4.3.

The choice of technology for the criterion of minimum costs

The idea of choosing the optimal technology is to minimize the cost of
production at the annual order. Mathematically:
Ввир і  Впост і  Взм і  N  min
where
Впост і
 – fixed production costs on the annual order by i-technoligy;
Взм
 – variable costs per 1 production unit by i-technology;
і

N – annual order.
This dependence is stated that there is the best (absolute) in terms of cost
technologies, and is the best technology for a given output. Thus, in terms of
logistics should be considered types of production technologies, depending on
the use of manual labor, ie: manual (1) Mechanical (2), automated (3),
automatic (4). This sequence of technologies on the one hand ordered the
B  Bпост2  Bпост3  Bпост 4
increasing capital intensity, it means: пост1 on the other,
В  Взм 2  Взм 3  Взм 4
decreasing unit variable costs that mean: зм1
Graphical interpretation of the choice of technology is that shown in Fig.
4.2.
Витрати (В),
грн.

Вв1

NП1
NП2 Вв2

Вв3
Вв4
 
Вп4

Вп3

Вп2

Вп1
N1 N2 N3
Зона Зона Зона Зона Річне замовлення
технології 1 технології 2 технології 3 технології 4 (N), шт.

Fig. 4.2. Graphical interpretation of the choice of technology

The strategic aspect of the choice of technology illustrates an alternative

baseline assessment of demand (Fig. 4.2 NP1 - the first forecast (pessimistic) and
NP2 - the second forecast (optimistic). In the case of adopting a pessimistic
prognosis for implementation should be made by a third technology so as to
ensure a minimum costs. However, if likelihood optimistic prognosis accepted
for implementation would have to be the fourth technology, otherwise the
company will bear excessive annual variable costs of production while saving
fixed costs that can be calculated by the formula:
 
 В в ( 3  4 )  в зм 3  в зм 4 N П 2  В п 4  В п 3
If taken to implement optimistic prognosis, and come pessimistic demand
for products, you will be excessive annual fixed costs of production and savings
in variable costs, which amount to:
   
 Вв( 43)  Bп4  Bп3  B зм3  B зм 4  N п1
Logistic approach to designing their own production units and parts on the
one hand based on the length of working operations, travel time components of
the product, the other - on valuation due at the same cost of production. These
circumstances and characterize the applicability of an interchangeable
manufacturing technology. The choice of technology is relevant both in the long
and in the medium term and is based on an economic comparison. This provides
answers to the following questions:
 impact with fixed and variable costs of complying with the order;
 the order in which the value of what technology has lower cost and more.
From a logistics point of view should be considered more advanced
technologies that require significant capital expenditures, but provide low unit
costs change, and simple (primitive) technology that does not require significant
investment, but are characterized by high proportions of variable costs. Classic
pull-ranking approach can be considered a method of constructing a series on the
basis of labor (manual labor capacity): automatic, automatic, fully mechanized,
partially mechanized, manual technology. Another sign may be the performance
of the technology, and thus the duration of individual operations.
Methodology of comparing technology options, consider the following
example: for the manufacture of a number of separate parts to select ( Рз ) has
three processing technologies that have the following characteristics:
 processing time (tоброб ) (min. / Pcs.)
 preparatory and final time (tпід.-закл) (Min. / Batch);
 the average hourly rate (St) (UAH / hour);
 The cost of raw materials (Всир.+матер.) (Kg / unit);
 material price (Цматер) (UAH/Kg)
 Fixed costs per batch (Впост.партія) (UAH).
Total costs for production batch consists of two parts:
 fixed component to the whole party, which includes fixed costs and
payment for preparatory and final time;
 variable component per 1 pc., Which includes payment processing time
and cost of material consumption.
 Mathematically, the total cost of the party making N can be calculated by
the formula:

(
S E= В пост. юпартія+ S t
t підг .−закл.
60 )(
+ St
t оброб .
60 )
+ Всир .+ миатер.×Ц матер . ×N

Note that the results of optimization of the choice of technology it is advisable to

check with criteria that take into account the duration of the process using one of the
known tools of financial analysis. So, we can say that there is absolutely the best
technology (in production processes in logistics for transportation, storage, etc.) and
have the best technology in relation to a certain value of annual demand.
However, this also means that in making decisions about the logistics of
choosing the optimal technology major regulatory factors are the annual order. This
statement updates the value of marketing in the projected estimates of annual orders
for their plausibility. On the other side the annual division order did not significantly
affect the change in total costs, while taking into account factors procurement,
transportation, etc. influence the division of the annual order can be important.
 Task 4.3:
Determine the optimal mode using 2-tech machining parts depending on the
annual order, which is 30 000 units. Give a graphical interpretation. Analyze the
results.
Marking Variant of
Unit of
Options technology
measure
1 2
Processing time tоброб min./unit 16+р=31 14+р=29
Preparatory and final time tпід.-закл. min./batch 45 55
The average hourly rate St UAH/hour 85 75
The cost of raw materials Всир.+матер. kg/unit 0,56 0,45
Material price Цматер UAH/kg 12+р=27 19+р=34
Fixed costs per batch Впост.партія UAH 5200 6800

(
S E= В пост. юпартія+ S t
t підг.−закл.
60 )(
+ St
t оброб .
60 )
+Всир .+ миатер.×Ц матер . ×N

SE – total cost

45 31
SE1 = (5200+85* 60 )+(85* 60 +0.56*27)*30000 = 5263.75+59.04*30000 =
= 5263.75+17771200 = 1 776 463. 75 UAH

55 29
SE2 = (6800+75* 60 )+(75* 60 +0.45*34)*3000 = 6868.75+51.55*30000 =
= 6868.75+1546500 = 1 553 368. 75 UAH – chearep

Company should use the technology #2, because it is cheaper for less than 30000 units. But
then the Company should use the technology #1 for more than 30000 units.
Example