Real Options: an Application to RMS Investment Evaluation

Amico, M.; Asl, Farshid Maghami; Pasek, Zbigniew J.; Perrone, Giovanni

doi:10.1007/3-540-29397-3_34

Cited by 15 publications

(7 citation statements)

References 7 publications

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“…2 Assembly system design starts with market needs and product design systems is presented by Bruccoleri and Perrone [16]. Amico et al [17,18] have studied the use of real option analysis (ROA) by explicitly capturing the flexibility and its effects on uncertainty. ROA provides a consistent treatment of risk in the valuation of investment in production systems.…”

Section: Assembly System Trade-off Analysis Methodsmentioning

confidence: 99%

Life cycle and unit-cost analysis for modular reconfigurable flexible light assembly systems

Heilala

Montonen²,

Väätäinen³

2008

Proceedings of the Institution of Mechanical Engineers, Part B:

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The article presents a decision support methodology for the selection of a modular reconfigurable assembly system using three-dimensional visualization, component-based simulation, efficiency, and economic analysis methodology. During the design and selection of an assembly system, measurement schemes should be established for determining and understanding design effectiveness. Measurements can be classed into two categories: cost and performance. Understanding assembly production costs is the first step towards increasing profits. The authors have developed an analysis method that integrates factory simulation, overall equipment efficiency (OEE), and economic analysis methods. Cost calculation includes life cycle cost (LCC), cost of ownership (COO), commonly used investment evaluation methods, discounted cash flow techniques, net present value (NPV), and internal rate of return (IRR). The idea is to use these integrated analysis methods in the selection and development of a light assembly system. The development is based on selected industrial standards and the authors’ own experience in assembly system design and simulation. The developed TCO (total cost of ownership) methodology is useful in system supplier and end-user communication; ideally, it is used in the assembly system sales process, it helps in trade-off analysis of the system concepts, and it improves system specification.

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Section: Assembly System Trade-off Analysis Methodsmentioning

confidence: 99%

Life cycle and unit-cost analysis for modular reconfigurable flexible light assembly systems

Heilala

Montonen²,

Väätäinen³

2008

Proceedings of the Institution of Mechanical Engineers, Part B:

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“…Kuzgunkaya and ElMaraghy [5] present an RMS evaluation model using a fuzzy multi-objective optimization approach incorporating both economic and strategic objectives, such as flexibility and responsiveness. Amico et al [2] propose a model that compares system alternatives based on traditional net present value and real options analysis. Singh et al [9] and Abdi and Labib [1] apply fuzzy analytical hierarchy processing logic for the selection of manufacturing systems based on different criteria, such as responsiveness, product cost, operator skill, and convertibility.…”

Section: Literature Reviewmentioning

confidence: 99%

Investigating the Potential in Reconfigurable Manufacturing: A Case-Study from Danish Industry

Andersen

Brunoe

Nielsen

2015

Advances in Production Management Systems: Innovative Production Management Towards Sustainable Growth

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In today's global manufacturing environment, manufactures must respond to the challenges of quickly adopting new technologies and provide an increasing number of product varieties, while continuously increasing costefficiency. Reconfigurable manufacturing systems meet these challenges through rapid and efficient changes in functionality and capacity. The purpose of this paper is to investigate a practical approach for evaluating the potential of reconfigurability in manufacturing companies, through a case-study in Danish industry. In this approach, historical production data is analyzed and focus is explicitly on capacity savings, which makes it applicable for decision support in companies that are in a transition towards becoming reconfigurable.

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“…Starting from this idea, several authors developed comprehensive approaches for real option valuation (ROV), see e.g., [29][30][31]. Many papers have been published dealing with the application of ROT to problems in the area of production engineering, e.g., [32,33]. Since the option valuation is more complex than traditional NPV calculation, often expert knowledge is needed for the application of ROT, which has lead to only scarce diffusion of this method in industry up to now.…”

Section: Investment Theory-real Optionsmentioning

confidence: 99%

Valuation of changeable production systems

Milberg

Möller

2008

Prod. Eng. Res. Devel.

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The introduction of changeable production systems increases the adaptability of factories in an uncertain environment. This paper analyzes the valuation of the economic efficiency of such systems using the real options theory. The developed approach proposes a structured valuation process for selecting options related to production engineering and factory planning. Based on a classification of possible modifications of a production system, options profiles are derived. Considering the existing uncertainty of a company's environment these profiles may be utilized to identify real options which ought to be included when valuating a technical production system design.

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Real Options: an Application to RMS Investment Evaluation

Cited by 15 publications

References 7 publications

Life cycle and unit-cost analysis for modular reconfigurable flexible light assembly systems

Life cycle and unit-cost analysis for modular reconfigurable flexible light assembly systems

Investigating the Potential in Reconfigurable Manufacturing: A Case-Study from Danish Industry

Valuation of changeable production systems

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