The research for flexible product family manufacturing based on real options
Abstract: The goal of this
paper is to find the best production strategy for product mix, which means the
largest value of the options. And finally, give a case and find the solution of
the optimal production strategy for product mix.
Design/methodology/approach: This article, based on the production with
characteristics of a call option and 0-1 integer programming model, build
new-products mix strategy, and through case demonstrate that traditional method
underestimates the value of the products mix.
Finding: According to market being volatility and uncertainty and the
production can being delayed, firms can flexibly arrange the best time for
products to manufacture. Use real options theory to analyze product decision
and the best production timing decision. Find the total options value is higher
than the traditional methods.
Research limitations/implications: We are not applied to real option
pricing theory in modular flexible production system. We just applied real
option pricing theory to the product platform. The basic model needs to
improve. While the thinking of this paper provides some research ideas for
flexible production systems based on real option in further research.
Practical Implications: The introduction of the real option make the
company can achieve dynamic planning and flexible management for production of
products mix and get the better benefit.
Originality/value: The central contribution of this paper is to introduce
the option mechanism in the production timing for the product mix.
Keywords: flexible product
platform, product family, real option, binary pricing theory, 0-1 mathematical
programming
Author: Maozhu Jin, Xiangguo
Tian
Journal Code: jptindustrigg150029
