Reduce Unit Costs Research Articles

Product development and competitiveness : The experience of LKAB

LKAB was severely hit by the emergence of an extraordinary oversupply of iron ore, following the two oil crises in the 1970s. LKAB's products became uncompetitive, both on cost and on quality grounds, and the volume of deliveries was sharply curtailed. A forceful product development programme helped the company to regain lost markets. This was particularly true for pellet products, whose share in total deliveries has risen from one-third to two- thirds in the past 20 years. The product development efforts, along with strong measures to reduce unit costs, have turned the former losses into stable profits. Planned investment in a new mine level and in additional pellet capacity, along with continued product development efforts, assure the company's long-run viability.

Economic evaluation of heterosis and culling policies for lifetime productivity in Hereford, Angus, shorthorn, and crossbred cows.

Experimental lifetime performance data obtained from 156 straightbred Hereford, Angus, and Shorthorn and 172 first-cross heifers were used to estimate heterosis for economic efficiency in a 100-cow herd at age equilibrium under three culling policies and at terminal ages from 6 to 12 yr. All nonpregnant heifers and cows greater than 9 yr of age were culled. The culling policy for removal of nonpregnant cows from second parity through 9 yr of age were 1) no culling, 2) after two consecutive years (actual), and 3) all (imposed). Efficiency was calculated as input cost per unit of output value. A 10-yr average was used for costs of replacement heifers, cow units, and the ratio of calf:cull cow prices (PR), plus higher and lower PR. Input included costs for both cow units and purchased replacements. Output value included both weaned calves and cull cows. Optimum terminal age was mainly a function of PR: 9 yr for average and high PR, but 6 through 9 yr when PR was low, regardless of culling policy or breed groups. Efficiency differences among culling policies were small for high or average PR, but more culling for infertility was beneficial when PR was low. Estimated reductions in unit costs of output value under any culling policy or terminal age were approximately 6% from crossbred cows plus another 6% from crossbred calves, or a total of 12% from specific three-breed crossing of these British breeds. Cost reductions would be somewhat less for rotation crossbreeding but greater for mating smaller crossbred cows with sires of superior growth-carcass breeds.

Nuclear power plant performance: the post Three Mile Island era

This paper examines the relationship between US nuclear plant performance and age in the post-TMI era. Our analysis indicates significant differences across technologies and over time. The boiling water reactors in our sample appear to be on the declining side of their age-performance curve while the pressurized water reactors have shown little of the improvement that was evident in the pre-TMI years. While age-related improvements were once thought to hold the promise of improved reliability and associated unit cost reductions, our analysis of more recent data suggests this is not to be.

MODELS FOR OPTIMAL LEAD TIME REDUCTION

Most inventory and production planning models in the academic literature treat lead times either as constants or random variables with known distributions outside of management control. However, a number of recent articles in the popular press have argued that reducing lead times is a dominant issue in manufacturing strategy. The benefits of reducing customer lead times that are frequently cited include increased customer demand, improved quality, reduced unit cost, lower carrying cost, shorter forecast horizon, less safety stock inventory, and better market position. Although the costs of reducing lead times in the long term may be relatively insignificant compared with the benefits, in the short term these costs can have a significant impact on the profitability of a firm. This article develops a conceptual framework within which the costs and benefits of lead time reduction can be compared. Mathematical models for optimal lead time reduction are developed within this framework. The solutions to these models provide methods for calculating optimal lead times, which can be applied in practice. Sensitivity analysis of the optimal solutions provides insight into the structure of these solutions.

