Production Cost Model Research Articles

Analysis of Manufacturing Productivities of Integrated Economic Regions in Korea using Spatial Spillover Effect Model of Production Costs

Analysis of Manufacturing Productivities of Integrated Economic Regions in Korea using Spatial Spillover Effect Model of Production Costs

Quantifying Avoided Fuel Use and Emissions from Solar Photovoltaic Generation in the Western United States

The electric power system in the Western United States was simulated to evaluate the potential of solar photovoltaics (PV) in reducing fossil-fuel use and associated emissions. The simulations used a utility production cost model to evaluate a series of PV penetrations where up to 10% of the region's electricity is derived from PV. The analysis focused on California, which uses gas for a large fraction of its generation and Colorado, which derives most of its electricity from coal. PV displaces gas and electricity imports almost exclusively in California, with a displacement rate of about 6000-9000 kJ per kWh of PV energy generated. In Colorado, PV offsets mostly gas at low penetration, with increasing coal displacement during nonsummer months and at higher penetration. Associated reductions in CO2, NOx, and SO2 emissions are also calculated.

Reliability-based optimization of design variance to identify critical tolerances

Reliability-based design optimization (RBDO) is a topic of interest for research in both academia and industry. RBDO typically involves adjusting the mean values of the design variables while fixing the spread parameters, often measured as variance, in order to accomplish a given objective within the stated constraints. This paper proposes an alternate way to meet given design criteria by fixing the mean values of the statistical inputs and allowing the spread parameters to become design variables. To do this, product cost models are proposed in terms of statistical variables. By performing this type of optimization, the design changes are kept to a minimum, and the focus is instead shifted to variance control. An initial study is performed on a three-bar truss subject to static loading with material variability. A more complex example is performed involving the cost minimization of an unmanned undersea vehicle subjected to hydrostatic buckling.

THE IMPACTS OF TRANSPORTATION INFRASTRUCTURE ON PROPERTY VALUES: A HIGHER‐ORDER SPATIAL ECONOMETRICS APPROACH

ABSTRACT We evaluate the impacts of enhanced transportation systems on property values for U.S. manufacturing firms, allowing for higher‐order spatial error correlation. We use a state‐level model of production cost and input demand that recognizes the productive contribution of public transportation infrastructure stocks. Our findings include significant impacts on property shadow values and input composition from both public highway and airport investment. We also find that these effects have a spatial dimension that depends on the proximity of the transport system; at least one and as many as three spatial error lags are significant in our estimating equations. Further, recognizing production growth from transportation system improvements augments the associated incentives for private capital investment.

A GA-based parameter design for single machine turning process with high-volume production

This paper presents a Parameter Design (PD) approach that provides near-optimal settings to the process parameters of a single lathe machine with high-volume production. Optimized process parameters include both machining parameters (cutting speed, feed rate, and depth of cut) and production parameters (material order size and inventory safety stock and reorder point). In high-volume production, machining parameters have amplified impacts on the machine performance in terms of productivity (cycle time), reliability (tool life), and product quality (surface finish). In addition, production parameters become critical in high-volume production since they directly impact the overall order fulfillment (production makespan and delivery reliability). Hence, this paper extends the conventional per-part machining cost model into a per-order production cost model by consolidating the production economics of both machining parameters and production controls. Discrete Event Simulation (DES) is utilized to capture the stochastic and dynamic production attributes and to transfer the static machine PD model into a dynamic PD-DES production model. The model is also utilized to accumulate the per-order running cost over production time while incorporating the impacts of process variability in tool life, labor efficiency, machining conditions, order lead time, and demand rate. Using the PD-DES model as a dynamic fitness function, a Simple Genetic Algorithm (SGA) is developed and applied to a CNC lathe machine to determine near-optimal settings to both machining and production process parameters so that the overall per-order production cost is minimized. Results showed effective SGA convergence profile with relatively low number of search generations. Sensitivity analysis with SGA parameters is conducted to demonstrate the search’s robustness. The benefits of the per-order cost model are illustrated by repeating the SGA solution using machine productivity as a fitness criterion. The new SGA solution resulted in a better productivity but at a higher per-order cost. Finally, the effectiveness of SGA search is illustrated by outperforming the solutions obtained from two-level and three-level full factorial designs.

