Integration of speed economics into decision-making for manufacturing management

Decision methodologies for manufacturing management typically use cost as the sole or primary criterion of merit. In this article we impute economic value for the speed of manufacturing deployment and execution, thereby enabling the value of speed to be properly weighed against costs. To illustrate, we consider semiconductor industry data. Selling prices of major products have been declining at stable rates for many years. We show that, to good approximation, these rates of price decline are insensitive to speed improvements achieved at individual factories, and therefore it is relatively straightforward to calculate the revenue gains resulting from local speed improvements. We embed these calculations in a Delay Cost Model that we propose as a practical engineering tool to quantitatively assess revenue gains resulting from increased speed of engineering and manufacturing execution. (c) 2006 Elsevier B.V. All rights reserved.