Telesis "...an ancient Greek word signifying the achievement of a steady progress towards an objective through careful planning & the intelligent use of resources"
The Real Incomes Approach to economics and the effective management of supply side resources according to microeconomic principles requires a system of information management which is able to manipulate many factors in an techical, economic and financial model.
The classic econometric models tend to relate output in a mathematical function to just labour input and capital. Structural Production Functions are a version of conventional input-output modelling. However their layout maps the functions of the whole company and also they take into account all of the factors of production for each activity including:
manpower
information
equipment
energy
variable inputs
space
Not just input-output, also a production function
By relating the actual technology employed at different stages in the process to its capacity, operational capacity utilization and output yield (saleable output) it is possible to create a functional relationship relating throughput (input) to unit costs, physical output and cash flow.
These relationships, including yield, can be varied at will within the range of operational capacity of the equipment and subject to any other constraints such as availability of manpower and energy or any other factor which might be limiting. Because the operational limits are physical one ends up with a production function for each stage in a process. On the other hand subsequent analysis might introduce further constraints related to finance.
Depending upon the management criteria the additional factor to effect the usage of the listed factors might or might not be:
finance
For certain activities the relative input costs or delivery cost impacts on the output offer (net price) is will depend upon:
location
The Time Factor
All of the factors in an enterprise are used in production of a service or a physical product and the introduction of time into the calculations on the state of affairs of a company is the equivalent to converting the enterprise into a process. (see Process Automation). A company can possess best practice technical input-output ratios and effective procurement can produce what in economic terms is a theoretically profitable activity. However, if the flow of payments for inputs and receipt for outputs are not well coordinated over time it is possible for the profit situation to convert to a loss situation.
Time horizons for decisions
Most corporate decisions are ranked according to the period within which they will be implemented. Most optimization algorithms operate within the short term within which fixed factors will not change and therefore represent constraints. Structural Production Functions apply a formula whereby all resources and factors are aggregated into a single cost model and simulations can be run to determine in "what direction" technological factors should evolve to improve performance. Sometimes desirable options are not feasible because the state of the art technology does not exist. On the other hand this provides indications where a next generation of technology should improve matters.
Capacity utilization
Because capital equipment can be aggregated into a single cost model with variable inputs, Structural Production Functions represent a correct quantification of the cost of under-capacity operations including the cost of time delay to economic replacement.
Certainly accounting can estimate the cost of undercapacity working but Structural Production Functions make this explicit and a key component of cost calculations in simulation runs.
An example of a SPF used for management decisions support is the Seel-Telesis® Program.
functional relationship relating throughput (input) to unit costs, physical output and cash flow. 