Analytical Approximation to the Probability Distribution of Electricity Marginal Production Costs

This paper proposes an analytical approximation to calculate the probability distribution of the marginal production cost of an electric power system. This information is expected to benefit both buyers and sellers of electricity in the upcoming deregulated environment. Since the exact computation of the probability distribution is prohibitive for large systems, we propose to use a combination of the Edgeworth expansion and the large deviation approximation. The results show that the Edgeworth expansion is accurate for computing probabilities at the center of the distribution and the large deviation approximation for computing tail probabilities. Monte Carlo simulation is used as a benchmark to verify and assess the performance of the approximation method in a large power system. In our stochastic model of the system marginal production cost, the load is represented by a normal distribution and the generating unit availability is characterized by its forced outage rate. It is found that the proposed approximation provides accurate estimates at a reasonable computational time.

A Strategic Production Costing Model for Electricity Market Price Analysis

Production costing models (PCMs) have been extensively used to analyze traditional power systems for decades. These tools are based on the costs of production, but in oligopolistic electricity markets market prices can not be explained attending just to marginal costs but instead bid prices have to be considered, since market participants seize their dominant position in the market looking for higher profits. Thus, the merit order composition criteria applied in traditional PCMs has to be somehow reconsidered in order to be able to represent the agents' strategic bidding. The objective of the strategic production costing model (SPCM) presented in this paper is to evolve the PCM approach to adapt it to the actual wholesale electricity markets without losing its typical advantages. The generalization proposed allows to represent an oligopolistic hydrothermal electricity market and provides the system price-duration curve as well as the income and expected costs of every generating agent. Compared with other oligopolistic models, the main advantage of the SPCM is its potential computational speed, which makes it very suitable for risk analysis studies that require considering a large number of scenarios.

Performance characteristics and economic comparison of broiler chickens fed wheat- and triticale-based diets

The effects of triticale and wheat on broiler (mixed sexes) performance and cost of production were compared. In experiment 1, wheat- and triticale-based diets were fed to 3 strains of broilers (Ross × Ross, Hubbard x Hubbard, and Ross × Hubbard). Each of the diets was provided to 5 cages/strain (n = 10 chicks/cage; 1,273 cm2/bird). Weekly BW, gain, feed consumption, and feed conversion ratio (FCR; g of feed/g of gain) were determined. At 42 d, 4 chicks/pen were shipped to a commercial processing plant. The plucked, eviscerated carcasses were evaluated for carcass traits. Overall, the triticale-fed birds had lower final BW and average daily gain and higher FCR. Eviscerated carcass, thigh, and drum weights were lower, but pectoralis minor as a percentage of carcass weight was greater in triticale-fed birds. In experiment 2, a wheat diet and a diet in which triticale was substituted (by weight) for wheat were provided in a 3-phase feeding program. Each diet was provided to 2 identically-equipped commercial barns housing 17,034 broilers each. Individual BW of a sample of birds were recorded in each barn at 0, 19, 34, and 42 d, corresponding to the beginning and end of each dietary phase. Feed consumption and FCR were calculated for each barn. An analysis of each of the diets was calculated using a broiler chicken production cost model. Final BW, feed consumption, carcass weight at processing, flock uniformity, percentage of Grade A carcasses, and percentage of condemned carcasses were not affected by cereal source. Overall FCR (2.165, 2.036; P = 0.0052), feed cost ($ 0.617, $ 0.577/kg live weight; P = 0.0260), and total cost of production ($ 1.019, $ 0.972/kg live weight; P = 0.0183) were greater for the triticale than wheat diets, respectively. Triticale would be an economically feasible replacement for wheat in broiler diets when its price is less than or equal to 95% of the cost of wheat, less $ 18 (Canadian). Increased knowledge of the available nutrient profile of triticale, as well as least-cost feed formulation would likely increase the value of triticale relative to wheat for broilers.

