This paper demonstrates a new methodology for designing a virtual factory model and model execution on the basis of a real schedule plan. The main characteristic of the developed method is that the inputs are regarded as one of the main parameters of the production process, and the main objective is to create a low-cost production process model. The methodology is adjusted for use in SMEs (Small and Medium-Sized Enterprises) with individual or unique type of production. For such companies, the method represents an ability to optimize existing production processes through detecting and eliminating possible errors and disturbances before the real production process is executed at an acceptable cost. The applicability and suitability of the developed method for virtual production performance has been proven with the verification process, where the input data for the simulation was obtained from a real company. The simulation results have shown that the presented methodology is a useful tool for the optimization of the production process. (Received in June 2013, accepted in September 2013. This paper was with the authors 1 month for 1 revision.)