This study develops an economic model to find the optimum throughput rate that maximizes the profit with considering product price decline and the fixed cost based on a queuing theory in capital intensive manufacturing industry (CIMI). Comparing to the previous studies, the model reflects more realistic situations of which inventory levels vary over sales periods depending throughput rates. Through a set of simulation experiments, the paper draws an operating curve that maximizes the profit when a price decline rate, throughput rate, and inventory holding cost are given as inputs. By Simply applying the estimated price decline rate, throughput with cycle-time, and inventory holding cost in the model, one can calculate the future profit and use it in many decision-making applications.
Inventory level, production optimization, price decline rate, product life-cycle, throughput rate.
The authors are with the School of Business Administration, Kyungpook National University, Daegu, the republic of South Korea (e-mail: firstname.lastname@example.org, baeu0429@ naver.com, chung@ knu.ac.kr).
Yunjung Suh, Yujin Bae, and Jaewoo Chung, "
Optimum Throughput Rate under Buyer’s Market in Capital Intensive Manufacturing Industry," Journal of Economics, Business and Management vol. 5, no. 1, pp.