Economics of Cost and Production Term Paper

" (Kee, 2001, p. 139)

To further this discussion of short- and long-term production and cost one must at least briefly understand the just-in-time model. This model was developed by the Toyota Motor Corporation to mirror the ability of certain suppliers to provide just the amount of a product that a market demanded at the time it was demanded. To apply this model to manufacturing one must have a careful set up for short- and long-term goals of production, and potentially this model can effect short run production and be ignored by cost cutting that attempts to buy raw materials in bulk to meet the demand of a bottleneck in the early life of a product. (Ohno, 1988, pp.26-33) Just-in-time has become a goal of many in manufacturing, as they seek to carefully organize short-term and long-term production and cost issues. In the short-term, procurement is lower and waste is less, and in the long-term the firm is not left with surplus with regards to either raw materials or unwanted or slow selling finished products.

Short-term goals of production and cost often revolve around the idea that the most important job of the manufacturing team revolves around how to procure the most raw materials at the lowest price and how to effectively cut costs of production of a product while retaining or even raising its market price. Long-term goals on the other hand have to do with assessing the quality of a product and attempting to prevent product failure in the future, so as to reduce long-term loss from attrition and/or in the worst case scenario recalls.("Value, in Economics," 2004) Both sort and long-term decisions and plans must be in place and balanced for a product to meet the demands of profit, no matter the industry or the size of the firm. (Hegji, 2001, p. 17)

Short-term production and cost goals, revolve around the attempt to most immediately recuperate the cost of research and development as well as the cost of bringing a product to full production. These costs include both fixed and variable costs, where variable costs are sought at lower rates and fixed costs are fixed. Short-term production and cost may be influenced heavily by attempting to bottleneck the market while long-term production and cost models attempt to sustain the longevity of demand through the application of investment in resources that best meet quality assurance to reduce attrition and returns. In long-term production cost scenarios the firm is attempting to re-contract and lower fixed as well as variable costs and may also pay much more attention to preventative application and reduction of labor costs through automation and speed of set up and production.

References

Dorf R. C and Kusiak, a. (1994) Handbook of Design, Manufacturing and Automation. New York: Wiley-IEEE.

Value, in Economics. (2004). In the Columbia Encyclopedia (6th ed.). New York: Columbia University Press.

Hegji, C.E. (2001). Fixed Cost, Marginal Cost and Market Structure. Quarterly Journal of Business and Economics, 40(1), 17.

Kee, R.C. (2001). Evaluating the Economics of Short- and Long-Run Production-Related Decisions [*]. Journal of….....