Industrial Engineering and Management Systems

Korean Institute of Industrial Engineers (대한산업공학회)
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Method and Procedure for Economic Evaluation of Improvement Activities

  • Kono, Hirokazu (Graduate School of Business Administration, Keio University) ;
  • Ichikizaki, Osamu (Graduate School of Business Administration, Keio University)
  • Received : 2015.02.02
  • Accepted : 2015.06.05
  • Published : 2015.06.30
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Abstract

The purpose of this paper is to propose an appropriate evaluation scheme for improvement activities, based on a simple model comprising cash inflow by sales as well as variable and fixed cost expenditures. The paper distinguishes capacity surplus and capacity shortage situations, and examines economic benefits gained by yield increase improvement and capacity increase. The paper then proposes a basic rule of thumb for economic evaluation of improvement activities. The logic is simple but useful in practice, being conducive towards improvement activities under current economic conditions with uncertainties.

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References

  1. Kono, H. (2003), A Method for Evaluating Investment Alternatives on the Total-Cost Unit-Cost Domain, Proceedings for the Autumn Conference of the Japan Industrial Management Association, Osaka, 124-125.
  2. Kono, H. and Mizumachi, T. (2004), Economic Evaluation for Multiple Investment Alternatives under Uncertainty, Proceedings of the 5th Annual Conference of Asia-Pacific Industrial Engineering and Management Systems, Gold Coast, Australia, 8.3.1-8.3.10.
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  4. Kono, H. (2010), Economic Risk Analysis for Investment Alternatives Considering Yield and Capacity over Multiple Periods, Journal of Japan Industrial Management Association, 60(6E).
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Cited by

  1. Profitability and Risk Analysis for Investment Alternatives on C-R Domain vol.16, pp.4, 2015, https://doi.org/10.7232/iems.2017.16.4.647