3.1.2 Architecting the Raytheon Production Cost Model

AbstractThe Advanced Systems Economic Analysis (ASEA) Department in Systems Engineering at Raytheon Missile Systems (RMS) was presented with the challenge to develop a software tool to track and report costs on production programs. This challenge was driven by the Guided Projectile product line, which had an immediate need to provide production cost projections for three similar programs. The goal for the tool was to track and manage costs to meet the Design to Cost (DTC) goal for each production program. The tool tracks the recurring system costs and accumulates the cost of components in a hierarchy which allows each model user to derive the necessary information needed to manage their own program's cost.RMS Information Technology (IT), in conjunction with ASEA, developed the Raytheon Multi‐Program Production Cost Model (RPCM). This cost model provides Raytheon with a cost tool that can provide management and control cost, thus aiding the company goal of providing quality products at the least cost. Cost data is presented to developers and managers in a form that allows them to make decisions in a timely manner. With this cost tool, they are able to understand projections of cost for baseline programs, and evaluate design changes, preplanned product improvements, productivity improvements, changes to business practices, and other factors which impact production costs. This tool is different from all currently available COTS tools is the ability to track costs and take advantage of commonality across all production programs.

Welcome to the New Era of Resource Planning: Why Restructuring May Lead to More Complex Regulation, Not Less

To prepare themselves, utilities will need to develop much more rigorous analytical tools. The standard analytical toolbox, relying on deterministic production–cost models, cannot be used to evaluate many of the new supply alternatives. Second, to the extent utilities begin to rely on these supply alternatives, they will need to justify their supply decisions to regulators, even if utilities decide to let third parties completely manage their supply portfolios.

Design‐to‐market integrating conceptual design and marketing

AbstractThis article presents an approach to integrate conceptual design and marketing by using a systems engineering approach. A methodology is applied that has successfully linked conceptual design with cost modeling to now also integrate marketing considerations. By combining technical product models and cost models with a market model in one integrated model, an added value is generated: Systems engineers can analyze entire business cases. The paper describes how the market model works, shows the interfaces to conceptual design and cost modeling, and discusses the integration into the overall design process. The full model is applied to the development of the European satellite navigation system “Galileo.” Development teams can easily change parameters in the design and analyze the effects of these changes on, for example, market revenues. To quantify differences among design alternatives, two approaches are considered: (a) a measure of effectiveness (market robustness) and (b) cash‐flow curves to model, simulate, and evaluate entire business cases. © 2002 Wiley Periodicals, Inc. Syst Eng 5: 315–326, 2002

The Cost of Environmental Protection

Reported expenditures for environmental protection are often cited as an assessment of the burden of current regulatory efforts. However, the potential for both incidental savings and uncounted costs means that the actual burden could be either higher or lower than these reported values. Using a production cost model that considers the possible interaction between environmental and non-environmental expenditures, we directly estimate the dollar-for-dollar incidental savings/uncounted costs arising from a one-dollar increase in reported environmental expenditures. Although recent literature supports the idea that reported expenditures probably understate the actual burden, we find no such evidence in the manufacturing sector based on a large panel of plant-level data. In one industry, we find statistically significant overstatement. In three others, we find no significant deviation in either direction. We conclude that, although cost estimates are not overstated on average, variation and uncertainty exist ...

Optimization of evaporative fluid coolers

In the paper the optimization of geometrical and operating parameters for evaporative fluid coolers has been presented. The algorithm of optimizational calculations contains: • the mathematical model of heat and mass transfer in evaporative fluid coolers; • model of operating costs based, among others, on the Zalewski–Gryglaszewski relations developed by the authors for evaluation of air pressure drops in the heat exchanger; • model of evaporative heat exchangers production costs. Optimization problem formulated for non-linear objective functions with inequality and equality constraints has been solved using Schittkowski's method based on quadratic programming. Two optimization problems have been considered. A solution to the first problem consists in the design of a heat exchanger with such geometrical parameters which ensure its maximum heat capacity at minimal total costs. A result to the second optimization problem are such thermal and flow parameters which will ensure minimum operating costs.The results of optimization calculations presented in the paper are accompanied by their experimental verification.

Multi-period probabilistic production cost model including dispatch constraints

This paper presents a multi-period probabilistic production cost model. Dispatch intra-period and inter-period constraints are considered through the use of a facet LP formulation. An efficient solution procedure based on the Dantzig-Wolfe decomposition technique is developed. The work reported in this paper extends previous work in two respects: (i) inter-period constraints are rigorously treated, and (ii) a systematic general solution procedure is developed. Results for a large-scale case study are presented.

