Manufacturing and Production Economics Numerical Model Old Non-FMS versus Modern FMS Plants

Abstract

Flexible Manufacturing System (FMS) is a modern innovation in manufacturing technology that allows a factory to switch at no cost between manufacturing different products. This paper presents a simple numerical model of manufacturing and production economics with illustrated demand and cost curves. The model shows industry long-run equilibrium (E( Π )=0) for manufacturing and production to supply hypothetical demand schedules for two products: 1 and 2. The model has two plant types: old non-FMS Plant 2 L that can produce only product 2 and modern FMS Plant K that can switch easily between manufacturing products 1 and 2. The model assumes linear total cost curves with absolute capacity limits for the two plant types.