Economic analysis for agility in manufacturing environment

Abstract

This article is intended to model unpredictable change in an agile manufacturing environment. A model for unpredictable changes expressed by an agility index was developed and explained through numerical simulation. The model took into consideration the need for investing in agility depends upon the business circumstances and environmental turbulence. It shows that investing in agility increases the expected savings from changes and decreases the expected time a company needs to spend in dealing with change intelligently. The mathematical model is developed to evaluate the expected total cost through the four dimensions of change: cost, time, scope and robustness. This model supports the decision making process for justifying agility investment using change sensors analysis, and it aids in finding the optimal value of an agility index that minimises the expected total cost. It is found that there is an optimal value for an agility index that minimises the expected total cost for a certain production system.