A Real Options Approach for NPV Investment Evaluation of Changeable Manufacturing Systems

Fredrik Olsson*, Alexander Werthén, Ann-Louise Andersen

*Corresponding author for this work

Research output: Contribution to book/anthology/report/conference proceedingArticle in proceedingResearchpeer-review

Abstract

Dealing with uncertain market conditions is a growing challenge for manufacturers. Changeable manufacturing systems have been suggested as a means to overcome the challenges resulting from uncertain markets. However, for changeability to acquire wide acknowledgement and implementation within industry, a clear economic justification considering the higher initial investment of such a system is needed. This paper attempts to develop an investment model comprehending the benefits of changeability, while focusing on applicability in industry. The proposed model complements a traditional Net Present Value method by evaluating the added value for changeability at either system or machine level, using a combination of Real Options approach. The model is applied in an industrial case and demonstrates an added value for changeability in both a flexible and reconfigurable manufacturing system.

Original languageEnglish
Title of host publicationTowards Sustainable Customization : Bridging Smart Products and Manufacturing Systems - Proceedings of the 8th Changeable, Agile, Reconfigurable and Virtual Production Conference CARV 2021 and 10th World Mass Customization and Personalization Conference MCPC 2021
EditorsAnn-Louise Andersen, Rasmus Andersen, Thomas Ditlev Brunoe, Maria Stoettrup Schioenning Larsen, Kjeld Nielsen, Alessia Napoleone, Stefan Kjeldgaard
Number of pages8
PublisherSpringer
Publication date2022
Pages130-137
ISBN (Print)9783030906993
DOIs
Publication statusPublished - 2022
Event8th Changeable, Agile, Reconfigurable and Virtual Production Conference, CARV 2021 and 10th World Mass Customization and Personalization Conference, MCPC 2021 - Aalborg, Denmark
Duration: 1 Nov 20212 Nov 2021

Conference

Conference8th Changeable, Agile, Reconfigurable and Virtual Production Conference, CARV 2021 and 10th World Mass Customization and Personalization Conference, MCPC 2021
Country/TerritoryDenmark
CityAalborg
Period01/11/202102/11/2021
SeriesLecture Notes in Mechanical Engineering
ISSN2195-4356

Keywords

  • Changeability
  • Changeable manufacturing
  • Investment model
  • Real options approach
  • Reconfigurable manufacturing system

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