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Principle (Diminishing Returns): The marginal  improvement in a system from improvements of a single factor tends to decrease as that single factor is improved.


The principle of Diminishing Returns is a general concept from economics that finds broad application in manufacturing. Often a manufacturing system can be improved by altering a variety of factors (e.g., equipment reliability, scheduling policies, product designs, process controls, etc.). The principle states that, in most cases, the additional benefit from improving a single factor get less and less as that factor is improved.  Hence, it is often the case that an effective improvement strategy is one that devotes resources to more than one alternative.


  1. Reducing Repair Times: The Stand Alone Capacity (SAC) of a single machine workstation is the long-term rate at which it could produce if it were never starved for inputs nor blocked by lack of space for outputs.  One way to increase the SAC is to increase the repair rate (i.e., shorten the average times . As we go on increasing the repair rate though, the marginal gain in SAC keeps on decreasing. The case is illustrated in the following diagram. Initially, when the repair rate is low (i.e., repair times are long), improvements cause a large increase in SAC.  But as repair rate grows large the increase in SAC for additional improvements in repair rates diminishes.  The implication is that once repair times have been made sufficiently low on one workstation, it is probably attractive to devote resources somewhere else.

Principle of diminishing return: stand alone capacity versus repair rate

  1. Adding Capacity: The throughput of a production line can be increased by adding capacity to a workstation in the line.  If initially this station is the bottleneck, then the increases in throughput per additional unit of capacity will be large.  But as more capacity is added to the station it will eventually cease to be the bottleneck and hence the additional throughput per extra unit of capacity will decline. Again the implication is that once capacity has been increased sufficiently at one workstation, a throughput enhancement effort would be better served by focusing on other workstations in the line.

  2. Reducing Setups: One way to increase the effective capacity of a workstation, and to facilitate the production of smaller lots, is to reduce the setup time it takes to switch the station from one product type to another.  Initially, reductions in setup times have a large effect on the workstation capacity.  But as the setup times grow smaller, additional reductions have a diminishing impact on capacity.  Hence, while it makes sense to focus on the station whose setups are most troublesome, it will eventually become appropriate to shift setup reduction to another station.

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