4.2. Importance of Economic Evaluation

Now let us find the balance number of trucks needed for one loader. So, that depends upon your the balance number of trucks per loader going to be serve by one loader is equal to your truck cycle time divided by load of cycle time. So, you have estimated the truck cycle time earlier, so estimated it is 39.5. The truck cycle time is 39.5 and the loader cycle time is 5.5, we have calculated the loader cycle time as 5.5. So, this gives me the balance number of 7.18.

To determine how many trucks are needed for one loader, you divide the truck cycle time by the loader cycle time. Here, the truck cycle time is found to be 39.5, while the loader cycle time is 5.5. When we compute this, we find a balance of 7.18 trucks necessary for optimal operation. It's important to round this number properly, either to 7 or 8, based on how it impacts productivity and cost.

Think of a taxi service where a driver can take passengers to a destination quickly (loader cycle time). If there are too few taxis (trucks), passengers will have to wait, resulting in lost potential rides. Conversely, having too many taxis when there aren't enough passengers (beyond the balance number) leads to wasted time and resources. Thus, finding the right number of taxis is crucial for efficient service.

So, just to give you a better explanation I am just working out what will be the economics when I go for different number of trucks. Say if I go for 5 number of trucks 6, 7, 8 and 9, how the productivity will vary, how the unit production cost will vary? We will work it out and see, so that will get a clear picture on what is the effect of number of trucks, and what is the effect of increasing the number of trucks beyond the balance number on the unit production cost.

It's essential to analyze how productivity changes with various truck numbers. For example, starting with 5 trucks allows us to calculate specific outputs, such as how much material can be moved per hour. If we increase the number of trucks to 6, 7, 8, or 9, we need to observe both productivity levels and the associated costs, especially after reaching the balance point, where increasing truck numbers no longer helps productivity but raises costs.

Consider a pizza delivery service. If one delivery person (loader) can only deliver a certain number of pizzas at a time, having more delivery vehicles (trucks) than needed means some cars will be idle waiting for pizzas to be ready, which is inefficient. You need to strike a balance to ensure all delivery vehicles are used effectively while keeping operational costs manageable.

Beyond the balance number, so you can see that number of trucks are more so the truck will be waiting for the loader unless the loader is available your truck cannot do the job. So, the productivity here will be controlled by your loader. So, beyond the balance number you can see that you cannot go beyond the productivity of the loader because the load of cycle time will control the productivity of the system, for cases above the balance number.

When we have more trucks than the balance number, those additional trucks can only wait for the loader to become available. The productivity of the entire system is reliant on the loader, which can only process a certain amount of material at a time, hence the effectiveness of each additional truck diminishes.

Imagine a school where there's only one teacher (the loader) and multiple students (the trucks). If there are too many students wanting attention, some will simply have to wait, regardless of how many more students are present. The teacher can only teach a finite number of students at once, demonstrating why having too many students waiting is not beneficial.

Now let us estimate the total unit cost for the truck loader combinations for different number of trucks. Say for first for 5 number of trucks, how will you calculate the total cost? Total cost is nothing but 5 multiped what is the hourly cost of truck 1650 plus there is only one loader 1 multiplied by 2700. This gives me the cost is 10950 rupees. Similarly for the 6 trucks, 6 multiped 1650 + 1 multiped 2700, so this gives me the cost is rupees 12600.

The unit cost is determined by adding the costs associated with each truck and the loader, which varies depending on the number of trucks. By calculating this for each possible number of trucks, you can gain insights into how costs fluctuate, which is vital for economic decision-making.

Think of a family budgeting for groceries. Each member (truck) adds to the total grocery bill (cost). If too many family members go, the grocery bill rises sharply, but they can only cook in one kitchen (loader) at a time. Finding a number that maximizes what is made (meal productivity) while minimizing the overall costs is key to budgeting effectively.

So, one important thing you have to note here is when the number of trucks is 5 though the total cost is less in this case, but the productivity is also less, that is why you can see that the unit cost is high. But as your number of trucks increases you can see that the productivity increases significantly, that is why your unit cost of production reduces.

While fewer trucks may lower total costs, they compromise productivity, leading to higher unit costs. Conversely, increasing truck numbers enhances productivity, which reduces unit costs until reaching the balance point. Beyond this, further increases lead to diminished returns where costs rise without productivity benefits.

Consider a farmer who has only a few tractors (trucks) for farming. If they need more tractors to increase production (plowing the fields), they might spend more for new tractors, but if they buy too many, they’ll just have idle equipment, leading to wasted money. Likewise, having the right number maximizes production without unnecessary costs.

But when you try to increase number of trucks beyond the balance number, what is happening? There is no increase in productivity. Beyond the balance number the productivity is limited by the loader, so I cannot go beyond 90-meter cube per hour that was the productivity of the loader.

Once the balance number is established, shifting beyond it yields no productivity gain. The loader's limits create a scenario where additional trucks only inflate costs rather than enhance efficiency. Properly rounding to the nearest practical number (like 7 instead of 8) helps avoid unnecessary costs while balancing the operations.

In a concert, if there are too many musicians trying to play at once (extra trucks), they may just clutter the stage without enhancing the music being performed (loader productivity). The conductor (economics of the situation) can only manage so many musicians efficiently at one time, emphasizing the need for balance.

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