An Optimal Product Mix Decision Model Considering Unit-Batch-Product Level Cost for Steel Plant
In recent years, the iron and steel industry’s operation condition has been continuously worsening, profitability reducing, thus the product mix decision (PMD) for the iron and steel enterprises became research focus to reduce manufacturing costs and maxi
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An Optimal Product Mix Decision Model Considering Unit-Batch-Product Level Cost for Steel Plant Hu-sheng Lu and Guo-qiang Lv
Abstract In recent years, the iron and steel industry’s operation condition has been continuously worsening, profitability reducing, thus the product mix decision (PMD) for the iron and steel enterprises became research focus to reduce manufacturing costs and maximize profits. Taking into account unit-level, batchlevel and product-level cost, an integrated model conducting product mix decision for steelmaking, continuous casting and hot rolling (SM-CC-HR) process was proposed in this paper. A numerical example was presented to illustrate data input, solution method and result analysis. By comparing the model with two traditional ones, it was showed that the model attained higher profit and smoother implementation, because it traced the cost appropriately and effectively reduced the volume of left slabs in manufacturing processes and that of left steel products after order-delivery. Keywords Activity-based costing (ABC) • Iron and steel enterprises • Product mix decision model
Introduction With the increasingly fierce market competition and severe management environment and production process transformation, only by well coordinating product mix can iron and steel enterprises achieve high profit and low cost in current conditions. Whereas the product mix problem is to maximize profit from the mix of manufactured products subject to constraints on the available capacity of resources. Kee and Robert provided a numerical example that integrated activity-based
H.-s. Lu (*) • G.-q. Lv School of Economics and Management, Inner Mongolia University of Science and Technology, Baotou, China e-mail: [email protected]; [email protected] R. Dou (ed.), Proceedings of 2012 3rd International Asia Conference on Industrial Engineering and Management Innovation(IEMI2012), DOI 10.1007/978-3-642-33012-4_16, # Springer-Verlag Berlin Heidelberg 2013
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costing (ABC) with the theory of constraints (TOC) to illustrate the economic consequences of the production-related decisions. ABC and TOC represented alternative paradigms to traditional cost-based accounting systems. Both paradigms were designed to overcome limitations of traditional cost-based systems (Kee 1995). Later, Kee and Schmidt developed a more general product mix decision model that overcame the stringent requirements of the TOC and ABC and demonstrated that TOC and ABC were special cases of their model (Kee and Schmidt 2000). On the basis of these studies, there was much work in the literature about deciding which paradigm to select for production-related decisions. Baykasoglu developed a new approach based on digraph theory and matrix algebra to quantify flexibility (Baykasoglu 2009). Balakrishnan and Chun-hung CHENG proved that LP was a useful tool in the TOC analysis by re-examining TOC and linear programming (LP) (Balakrishnan and Chun-hung Cheng 2000). Tsaia and Hung integrated ABC and performance evaluation and esta
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