considered years, mobility costs of electric vehicles significantly decrease especially in the upcoming years. In all cases mobility costs of electric vehicles exceed costs of conventional vehicles, but differences are reduced from 19€ct in 2010 to 3€ct in 2030. Cost decreases of the battery have high influence on the increasing financial comparability of EV. Concerning financial measures especially a differentiation of energy prices and a compensation of grid services can help to decrease total costs of EV and to manage a shift from fossil energy resources to electricity in the mobility sector. The existing tax exemption for EV compensates only a little fraction (about 6%) of the cost difference. This highlights the importance of research on incentive schemes to support market integration of EV and thereby the integration of renewable energies in the mobility sector. This integration is supported by the possibility of storing surplus fluctuating renewable energy in the batteries of EV.

The Optimal Design Project about Bus Station Spacing in the City

Urban public transport is the main means of urban resident trip. With the rapid development of national economy, the city size is expanding, and the urban population is becoming larger and larger. However, the development of urban transportation doesnt keep up the pace of development of socio-economic. Traffic jam has become a problem to be urgent solved to some cities. This article selects No.23 bus line in Huaian as studying object, analyzes characteristics of resident trip in Huaian, By referencing the minimum total system cost model, which aims at minimizing the total passenger travel time costs and operating costs, to optimize station distance of No.23 bus line, so can improve bus running efficiency, meet the travel needs of residents better.

Common replenishment cycle with mixed batch shipment policy for a single-vendor multi-buyer integrated system

This study addresses a single-vendor multi-buyer integrated system with a common replenishment cycle and a mixed batch shipment policy. The objective is to determine the common replenishment cycle, number of shipments and the structure of the mixed batch shipment which minimises the integrated total cost per unit time. The isolation model is constructed first, and then the isolation model is integrated into the integration model. The minimum total cost model is transformed into a maximum replenishment cycle model to optimise the structure of the mixed batch shipment. Moreover, two new concepts are introduced, namely domination curve and critical replenishment cycle. A new method, the replenishment cycle division method, is then developed to derive the optimal solutions to the subject problem. Examples are presented to illustrate the procedures involved in the replenishment cycle division method.

Economies of traffic density and scale in the integrated air cargo industry: The cost structures of FedEx Express and UPS Airlines

This paper examines the cost structures of the leading integrated air cargo carriers, FedEx Express and UPS Airlines. A total cost model is estimated for the two carriers using quarterly data on domestic operations and costs over a nine-year period (2003–2011). The estimated model indicates that the integrated industry exhibits increasing returns to traffic density and constant returns to scale. Accounting for carrier-specific differences in cost structure and network size, FedEx Express is found to be more cost-efficient than UPS Airlines. Looking at the carriers individually, UPS Airlines exhibits substantial economies of traffic density and constant returns to scale while FedEx Express' cost structure is characterized by weak economies of density and constant returns to scale. The combined effect of returns to density and returns to scale on the cost structures of integrated carriers is captured by economies of size. Both FedEx Express and UPS Airlines exhibit economies of size, indicating that carriers in the integrated industry can be more cost efficient by making appropriate adjustments to their network size as their output grows. Moreover, the relative cost-efficiencies of the carriers are reversed when their network-size differences are not controlled.

Economic Benefit of a Novel Intensivist Coverage in a Surgical ICU

Objective. To assess the cost implications of changing the ICU staffing model from a mandatory 24-hour in-house critical care specialist presence to a 16-hour coverage model with external supervision. Design. A pre–post comparison was undertaken among the prospectively assessed cohorts of patients admitted to our surgical ICU over a period of 3 years. Our data were stratified by case mixed index. Costs were modeled using a generalized linear model with log-link and gamma-distributed errors. Setting. Tertiary medical facility. Patients. All patients admitted to the adult surgical intensive care unit during the study period of June 2007 to April 2013. Intervention. Changing the ICU staffing model from a mandatory 24/7 in-house critical care specialist presence to a 16/7 model with robotic rounding in off hours. Results. A total cost model was calculated and evaluated. Total cost estimates of hospitalization were calculated for each patient. Length of stay and mortality were evaluated. Adjusted mean total cost estimates per case were 29% lower in the postimplementation period relative to the preimplementation period. Mean net revenue increased by 367% in the postimplementation period relative to the preimplementation period. Billing charges increased by more than 70% and billing collections increased by more than 40% with the new model. Length of stay was reduced by 33% with the 16-hour model versus the preimplementation time frame and maintained at the lower level during the measurement period. Mortality rate was 59% lower in the postperiod relative to the preperiod. Demand analysis for surgical ICU service, length of stay cost and capacity issues improved. Conclusions. We found that a 16-hour ICU that incorporates robotic rounding, without per diem intensivists, reduces length of stay, mortality, cost estimates, and actual costs. We have also shown an increase in mean net revenue and billing collections. The cost of introducing this staffing model has the potential to favorably impact overall costs. In this study, the 16-hour critical care service model performed favorably both in terms of quality and cost. Clinical implications. This model increases total savings generated for such patients in smaller ICUs, especially ones that predominantly care for lower acuity patients. Critical care interventions are expensive and have a narrow safety margin. It is essential to develop structured and validated approaches to study the delivery of this resource.

A queuing model on supply chain with the form postponement strategy

The form postponement (FP) strategy is an important strategy for manufacturing firms to utilize to achieve a quick response to customer needs while keeping low inventory levels of finished products. It is an important and difficult task to design a supply chain that uses FP strategy to mitigate the conflict between inventory level and service level. To this end, we develop a two-stage tandem queuing network to model the supply chain. The first stage is the manufacturing process of the undifferentiated semi-finished product, which is produced on a Make-To-Stock basis: the inventory is controlled by base-stock policy. The second stage is the customization process based on customers’ specified requirements. There are two types of order: ordinary order and special order. The former can be met by customizing from semi-finished product, while the latter must be entirely customized beginning from the first stage. The customer orders arrive according to a Poisson process. We first derive the inventory level and fill rate, and then present a total cost model. It turns out that the model is intractable due to the Poisson distribution in the objective function. To analytically solve the problem, we use normal distribution as an approximation of the Poisson distribution, which works well when the parameter of the Poisson distribution is quite large. Finally, some numerical experiments are conducted and managerial insights are offered based on the numerical results.