Measuring Flexibility in Investment Decisions for Manufacturing Systems

✍ Scribed by E. Abele; T. Liebeck; A. Wörn

• Publisher: International Academy for Production Engineering
• Year: 2006
• Tongue: English
• Weight: 195 KB
• Volume: 55
• Category: Article
• ISSN: 0007-8506
• DOI: 10.1016/s0007-8506(07)60452-1

✦ Synopsis

Investment decisions for manufacturing systems are primarily based on three characteristics: cost of purchase and operation, cycle time in connection with maximum capacity and achievable work piece quality. However, such considerations neglect another important criterion: the flexibility that allows a manufacturing system to adapt to future production requirements and structures. The major barrier in integrating flexibility into the decision-making process is the difficulty to measure and compare it due to upcoming production scenarios that are not ultimately definable. Therefore, this paper presents a methodical concept for the evaluation of manufacturing systems using real options in order to incorporate flexibility in the decisionmaking process.