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Consideration of market demand volatility risks, when making manufacturing system investments
University West, Department of Engineering Science, Research Enviroment Production Technology West. Global Industrial Development, Scania CV AB, Södertälje. (PTW)ORCID iD: 0000-0002-0578-3804
School of Science and Technology, Örebro University.ORCID iD: 0000-0003-1408-2249
University West, Department of Engineering Science, Division of Manufacturing Processes. (PTW)ORCID iD: 0000-0002-0380-1386
2016 (English)In: Procedia CIRP, ISSN 2212-8271, E-ISSN 2212-8271, Vol. 40, 307-311 p.Article in journal (Refereed) Published
Abstract [en]

When investing in new manufacturing systems, many aspects must be taken into consideration to ensure a sustainable business. In respect to the financial aspect, both the one-off investment cost and the continuous operational cost must be analysed to ensure that the life-cycle cost perspective is appreciated. However, one detail in the cost analyses that is often overlooked is the composition of fixed and variable cost elements. These details are important to be able to better manage the risk of market demand volatility, and accordingly make appropriateinvestment decisions. This case study demonstrates that when there is a low risk for reduced market demand, investing in a manufacturing system with low variable cost is favourable. However, if there is a high risk for reduced market demand, the importance will instead be to have a low fixed cost, as this will be the dominant cost factor.

Place, publisher, year, edition, pages
Elsevier, 2016. Vol. 40, 307-311 p.
Keyword [en]
Manufacturing System; Sustainable; Investment; Finance; Case Study; Cost Analyses; Risk Management
National Category
Production Engineering, Human Work Science and Ergonomics
Research subject
Production Technology
Identifiers
URN: urn:nbn:se:hv:diva-8791DOI: 10.1016/j.procir.2016.01.044ScopusID: 2-s2.0-84966657934OAI: oai:DiVA.org:hv-8791DiVA: diva2:892926
Conference
13th Global Conference on Sustainable Manufacturing, GCSM 2015; Binh Du'o'ng New City; Viet Nam; 16 September 2015 through 18 September 2015
Available from: 2016-01-11 Created: 2015-12-14 Last updated: 2017-02-14Bibliographically approved
In thesis
1. Money talks while volume and value should run the show: An evaluation of financial parameters for decision making duringmanufacturing system acquisition
Open this publication in new window or tab >>Money talks while volume and value should run the show: An evaluation of financial parameters for decision making duringmanufacturing system acquisition
2017 (English)Licentiate thesis, comprehensive summary (Other academic)
Abstract [en]

Market economic values have for the last decades been given an increasing role with the establishment of financial institutes and global organisations with a capitalistic focus as a consequence. As a counter reaction, the concept of sustainable development has emerged complementing the economic focus with environmental and social aspects. However, there are still challenges on how to make balanced decisions based on all three view points and consequently the decision makers still primarily reside to the established tangible financial data. Within the industrial setting there is no difference. The manufacturing system design is based on multiple criteria and requirements, but commonly the final investment decision is primarily based on what can be financially justified. Longterm solutions probably lies in combining the tangible economy with the less tangible soft values that cannot be valued in monetary means. Therefore, to find this sweet spot, the purpose of this research is to in-depth investigate the world of economy, but from an engineers' point of view. A financial analysis is done to understand the economical components and how these are related to the manufacturing system. Furthermore, to connect cost with contributed value of the manufacturing system, a holistic business value chain analysis is done to ensure that less tangible aspects can be understood and utilised. The result of this research, highlights for example that sales volume has a larger impact on the manufacturing profitability, than that of the initial investment cost. Therefore, manufacturing systems should also be evaluated on the bases of how well it can meet the volatility in market demands. Another result presented is a portfolio of new graphical representation used as a support tool for investment decisions. Furthermore, to be able to invest in manufacturing systems that contribute to a more competitive company, the wider business value with manufacturing is discussed.

Place, publisher, year, edition, pages
Trollhättan: University West, 2017. 55 p.
Series
Licentiate Thesis: University West
Keyword
Value chain, Manufacturing system, Investment process, Economical decision support, Production
National Category
Computer Systems Communication Systems
Research subject
Production Technology
Identifiers
urn:nbn:se:hv:diva-10696 (URN)978-91-87531-52-1 (ISBN)978-91-87531-51-4 (ISBN)
Supervisors
Available from: 2017-02-24 Created: 2017-02-14

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Johansson, AndersPejryd, LarsGustavsson Christiernin, Linn
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