Two Measures of Production System Flexibility and their Application to Identify Optimal Capacity Investment

Klaus Altendorfer, Corinna Engelhardt-Nowitzki, Herbert Jodlbauer

Research output: Chapter in Book/Report/Conference proceedingsConference contributionpeer-review

Abstract

We motivate the use of a company’s capability to handle the requirements con-cerning mean customer required lead time and customer demand variation as measures for production system flexibility within a Value Chain. Thus, the cus-tomer driven production planning concept is applied which links together custom-er demand variation, mean customer required lead time and service level. Thereby inventory holding and capacity costs for certain levels of required customer demand variation and mean customer required lead time are derived. For a service level constraint model, the cost optimum for capacity and inventory holding costs is shown to imply the ability to handle a certain mean customer required lead time flexibility when capacity demand variation is predefined. Further, the optimal costs are shown to increase in capacity demand variance. Applying the developed method a manager can either identify the minimum mean customer required lead time for a predefined capacity demand variation or he/she can identify the optimal values for the two flexibility measures discussed to minimize costs.
Original languageEnglish
Title of host publicationProceedings - 1st International Conference on Value Chain Management Steyr 2011
PublisherShaker Verlag
Pages441-461
ISBN (Print)978-3-8440-0041-2
Publication statusPublished - 2011
EventValue Chain Management (VCM) Conference - Steyr, Austria
Duration: 4 May 20115 May 2011
http://www.vcm-conference.com

Conference

ConferenceValue Chain Management (VCM) Conference
CountryAustria
CitySteyr
Period04.05.201105.05.2011
Internet address

Keywords

  • manufacturing
  • flexibility management
  • customer driven production planning
  • inventory
  • capacity investment analysis
  • Value Chain demand variation

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