System Optimization

A step-wise method to optimize production systems is presented. The proposed method requires a holistic view of the company activities and the ability to determine where the main bottlenecks for the optimization method are. The method includes goal setting, proactive leadership, modularizing of company activities, mathematical optimization, control in a broad sense and automation of the optimization procedure.

1 Introduction

Optimization can be said to be a variation of input parameters in order to minimize or maximize, or reach a target value for a cost function, within given constraints. The word optimization commonly refers to the mathematical handling of parameters in order to maximize or minimize a mathematical function. It is, however, possible to use the word to describe handling of more complex systems[1]. Increasing corporate competition and stronger demands on lower toxic emissions and other types of waste. This makes optimization of various systems an increasingly important activity. Optimization can, at least to some extent, be applied on all system levels. However, the expected results are likely to be less consistently “good” the larger the systems are, for various reasons. The main problem with large system optimization is that there can exist major disagreements on what an optimal system is and how to measure if it is optimal. See f.e Daly in his book “Beyond Growth” [Da96] where he discusses the problems of measuring sticks when nations are viewed as systems.

Despite the fact that some companies are bigger than some nations and have highly complex structures, attempts to optimize such systems might still succeed. The reason for that is that for those systems the number of measuring sticks can be reduced to basically two: profit and market share. Market share shall be optimized considering future profit. This leaves only one parameter to be optimized; profit. What needs to be defined regarding profit is what unit to use: $ per -hour, -day, -week, -year, -decade? This decision is vital when forming the strategy for the optimization of the sales price. I.e. the profit in $/Hr has to be targeted to match the ultimate goal that may be the profit in $/decade.

This paper presents a method for optimization of production companies when profit is used as the cost function.

[1] op·ti·mi·za·tion: an act, process, or methodology of making something (as a design, system, or decision) as fully perfect, functional, or effective as possible; specifically : the mathematical procedures (as finding the maximum of a function) involved in this, Merriam-Webster Online Collegiate Dictionary