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Bengtsson, Jens
Publications (3 of 3) Show all publications
Bengtsson, J. & Olhager, J. (2002). The impact of the product mix on the value of flexibility. Omega, 30(4), 265-273
Open this publication in new window or tab >>The impact of the product mix on the value of flexibility
2002 (English)In: Omega, ISSN 0030-2228, E-ISSN 1541-3764, Vol. 30, no 4, p. 265-273Article in journal (Refereed) Published
Abstract [en]

Product-mix flexibility is one of the major types of manufacturing flexibility, referring to the ability to produce a broad range of products or variants with presumed low changeover costs. The value of such a capability is important to establish for an industrial firm in order to ensure that the flexibility provided will be at the right level and used profitably rather than in excess of market requirements and consequently costly. We use option-pricing theory to analyse the impact of various product-mix issues on the value of flexibility. The real options model we use incorporates multiple products, capacity constraints as well as set-up costs. The issues treated here include the number of products, demand variability, correlation between products, and the relative demand distribution within the product mix. Thus, we are interested in the nature of the input data to analyse its effect on the value of flexibility. We also check the impact at different capacity levels. The results suggest that the value of flexibility (i) increases with an increasing number of products, (ii) decreases with increasing volatility of product demand, (iii) decreases the more positively correlated the demand is, and (iv) reduces for marginal capacity with increasing levels of capacity. Of these, the impact of positively correlated demand seems to be a major issue. However, the joint impact of the number of products and demand correlation showed some non-intuitive results. ⌐ 2002 Elsevier Science Ltd. All rights reserved.

National Category
Engineering and Technology
Identifiers
urn:nbn:se:liu:diva-40200 (URN)10.1016/S0305-0483(02)00034-8 (DOI)52603 (Local ID)52603 (Archive number)52603 (OAI)
Available from: 2009-10-10 Created: 2009-10-10 Last updated: 2017-12-13
Bengtsson, J. & Olhager, J. (2002). Valuation of product-mix flexibility using real options. International Journal of Production Economics, 78(1), 13-28
Open this publication in new window or tab >>Valuation of product-mix flexibility using real options
2002 (English)In: International Journal of Production Economics, ISSN 0925-5273, E-ISSN 1873-7579, Vol. 78, no 1, p. 13-28Article in journal (Refereed) Published
Abstract [en]

Flexibility in manufacturing operations is becoming increasingly more important to industrial firms, due to e.g., increasing market demand volatility, internationalisation of markets and competition, and shorter product life cycles. Defining, measuring and evaluating manufacturing flexibility have not been straightforward - neither in theory nor in practice. The use of real options has shown to be an accessible approach for the valuation of certain types of flexibility. When using real options for capital budgeting purposes it is possible to take flexibility options into account in the valuation process. In this paper, we use real options to evaluate one specific type of manufacturing flexibility, i.e., product-mix flexibility. We provide both theoretical and practical perspectives, based on a real case. The main interest of the company under study is to evaluate product-mix flexibility with respect to capacity, set-ups, level of automation and multi-functionality of resources. The case involves multiple products and demand uncertainty, wherefore product demands are used as the underlying asset in the real options models. Thus, the contribution of this paper concerns the combination of real case, multiple products, capacity constraints, and set-up costs. The results of the analysis show that (i) the value of flexibility decreases when demand volatility increases, (ii) flexible resources add substantial value as compared to dedicated resources, and (iii) the flexibility value of marginal capacity decreases with increasing levels of capacity.

National Category
Engineering and Technology
Identifiers
urn:nbn:se:liu:diva-40201 (URN)10.1016/S0925-5273(01)00143-8 (DOI)52604 (Local ID)52604 (Archive number)52604 (OAI)
Available from: 2009-10-10 Created: 2009-10-10 Last updated: 2017-12-13
Bengtsson, J. (2001). Manufacturing flexibility and real options: A review. International Journal of Production Economics, 74(1-3), 213-224
Open this publication in new window or tab >>Manufacturing flexibility and real options: A review
2001 (English)In: International Journal of Production Economics, ISSN 0925-5273, E-ISSN 1873-7579, Vol. 74, no 1-3, p. 213-224Article, review/survey (Refereed) Published
Abstract [en]

This paper considers manufacturing flexibility and real options from an industrial engineering/production management perspective. Real options papers are related to different types of manufacturing flexibility in order to show which types that are considered and in what way they are considered. Flexibility types not valued with real options and real options without any corresponding manufacturing flexibility type are identified and discussed. © 2001 Elsevier Science B.V. All rights reserved.

Keywords
Capital budgeting, Manufacturing flexibility, Production management, Real options
National Category
Engineering and Technology
Identifiers
urn:nbn:se:liu:diva-47200 (URN)10.1016/S0925-5273(01)00128-1 (DOI)
Available from: 2009-10-11 Created: 2009-10-11 Last updated: 2017-12-13
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