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Incorporating learning curve costs in acquisition strategy optimization

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  • Andrew G. Loerch

Abstract

Each year, the U.S. Army procures billions of dollars worth of weapons and equipment. The process of deciding what to buy, when to buy, and in what quantities is extremely complex, requiring extensive analysis. Two techniques used in this analysis are mathematical programming and cost estimation. Although they are related through constraints on available procurement funds, the use of nonlinear cost learning curves, which better represent system costs as a function of quantity produced, have not been incorporated into the mathematical programming formulations that compute the quantities of items to be procured. As a result, the solutions obtained could be either suboptimal, or even infeasible with respect to budgetary limitations. In this paper we present a piecewise linear approximation of the learning curve costs for a more accurate portrayal of budgetary constraints used in a mixed integer linear programming for acquisition strategy optimization. In addition, implementation issues are discussed, and performance results are given. © 1999 John Wiley & Sons, Inc. Naval Research Logistics 46: 255–271, 1999

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  • Andrew G. Loerch, 1999. "Incorporating learning curve costs in acquisition strategy optimization," Naval Research Logistics (NRL), John Wiley & Sons, vol. 46(3), pages 255-271, April.
    • Handle: RePEc:wly:navres:v:46:y:1999:i:3:p:255-271
    DOI: 10.1002/(SICI)1520-6750(199904)46:33.0.CO;2-2
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    1. J. A. Tomlin, 1971. "Technical Note—An Improved Branch-and-Bound Method for Integer Programming," Operations Research, INFORMS, vol. 19(4), pages 1070-1075, August.
    2. Andrew G. Loerch & Robert R. Koury & Daniel T. Maxwell, 1999. "Value added analysis for army equipment modernization," Naval Research Logistics (NRL), John Wiley & Sons, vol. 46(3), pages 233-253, April.
    3. Paul B. Kantor & Willard I. Zangwill, 1991. "Theoretical Foundation for a Learning Rate Budget," Management Science, INFORMS, vol. 37(3), pages 315-330, March.
    4. Dutton, John M. & Thomas, Annie & Butler, John E., 1984. "The History of Progress Functions as a Managerial Technology," Business History Review, Cambridge University Press, vol. 58(2), pages 204-233, July.
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    Cited by:

    1. Wei Xie, 2017. "Optimal pricing and two-dimensional warranty policies for a new product," International Journal of Production Research, Taylor & Francis Journals, vol. 55(22), pages 6857-6870, November.
    2. Andrew G. Loerch & Robert R. Koury & Daniel T. Maxwell, 1999. "Value added analysis for army equipment modernization," Naval Research Logistics (NRL), John Wiley & Sons, vol. 46(3), pages 233-253, April.
    3. Gerald G. Brown & Robert F. Dell & Heath Holtz & Alexandra M. Newman, 2003. "How US Air Force Space Command Optimizes Long-Term Investment in Space Systems," Interfaces, INFORMS, vol. 33(4), pages 1-14, August.
    4. Gerald G. Brown & Robert F. Dell & Alexandra M. Newman, 2004. "Optimizing Military Capital Planning," Interfaces, INFORMS, vol. 34(6), pages 415-425, December.

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