Capacity analysis of a sugar production process based on the cost of unused capacity

Abstract

The most widely used two measures to describe the usage of resources in production processes are capacity utilization and efficiency. This paper recapitulates and analyzes in details the problems linked to their application. Measuring capacity usage with conventional measures raises a number of problems, and frequently results in wrong management decisions. Hence, we have the need to introduce a technical parameters based measure but also with having an economic content. This new measure, the `cost of unused capacity`, is more and more often used to characterize resource usage even in non-technical systems. In order to apply this method including the new feature, we established a mixed integer linear programming model. The corresponding calculations will be demonstrated through an example of a small sample problem taken from sugar production industry.