Modelling the turnover rate of a production system as a performance indicator

In any organization, the information relevant to the problem area is essential in making decisions. The top management makes decisions like expansion of the plant, automation, recruitment of senior personnel and diversification of products, etc. There are many kinds of tools or methods available to analyse these problem areas. Among these, turnover rate is useful for many purposes, especially in evaluating the performance of an organization. Here, the turnover rate is considered in order to identify the effect of the number of types of products or product mix on the performance of a manufacturing system. It can be defined as the ratio of average demand to average inventory level. The model presented discusses the effect of the number of products/product mix on the turnover rate of a production system when the approprite market value of the products is considered. The turnover rate discussed is based on the economic production quantity and the manufacturing cycle time of each product. An example is presented to explain the application of the model.