Influence of growth type and season on the prediction of the metabolisable energy content of herbage by near-infrared reflectance spectroscopy

Two experiments are reported where near-infrared reflectance spectroscopy (NIRS) has been used to predict the metabolisable energy (ME) content of the organic matter (OM) of four herbage populations. The herbages comprised 158 spring primary growths harvested between 1980 and 1984 (Population 1), 32 spring primary growths harvested in 1986–87 (Population 2), and 13 summer regrowths (Population 3) and 24 autumn regrowths (Population 4) both harvested in 1986–87. In Experiment 1, calibration was carried out using a sub-set of Population 1 (104 samples). The best four calibration relationships were then validated separately on Populations 2, 3 and 4. All four calibrations validated best on the spring herbages (Population 2), but all contained spectral terms with F ratios less than 10. In Experiment 2, calibration was carried out on sub-sets of samples (total 149) from all four populations. A calibration relationship ( R 2 = 76.9%, standard error of calibration 0.583) containing five spectral terms was selected as the best for validation. This relationship validated well on all the remaining samples ( R 2 = 70.5, standard error of prediction 0.695, slope 0.956, bias 0), although when tested on the autumn herbages (Population 4) alone, the validation was poor. It is believed that this was due in large part to the small variation in the ME content of the autumn herbages. The wavelengths at the spectral segment centres of the five term equation were 2280, 1658, 1718, 1378 and 2308 nm. The prediction errors for spring primary growths recorded in these experiments were shown to be similar to those obtained earlier using the pepsin-cellulase in vitro technique. It is concluded that NIRS can predict the ME content of herbage with similar accuracy to the best available in vitro procedure, but with much increased speed and reduced unit cost. There appear to be some advantages in developing spectral relationships from herbage containing a mixture of different growth types rather than spring primary growth alone.

Reduction in large-scale adsorption chromatography unit costs by use of 30-Å Sorbsil C30 silica

Adsorption chromatography is being increasingly used to purify products on an industrial scale. A major cost factor is the purchase, recycling and disposal of the large volumes of solvents used in the process. Silicas of higher loading capacity are required to reduce the solvent costs and we have shown that specifically designed silicas with a pore size of 30 Å can provide the capacity increase. Although historically it has been believed that silica of pore size less than 60 Å cannot perform satisfactorily, it is shown that Sorbsil C30 gives good kinetic performance ( h < 2), and that the significantly higher surface area per unit column volume leads to much higher loading capacities. Data from small-scale breakthrough curves for laboratory- and pilot-scale elution chromatography show increases in capacity between 50 and 250% compared with conventional 60-Å silicas. Data models for large-scale operations show a significant reduction in processing costs from the use of Sorbsil C30, owing to decreased solvent consumption and a smaller sample recovery plant with the additional benefit of reduced contamination of the sample by solvent impurities.

The Human Side: Transforming R&amp;D Services at Bell Labs

Since 1984 and the break-up of the Bell System, market competition has forced ATT Administrative Systems has discovered that quality demands a culture of continuous improvement. However, the process can be described in terms of three stages: cost cutting (1985-88), creating learning opportunities, (1988-90) and total quality management, (1990 to present). I have followed this process in the role of observer and consultant. The cost cutting stage was essentially inside-out, meaning that actions were not always taken in response to customer needs but from an internal focus. Managers were told to cut costs, to cheese-slice by 5, 10 or 15 percent. An unnecessary layer of management was removed, and an employee voluntary termination program with incentives for early retirement was instituted. Each manager wrote productivity improvement plans. Functions that had been decentralized were brought into headquarters to achieve economies. A new accounting system determined unit costs for services, and a functional organization developed business plans for each division. Together with cost cutting, top management called for employee involvement. An annual employee survey was used to measure satisfaction with two-way communication, participation and leadership. As a result, there was a reduction of unit costs for services, and an overall reduction in Administrative Systems costs from 35 percent to 20 percent of the overall Bell Labs budget. Headcount was decreased by more than 15 percent. However, these traditional cost cutting approaches also had negative consequences. Some customers, dissatisfied with the loss of service, found other suppliers. Furthermore, this was purely a top-down exercise which reinforced hierarchical control and increased fear. …

The economics of ion implantation

Ion implantation as an engineering tool is a powerful and relatively new technique for the surface modification of materials. The process has proved to be beneficial in many applications but the cost of the process has hindered its wider acceptance in industry for volume components and tools. In this paper the effects of developments in ion source and vacuum plant design are discussed with respect to their effect on the overall economics of the process. New more powerful ion sources, advanced control systems and manipulation devices all contribute to a significant reduction in unit costs. An examination of the economics of the process and the new technical developments suggest the distinguishing features required in ion implantation equipment designed for use in subcontractor job shop environments.

