Economic analysis and synthesis of technology investment strategies in manufacturing

Analyzing and Justifying an investment strategy that changes the production system from continuous manufacturing to small batch flexible manufacturing while maintaining competitive characteristics such as cost is a significant undertaking. Considerable discussion in the literature has produced a number of useful concepts and alternative models for examining manufacturing system investments. The most difficult problems to overcome; however, remain those that involve estimating the actual costs and benefits that will accrue as a result of an investment. The problem of financially analyzing the investment hasn't changed. This paper presents the development of an Enterprise Decision Support Model (EDSM) used to analyze investment decisions for system performance and to determine the most beneficial sequence for deploying a group of investments. The approach uses discrete event simulation to create the EDSM and capital budgeting techniques to develop a Cumulative Net Present Value (CNPV) function for competing investment implementation choices. EDSMs support the evaluation procedure by making a comprehensive system model a formal part of the strategic planning and decision process. The approach was investigated using a local manufacturing company as a test case. The results of the investigation are provided as well as a discussion regarding this approach to decision analysis.