Modelling utility‐scale wind power plants. Part 1: Economics

As the worldwide use of wind turbine generators continues to increase in utility-scale applications, it will become increasingly important to assess the economic and reliability impact of these intermittent resources. Although the utility industry in the United States appears to be moving towards a restructured environment, basic economic and reliability issues will continue to be relevant to companies involved with electricity generation. This paper is the first of two that address modeling approaches and results obtained in several case studies and research projects at the National Renewable Energy Laboratory (NREL). This first paper addresses the basic economic issues associated with electricity production from several generators that include large-scale wind power plants. An important part of this discussion is the role of unit commitment and economic dispatch in production-cost models. This paper includes overviews and comparisons of the prevalent production-cost modeling met hods, including several case studies applied to a variety of electric utilities. The second paper discusses various methods of assessing capacity credit and results from several reliability-based studies performed at NREL.

Modeling competition in electric energy markets by equilibrium constraints

Throughout the world, the electricity industry is currently undergoing significant restructuring towards deregulation and competition. Under this new framework, electric firms assume more risk, and are more responsible for their own decisions. Utilities need original models that fulfil these new requirements. This paper presents a novel conceptual approach to modeling the newly deregulated power markets. It combines powerful traditional tools related to the detailed system operation with techniques for modeling economic market equilibria. The proposed approach models the competitive behavior of the electric firms by incorporating a set of constraints, namely the equilibrium constraints, into a traditional production cost model. These constraints reproduce the first order optimality conditions of the strategic companies. Thus the approach achieves a profit maximization objective while keeping the system operation details. This model has been implemented in GAMS. An application to a sample case study is also presented.

Probabilistic load variation modeling for estimating the variance of annual production cost

As the electrical industry becomes more competitive, the demand for more accurate cost simulation models has increased. In addition, there is increasing demand to estimate not only the expected value of cost, but also some measure of the risk associated with the cost estimate. The problem described in this paper arose because engineers in an electrical utility were asked by management to estimate the risk or uncertainty when proposing projects including fuel purchase, power transactions, generation modification and building new generation. This paper presents a method of estimating the risk by estimating the variance of the production cost. Existing chronological production cost models have included the uncertainty of generating unit availability; however they have emphasized the expected cost, rather than the variance of the cost. This paper includes the variance of load as well as the variation in unit availability, and it is shown for a sample system that the load contributes approximately five times as much cost variation as does unit outages. This probabilistic approach models unit availability using Monte Carlo sampling and simulates load variation using three load scenarios based on a stratification technique. The authors apply the proposed approach to illustrate the impact of load uncertainty and emphasize the estimation of cost variance which is induced by load variation and unit outages.

Cost/Time Analysis for Theoretical Aircraft Production

With the growing emphasis on affordability in aerospace systems design for future aircraft, there is a need for new techniques to predict accurate system and life cycle costs (LCCs). The prediction methods must be capable of quantifying cost differences resulting from material and manufacturing process alternatives. Existing cost models are primarily weight based. While these models have been used successfully for predicting the costs of conventional aircraft, they are not sufe cient for many modern or future aircraft that are produced using advanced manufacturing processes and materials. A high-e delity production cost model was developed and presented that accepts data from multiple levels of product design analysis. The use of cost/time analysis (CTA) for aircraft production is demonstrated for the evaluation of production alternatives. The production-cost model and CTA techniques are included in a LCC simulation. Numerical results are presented for a CTA evaluation of advanced wing structural concepts for a supersonic transport.

Wind power in New England: modeling and analysis of nondispatchable renewable energy technologies

Nondispatchable renewable energy technologies have beneficial environmental, financial and planning characteristics, yet are not readily included in resource planning analysis for two main reasons: the lack of familiarity in the power sector with their behavior, and the lack of appropriate analysis tools. This paper presents a methodology, to be used in conjunction with a standard production-costing model, for analyzing nondispatchable renewable energy technologies (RETs) as part of power systems operation. Our analysis of 1500 MW/sub p/ of wind power in New England shows that this capacity can capture the same amount of energy as the region's utility sponsored DSM programs, and that the wind resource in New England is comparable, on an energy basis, to that in California.

The efficiency distribution in a production cost model

Methods of estimating efficiency by cost frontiers are analysed here by generalizing the efficiency distribution approach in Farrell's convex hull method of cost minimization.