Reform in the financing of higher education in Papua New Guinea

The particularities of history, culture, economy and politics of Papua New Guinea and similar Pacific island and other developing nations place strains upon the formulation and implementation of reform in the financing of higher education (and of education in general). There has been progress in reducing unit costs, with favourable implications for the rate-of-return that links higher educational costs and benefits. Funding constraints continue to elicit calls for reform of higher educational financing and for increased student contributions. Failure to communicate human capital analysis and policy implications for improving efficiency, access, and equity in higher education have hindered reform. The analysis focuses on policy implementation of reform in the financing of higher education in Papua New Guinea, and concludes in favour of a shift in financing away from institutions and toward students.

The Economics of Educational Software Portability

AbstractPortability is defined as the capacity of an educational software item to be used differently from the way, the objectives, or the environment in which it was originally conceived. There are obvious economic strategies for increasing the portability of educational software. Computer software has high fixed costs and extremely low variable costs. In principle, portability would lead to greater utilization, reducing unit costs and increasing quality, thus leading to higher cost effectiveness. However, the nature and behavior of both centralized and decentralized education systems set limits to the exercise of pure economic rationality. The paper discusses both the limits of educational software markets and the potential effects of government policies to increase the portability of educational software. Three major findings derived from empirical observation and economic analysis are discussed. First, high fixed costs associated with very low variable costs make higher usage, and hence portability, p...

Tourism and transnationalism

This special issue of Tourism Management focuses on the development of transnationalism which is assuming a growing importance within the tourism industry. More sophisticated communications technology and the increasing global participation in tourism puts the transnational corporations, able to reduce unit costs, in the best position to profit from the ever more ‘globalized’ markets.

A Strategic Approach to Managing Costs

The greatest challenge facing most firms in the hospitality industry continues to be the management of costs. Even the success of firms such as Marriott and McDonald's is as much dependent on managing unit costs as it is on customer service, development and marketing. In fact, the inability of accommodation and foodservice firms to improve productivity has become a primary issue among executives and economists (Haywood, Patterson and Upton, 1985; Witt and Witt, 1989). Companies are being urged to implement strategies that will increase productivity and reduce unit costs. Unfortunately, little has been written on what such strategies involve, and how they can be implemented successfully.This article describes the key elements of a comprehensive cost management strategy. Readers will learn how one company is implementing such an approach to ensure that it becomes and remains a low-cost provider of hospitality services. Although the strategy provides some short-run cost reductions, it is primarily aimed at p...

Laboratory Outreach Marketing Planning for Success

A successful laboratory outreach marketing program can fill spare capacity, reduce unit costs, and improve overall laboratory service levels in addition to contributing important new net income. Yet, meaningful success usually results from careful plannng and implementation. A market-oriented focus is a prerequisite when conducting a situation analysis, defining the marketing opportunity, strategy, and program. Furthermore, the best planning is worthless if the implementation process is not a success.

An Application of Goal Programming in Healthcare Planning

The advantages of Goal Programming (GP) over linear programming (LP) are discussed in the context of the healthcare industry. Decision makers must give considerable attention to the formulation of a GP model. However, long‐ and short‐term solutions must not be confused. Solutions also require implementations, which may be impractical or difficult. The full utilisation of facilities is recommended in an attempt to reduce unit costs and increase output.

