Theory of exchange

In the context of production activity, several parameters play an important role in the total cost estimation and its optimization. These parameters include facility setup cost, inventory carrying cost, and manufacturing cost for the basic model. Shortages can be incorporated in certain environment and costs associated with shortages need to be included in the analysis. It is expected that the industries will run their manufacturing facility at an optimum level. In the multi-product manufacture, optimum common cycle time approach is usually adopted and all the items are produced in each cycle. A situation may occur in the real world, in which a particular parameter concerning an item is exchanged with that of another item. It is of interest to examine the aftereffects. Otherwise also, for the purpose of internal benchmarking, a deliberate exchange of parameters can take place. This can be implemented in case of cost improvement. A generalized approach is presented and discussion is made with reference to various parameters.