FLEXIBILITY AND THE CHOICE OF MANUFACTURING FACILITIES UNDER SHORT PRODUCT LIFE-CYCLES

Rapid changes in technology and intense competition have led to shorter product life cycles in both high-technology industries and industries not commonly regarded as high-technology. As a result of short product life cycles, firms are faced with the challenge of planning for facilities whose useful lives are much longer than the life cycle of any individual product it manufactures. This paper develops a model to analyze the critical trade-offs associated with determining the best level of flexibility for a facility that manufactures a series of high-volume products, sequentially over each product's life cycle. Our analysis considers the benefits associated with more flexible facilities including reduced changeover costs and earlier market entry, versus the higher initial investment and higher production costs typically encountered.