Technical support to the Syncrude Oilsands Mine

ABSTRACT The Syncrude Canada Limited Oilsand Mine has operated for the past ten years, achieving a successful startup and a consistent upward trend in ore production each year. The high production level, along with a significant reduction in unit cost, have been accomplished through the efforts of the operating and technical organizations in overcoming the complexities of the Mine and Tailings Operations. The size and complexity of the Operations have necessitated the creation of a large Mining technical organization covering a wide range Of disciplines and activities. The factors which make the Syncrude Mine and Tailings Operation unique and challenging are outlined as an introduction to the organization and functions of the Mining technical groups. The resources and activities of each technical area are described, giving an insight into the size and diversity of the Mining technical organization.

Financial selection of rotation age for SRIC plantations

Short rotation intensive culture (SRIC) plantations, established in central Pennsylvania, were analyzed to determine their economic optimum rotation age. The general management design for the plantations used fertilized and non-fertilized strategies, a tree spacing of 0·48 m 2 and a rotation length of 4 years. A stand-level financial model analyzed the unit cost of production for alternate rotation lengths based upon the plantation's investment and operating costs and resulting biomass yields. Analysis of the first two rotations indicated that the minimum unit cost for fertilized and non-fertilized strategies was in the fourth year of the first rotation and the third year of the second rotation. Growth curves for the rotations also showed a maximum volume production at the same points in the rotations. Selection of a 3-year rather than 4-year harvest during the second rotation would reduce unit costs by 14% in the non-fertilized strategy and by 15% in the fertilized strategy.

The political economy of European integration: From euro‐sclerosis to euro‐corporatism

The paper analyzes the evolution of coalitions over the early 1980's between business interests, government authorities in the larger industrialized countries and European institutions, notably the Commission, to promote policies aimed at securing a European comparative advantage in oligopolistic industries. Strategic gains for such firms are derived through the exploitation of economies of scale associated with expansion of production and reduction in average unit costs. The creation of the Internal Market is a prerequisite for the success of strategic trade policies since enlargement and integration of the home market gives firms a better base for oligopolistic competition internationally.

Universal primary education: An African dilemma

This paper examines the prospects for achieving universal primary education in the Sub-Saharan African countries. The principal finding is that, under present conditions, a large number of these countries may not achieve universal primary education even by the year 2020. A move towards this goal will call for a level of national effort which some of these countries can ill afford. It also calls for a strong willingness to treat the high levels of recurrent unit costs as a major policy issue. The simulation exercise shows that it is virtually impossible to achieve this goal without a reduction in recurrent unit costs.

IOn implantation part II: Ion implantation in nonelectronic materials

Ion implantation provides a highly versatile means of modifying the near-surface composition of solids. Two principal areas of application have emerged so far: these are the improvement of wear resistance, especially under abrasive conditions, for steels, titanium alloys, tungsten carbide, etc., and the improvement of corrosion properties in the gas phase e.g. during thermal oxidation. Mechanisms by which these benefits are achieved are becoming better identified, but are relatively complex. Ion implantation has also become a valuable research tool for the preparation of materials in a nonequilibrium condition and for investigating impurity-defect interactions. Some of these are important in ion beam mixing and ion assisted coatings, both of these being techniques in which deposition is combined with ion implantation. Developments have taken place in the equipment for ion implantation of metals on an industrial scale, the second generation facilities now available providing substantially reduced unit costs by virtue of an increased scale of throughput.

Definition and effect of productivity on corporate performance

The discussion of productivity is usually dominated by considerations of the productivity of labour, but in general terms a productivity ratio may be defined as the number of physical units of output per unit of resource input. This gives rise to many productivity ratios and it can be shown that they are inter-connected, so that an improvement in one ratio can be achieved at the expense of others. Furthermore, an improvement in labour productivity need not always result in reduced unit costs and increased profitability. The relationships between all these measures need to be explored through a modelling approach to determine the conditions under which productivity contributes to improved corporate performance. Some examples demonstrate the use of the proposed methodology.