Computing an Average Cost Allocation for Interrelated Operations

An important goal in the analysis of a sequential manufacturing process, such as the production of integrated circuits, is to identify those operations which have the greatest potential for cost reduction. One method for making this identification compares the existing production line to a target line composed of "optimal" operations and then allocating an appropriate portion of the difference in cost to each of the operations. For instance, you could choose a fixed sequence in which to optimize individual operations and assign to each operation the incremental cost recovered by its upgrading. However, because of the interdependence of manufacturing operations, this cost allocation may vary with the sequence selected. A method of eliminating this sequence-dependence is to average the cost allocation over the set of all possible upgrading sequences. Here we present an efficient method for computing these averaged allocations for a common type of manufacturing process.