PRINCIPLES ON THE BENEFITS OF MANUFACTURING PROCESS FLEXIBILITY

Increasing manufacturing flexibility is a key strategy for efficiently improving market responsiveness in the face of uncertain future produ ct demand. Process flexibility results from being able to build differ ent types of products in the same plant or production facility at the same time. In Part I of this paper, we develop several principles on t he benefits of process flexibility. These principles are that 1) limit ed flexibility (i.e., each plant builds only a few products), configur ed in the right way, yields most of the benefits of total flexibility (i.e., each plant builds all products) and 2) limited flexibility has the greatest benefits when configured to chain products and plants tog ether to the greatest extent possible. In Part II, we provide analytic support and justification for these principles. Based on a planning m odel for assigning production to plants, we demonstrate that, for real istic assumptions on demand uncertainty, limited flexibility configura tions (i.e., how products are assigned to plants) have sales benefits that are approximately equivalent to those for total flexibility. Furt hermore, from this analysis we develop a simple measure for the flexib ility in a given product-plant configuration. Such a measure is desira ble because of the complexity of computing expected sales for a given configuration. The measure is II(M), the maximal probability over all groupings or sets of products (M) that there will be unfilled demand for a set of products while simultaneously there is excess capacity at plants building other products. This measure is easily computed and c an be used to guide the search for good limited flexibility configurat ions.