Valuing the flexibility of flexible manufacturing systems

The author studies the topical issue of flexible manufacturing system (FMS) justification. He contends that current evaluation methods fall short of capturing a key advantage of an FMS: the value of flexibility. He identifies various benefits of FMS that arise from the ability to switch between modes of production, and in particular, he models the value derived from the ability to better cope with uncertainty. A model to capture this value must solve for the value of flexibility together with the dynamic operating schedule of the production process. He presents a stochastic dynamic programming model that captures the essential elements of this problem. A numerical example further demonstrates the optimal mode switching decision rules