Integrating Cost, Capacity, & Simulation Analysis
Frank Chance, Ph.D., Jennifer Robinson, Ph.D.
In this article, we discuss the integration of cost, capacity, and simulation analysis. Cost analysis is often treated as a separate task from capacity and simulation modeling activities. Several important factory-level cost performance measures, however, rely on detailed capacity analysis calculations. In fact, much of the difficult groundwork for making these calculations has already been completed in existing capacity and simulation analysis tools. We argue that these activities fit quite naturally together, and give a more complete picture of factory performance than isolated analyses. Also, capacity and simulation analysis tools are increasingly used to support strategic and tactical business decisions. These decisions are most often framed in terms of their impact on the bottom line. Therefore, effective decision-support tools must speak not only in terms of capacity and cycle time, but also in terms of dollars.
We focus on three factory-level cost and revenue performance measures, namely dollar-valued throughput, dollar-valued inventory, and operating expenses. We describe the input parameters added to Factory Explorer®, an existing factory analysis tool, to support estimation of these performance measures. With one additional parameter, it is also possible to perform detailed product cost analysis. We present some sample uses for this integrated analysis framework. On a cautionary note, we also present an example where the use of product cost to the exclusion of factory-level measures can lead to sub-optimal results. We close by discussing the advantages present in an integrated cost, capacity, and simulation analysis framework.
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