Conventionally throughput rate was a high priority in the manufacturing industry to achieve the effect of economies of scale. However new products are releasing and the product price is falling due to the obsolescence in fast changing market environme...
Conventionally throughput rate was a high priority in the manufacturing industry to achieve the effect of economies of scale. However new products are releasing and the product price is falling due to the obsolescence in fast changing market environment. The high throughput policy makes profits even worse if the value of the inventory drops sharply over time. This study develops an economic model to find the optimum production policy with throughput optimization that maximizes the profit by applying product price decline rate of inventory. The model uses queuing theory to estimate the changes of cycle times under variable throughput rates. Results of the numerical experiments show that firm s profits are greatly changed by the rates of throughput and product price decline. Since an appropriate throughput level enables a firm to maintain a reasonable level of cycle time and inventory, the responsiveness on variable demand might be improved as well.