A new method for guiding process flexibility investment: flexibility fit index

Flexibility enables manufacturing firms to respond efficiently to changes in the environment. Many firms make great efforts to increase their manufacturing flexibility to remain competitive in today's turbulent market. However, it is not true to say that the more flexible the better, because the cost of flexibility investment is high, and the capital for flexibility investment is limited. In this paper, we present a new method to guide process flexibility investment by developing a flexibility fit index. Taking demand changes into account, our method first defines a measure to quantify the requirement level of process flexibility. Then, a flexibility fit index is defined, which specifically identifies where flexibility is insufficient and where flexibility is surplus for a manufacturing system operating in a changing environment. The proposed fit index is objective and dimensionless, and so can be used more universally than previous subjective or non-dimensionless measures proposed in the literature. A set of simulation experiments shows that the proposed method can better guide flexibility investment by indicating the system structure which fits best with a given business situation, and other measures that ignore demand information may lead to over-investment or adding links that bring little benefit.

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