Building Blocks for Volume-oriented Changeability of Assets in Production Plants

Abstract

Demand volatility and uncertainty in the business environment lead to an increasing relevance of volume-oriented changeability (VoC) for manufacturing companies. Strategic investment decisions are often based on forecasts and predictions, which more frequently fail to materialize due to obsolete assumptions or unpredictable events with extreme impact. If the production output fluctuates, fixed costs of production plants emerging from these investments result in high variance of unit costs, which has an impact on operational performance. Despite these demand and investment risks, managers on the strategic level must make capacity decisions without endangering the plant's performance both in growth and decline phases. Therefore, the paper conceptualizes building blocks for strategizing VoC of assets in production plants. These building blocks systemize capacity strategies for economical and dynamical up- and downscaling of production output. The paper depicts the impact on financial targets and analyzes contextual requirements and interdependencies with the organizational concept. By means of this decision support concept, managers of the production plant can select and combine interdisciplinary measures for developing an asset management strategy in the face of demand volatility and uncertainty.